Thirteen ways Washington State can help small businesses

To continue our conversation about how to grow small businesses and create jobs in the US, below are a list of topics that were important to the participants in our February 9th, 2010 Council for Small Business meeting. Many thanks to Karen Pemerl of the Washington State Department of Commerce for compiling these notes. I have edited them to elaborate on the content of the conversation.

Workforce development
Do more skills matching in jobs. Many states have resources for employees. In Washington, WorkSource uses keywords to help employers find candidates. The system uses a weighted approach and other creative methods will help employers link up with well qualified employees. Since WorkSource has a direct link to unemployed individuals in the state, it has one of the most comprehensive resources available to employees.

Recognition
Recognize new small businesses. Theresa Chambers of RecognitionWorks suggests that the state shows pride in small businesses by promoting them to increase name recognition. One option is a directory with new business name, the NAICS code plus a small amount of information that allows for self-directed search (more extensive than the current licensing database now available). 

Encourage match-making between small and large businesses. Enterprise businesses can be some of the best customers for small and emerging businesses. They often buy goods and services locally. Match-making would encourage more local purchases and help the small businesses stay afloat while helping large businesses find the sub-contractors they need to fill gaps left behind by downsizing, reorganizing, and rapid market changes.

Help small businesses tell their story. In addition to the directory, the state could highlight small businesses through existing communications channels so they get increased exposure to potential customers.


Regulation
Eliminate excessive regulations. Regulation is putting small businesses out of business. Reduce regulation at all levels of government (see my previous post.)

Streamline licensing and permitting process. I discussed this in my previous post. One of the attendees revealed that as a licensed home health care provider and business owner who recently relocated to Washington state, she was informed that it would take 3 to 6 months to obtain license. That's three to six months of not being able to generate income while waiting for a license for a small business owner.

Money Matters
Support economies of scale. Software costs can be crippling for small business owners. The state could help small businesses get lower costs on software, products and services through group purchasing programs. The Greater Seattle Chamber offers similar programs on services like health insurance and 401(k) programs.

SBA loan options are dwindling. Many SBA loans that were previously available are not available today.  Help small businesses by restoring loans similar to what was available in the past.

Be the bank. North Dakota has its own bank to increase lending to small businesses. Washington state is considering the option. It would allow for more fiscal flexibility in the long-run and provide a resource for small business lending programs.

Hold banks accountable. Many voiced that the state should make it easier to get funding through banks. Some even advocated that Washington should force banks to lend to qualified small business owners. We acknowledged that changing federal guidelines are making it difficult for some banks to loosen purse strings, though new federal funding will soon be available.

State Contracting
Make state contracts competitive. One recommendation is to create dollar limits on state contracts so small businesses can compete. It's easier for a small business to respond to a $5 million, five-year contract than it is to respond to a $50 million lump contract.

Respect the creative ideas of small businesses. In one state contracting example, a business owner had submitted innovative process for job skill matching. The state chose a different vendor, but used his idea to build a job skill matching process that wasn’t nearly as successful as it could have been with his additional knowledge and resources.

Establish a buy local priority. The state could create a model and incentives for state organizations and private enterprises to buy goods and services locally.

Ways to Help Build Small Business Viability in Our Communities

Last year at this time, we were discussing access to capital as the number one barrier to success for small businesses. Since then, it seems that small businesses have grown used to the lack of capital resources from traditional financial services institutions and have gotten creative in finding ways to finance growth and development.

Access to capital still leaves a gaping hole in success for many organizations large and small. But as I connect with more and more small businesses, the top barriers to adding staff members and growing market capacity include:

• Patents. For many organizations, the process of getting a patent on their secret sauce can take years (the current average is 22 months), whereas the window of opportunity for their launch might not be as long. For companies whose main clients are beyond our national borders, the lack of international trademark and patent regulations can put a damper on success and introduce a reluctance to launch in countries where proprietary information might not be protected. Our government should work harder to streamline the patent approval process here at home. In addition, our global leaders should work together to put into place standards to recognize patent filings in home countries and to enforce laws against infringement.
• Policies. Bureaucratic processes provide a slow and deliberate process for making changes in public policy and legislation. These processes are designed protect people from sudden changes in the opinions of new leadership and hotheaded activists. However, these processes were created in an era during which horses were more common than cars and the US Patent and Trademark Office claimed that nothing new could be invented. The pace of change has accelerated with the dawn of a new, information-based economy in our country. Our policies have to keep pace, or innovative new companies will face a lot of little hurdles that add up to big dollars when attempting to fill market demands. Economic and trade policy makers need mechanisms that will allow them to be responsive to worldwide market changes. The result will be policies that keep relative pace with the marketplace, instead of a five to ten year lag in policy updates.
• Permits. See Patents and Policies above. Many of the same challenges that stall patent approvals and policy changes also hold up the permitting process. In the recent economic downturn, one property developer saw its previously approved financing completely disappear just as a few of its buildings were completing construction. Not long after they put the construction process on hold in an effort to secure new financing, their permits expired. To renew the permits required starting from scratch -- new master use permits, construction permits, project filing fees - the works. In light of the economic circumstances and developer outcry, local building authorities created a permit extension, giving developers more time to secure financing. We need more responsiveness like this from our permitting institutions to keep business moving forward.
• Prospects. This is the same challenge that small businesses were having a year ago: where are the customers? Last year, customers were reluctant to buy. This year, however, that has changed: more customers are opening their purses, but hungry enterprise organizations are swooping in with extra-low-pricing and extras that small and medium businesses cannot afford due to smaller staffs and limited resources. The mantra of the 1990's that "there's plenty of business for everyone" has gone silent. To help our local small businesses, we have to realize that shopping local isn't just for grocery stores any more. The nation is picking up on supporting local small businesses by contracting and shopping for goods and services within their own regions. Big organizations should not be overlooked, but healthy local communities come from small and medium businesses in our local economies.

Addressing these four areas will help our small and medium businesses go to market more quickly with their offerings, create more jobs, and pump more tax dollars into our local communities.

How do you propose we increase demand and create more jobs for small and medium businesses?

Leading the Way to Recovery and Tips for Making the Most of Your Tradeshow

I lead conversations on small business growth and competitiveness as the Chair of the Council for Small Business at the Greater Seattle Chamber of Commerce. On 4/13/2010, Carl Gipson, Small Business Director at the Washington Policy Center, joined me to lead a discussion on recently passed Washington State legislation and its impact on the small business community's ability to lead our economic resurgence. He also shared a copy of the WPC's report, Lead the Way: Small Business & the Road to Recovery. Thank you to all of the attendees who provided feedback and insights on navigating our changing economy!

During the second portion of the program (time stamp 1:14:00), I shared with our viewers some marketing tips for making the most of trade shows. This is in preparation for the upcoming Chamber Annual Tradeshow, the premier Puget Sound venue for showcasing your business and networking with more than 1,500 attendees. If you are a Seattle Chamber member and have not yet registered to exhibit, hurry up! Booths are selling out (they have a few left as of today).

Small Business Brings Fresh Ideas to Washington State

On February 9, 2010, Business Solutions Manager Karen Pemerl joined the Greater Seattle Chamber of Commerce's Council for Small Business meeting to share what's new at the Washington State Department of Commerce. In this video, we heard about great initiatives that Washington State is implementing to fuel a job growing economy, and participants contributed great ideas on how state governments can be more responsive to small business needs.

In the next few posts, I will share a synopsis of the comments shared here and through other conversations with small businesses.

The Council is a great way to engage and explore ways to help small businesses thrive. If you're a small business in the Puget Sound region, please contact the Greater Seattle Chamber of Commerce about getting involved with the Council and attending our Opportunity Exchange events each quarter. If you're not in the Puget Sound, I encourage you to share your ideas in the comments below.

Here are links to a few of the small business resources we discussed:

• Current legislative bills in Washington State: Lobbyist Brad Boswell’s latest bill tracking report and legislative summary are available online.
• Regional Contracting Forum: http://www.kingcounty.gov/exec/BusinessDev/regionacontractingforum.aspx
• Doing business with Washington state: http://access.wa.gov/business/
• Small Business Liaisons Flyer:  http://www.ora.wa.gov/documents/small_business_liaison_flyer.pdf
• Reports following the Summer 2009 stakeholder feedback sessions with Dept of Commerce: http://www.commerce.wa.gov/site/1268/default.aspx

Here are a few government contracting links for businesses:

• National consolidation for local, state, and federal bid opportunities: http://www.govdirections.com/
• Onvia's 2010 Government Market Outlook Report: http://www.onvia.com/governmentstimulus/fp/government_market_outlook.aspx

Is there a Worker's Comp crisis? You decide.

During a Friday morning legislative update with WashACE, we discussed a few issues including education, tax changes, and worker's compensation. We reviewed how the recent election in Massachusetts and tax changes in Oregon impact Washington legislative policy. For me, a few key items stood out that will have a major impact on small business.

First, Washington business taxes comprise nearly 52% of all state and local tax revenue for the state (see the numbers). The success of small business is critical to the success of the state. Lawmakers should be working harder than ever to ensure that small businesses succeed.There is real concern that recent changes in Oregon could signal higher taxes for corporations. With businesses already struggling, an even higher tax burden will make it difficult for small employers to hire and could even drive them out of business.


Then we heard about the proposed changes in worker's comp. In addition to a controversially high rate, the program runs the risk of insolvency, which could trigger an insolvency tax. One small business owner shared that in 2010, her tax rate went up by 347%, though her company is claims free. This increase means that she cannot hire because of the increased cost. Bringing on new employees would risk her company's insolvency.

Washington desperately needs job growth so that consumer confidence will increase and improve the demand for the products and services of small businesses. The governor's proposed tax incentives will help offset the costs of hiring in the future, but small businesses need real breaks now to get Washingtonians back to work.

Our economic development leaders agree that small businesses will once again lead us out of this recession. We hope that our legislature will give them the opportunity to do that through job creation and innovation. The goal is to find a way to encourage job growth and keep your economy going without taxing small companies out of existence and sending large employers elsewhere.

Have you hugged a young professional today? Rebuilding the next generation of leaders

On Tuesday night, Greater Seattle Chamber of Commerce leadership Phil Bussey, CEO, and Kirk Nelson, Board Chairman (also Washington President of Qwest) led a great discussion with the chamber's Young Professionals Network. The chamber, like so many other organizations, need the up and coming generation of Generation X (Gen X) and Millennials (also known as Gen Y) to fill the leadership gap that's afflicting many organizations.

Their words were inspirational, particularly at a time when this economic crisis is kicking so many Gen X and Millennial professionals in the pants. Unlike other recessions, this on is a doozie on many fronts, creating what John Talton has stated as an economic reset.

One point that John left out is that unlike other market corrections and cycles since World War II, this recession has decimated small businesses. Historically, small businesses have fueled up to a third of job growth and have represented roughly 9 percent of job losses, according to research economist Melinda Pitts. This recession, however, "these very small firms have made up 45 percent of the nation's job losses."

When you consider that Gen Xers and Millennials were the fastest growing initiators of new business starts since the turn of the millennium, our young professionals are taking on the lion's share of the economic hemorrhaging. And if you add in that business owners cannot claim unemployment, the hit to young professionals and business owners is much greater than what's getting reported.

Now, more than ever, all professionals need business and community leaders like Mr. Bussey and Mr. Nelson to help them navigate the economic reset and move into leadership roles. Mentorship and support of young professionals will help them make smart business decisions to prepare for long-term job growth and economic recovery.

More articles about young professionals (Generation X and Generation Y/Millennials)

• Gen Xers Feeling More Discontent at Work
• Generation X and The Millennials: What You Need to Know About Mentoring the New Generations
• Why Xers and Management Positions Don't Always Align
  

Why does higher education matter to business?

Higher education cuts are resounding throughout the country. Our universities, community colleges, and continuing education programs cannot handle the growing demand in a time when state budgets and private investment are shrinking. But why should the business community care?

Higher education does not exist solely to train people in a trade. Don't get me wrong: I don't want to be under the knife with a surgeon who does not have a degree! Higher education builds communities in which continuing education is valued. Those who know how to learn will always be able to navigate market upsets and shifts in available jobs.

If you will recall from my blog post "From Expense to Asset: How Layoffs Can Kill Your Organization", people are the most valuable asset in any organization that hopes to thrive in the information age. People need opportunities in growth and development in order to retain their competitive edge and make our businesses, in turn, more competitive. The business community's support of higher education means more resources and better talent in our communities and at our fingertips. And better educated citizens means better communities for the growth and development of all.

When higher education fails, communities fail. When communities fail, they cannot provide the types of citizens needed to work together to pull that community out of a decline. Failed higher education leads to unskilled citizens, which leads to atrophied communities, which leads to struggling small businesses, and the inability of a community to create viable, desirable jobs.

Business leaders and private citizens work together to create a job-growing economy by supporting our higher education institutions.

It's Time to Poke the Bear: Stop Crippling Your Organization with Inaction

Back in July 2009, I attended a Washington Technology Industry Association/MIT Enterprise Forum event in which talked about leveraging the economic downturn. One of the most valuable points I took away was that strategy isn't about what you're going to do: It's about what you are NOT going to do.

As I look around, I seen a lot of people not doing anything. Instead of leveraging the available opportunities, many are unwilling to take the necessary steps to move forward. These organizations hope to ride out this bear market and come out the other side doing business as usual.

Well, I hate to tell you the obvious, but business is going to look very different when we come out the other side of this downturn. Already, the economy is seeing a bit of an upswing. Those organizations will continue to fall behind and eventually cripple their ability to compete. They will not be ready when opportunities arise, for they won't have been proactive in reshaping their organizations for the new market. The three ways I have seen leaders use inaction to slowly cripple their organizations include:

1. Screaming Poverty. Access to capital is tougher than ever. It's unfortunate what's happening in the credit markets. But demanding something for next to nothing at every turn will get the organization that's always crying poverty nothing in the end. Bears don't care how much you scream. Organizations have to be proactive, creative, and resourceful in developing a strategy to deal with the bears that pop up along the path. Poverty-screaming organizations will slowly run out of cash as they waste their time wheeling and dealing instead of developing an effective strategy and leveraging currently available opportunities. Even with bears lurking, there is fruit on the trees.
   
2. Analysis Paralysis. Many decision makers either know this or someone like this. Organizations trapped in analysis paralysis get so bogged down in weighing the opportunities, that the window of opportunity opens and shut while they're huddled in indecision. Bears like huddles: more snacks in a smaller area.
   
3. Playing Dead. It's an old trick of camouflage that "if they don't see me, then they can't eat me." With Playing Dead, leaders cover their eyes, double over, and think that "If I can't see them, then they can't eat me." Bears have a great sense of smell. They will eat an organization whether it's being proactive or not. When leaders curl into a ball, they don't become more effective in riding out the storm. They just get eaten from behind and don't even realize it.

So how do you recognize when inaction cripples an organization? Three easy ways:

• Revenue has dropped sharply or crawled to a halt.
• Productivity is on a measurable decline.
• Morale is non-existent among your team members.
  

If you're noticing one or more of these three things happening in your organization, you need a strategist to help you identify the gaps and get together a plan of action to keep this bear market from devouring your organization. Tracy A. Corley & Associates can do just that.

It's time to poke the bear and keep moving forward. Let this aggressive market drive you to be proactive in developing and following a responsive strategy that works in the current and future market scenarios. It will guide your organization on the right path so that you focus and move forward instead of getting stalled by what you should NOT be doing. Most importantly, you should NOT scream poverty, get trapped in analysis paralysis, or play dead. Inaction will cripple your organization and eat you alive. Stay on the move with an effective strategy and don't be afraid of the bears you poke along the way.

An Event for Securing Small Business Capital: Perfect Your Pitch Workshop

enterpriseSeattle and Tracy A. Corley & Associates (a division of TsuluWerks, Inc.) will host Perfect Your Pitch on September 18, 2009. The event, sponsored by Towers Perrin, runs from 8:00 am to noon, with registration starting at 7:30am. The informational workshop is designed to help new and growing businesses secure venture and angel funding to launch and expand their enterprises.

"Capital is tight for all businesses from all sources," says enterpriseSeattle clean energy and technology specialist Steve Gerritson. "Small businesses have to be able to quickly and clearly get their messages across to potential funders. This workshop, specially designed for us by Tracy Corley, will help them communicate their value proposition and handle any open ended questions that might come their way."

The event will be held at the enterpriseSeattle offices at 1301 Fifth Avenue, Suite 2500 from 8am to noon and is limited to 50 participants. The event cost of $95 ($125 at the door) includes the program presented by Tracy A. Corley, workshop materials, continental breakfast, and a half hour coaching session with an enterpriseSeattle consultant.

The program will cover:

• How to present with purpose
• Telling your story with clarity
• Organizing your presentation for maximum impact
• Selecting language that commands the room
• Deliver with confidence, even in 10 minutes or less
• Preparing for anything in open-ended sessions
• Building buy-in with stakeholders and investors

The event will also be simulcast to other locations across the state to make the presentation available to all of our state's CEOs and other C-level executives of start-ups and growing businesses. Participants can register online or call Steve Gerritson at 206-389-8656.

About enterpriseSeattle

For over 35 years, enterpriseSeattle has provided client-based economic development services to businesses throughout King County and its 39 cities. enterpriseSeattle's mission is to be a "difference-maker" in the community by growing the jobs and tax base in King County, its 39 cities and the greater Puget Sound region. It accomplishes its mission through a customized client services program focused on business retention, expansion and recruitment. It's objective is to become the premier economic development organization in the US. It supports businesses in the areas of Life Sciences, Clean Technology, Information Technology, International Trade and Logistics, and Aerospace. www.enterpriseseattle.org

About Tracy A. Corley & Associates

Using Vision Driven Results, Tracy A. Corley & Associates aligns individuals and organizations with simple, actionable strategies and precise execution for change and growth. They offer consulting, speaker services, and media content to improve cash flow, enhance competitiveness, increase efficiencies, and build confidence in their clients and their communities. The organization is led by Chief Strategist, Tracy Corley, who simplifies the strategic planning process for small businesses, nonprofits, corporations, and public agencies. Its parent company, TsuluWerks Inc., has been providing strategic consulting and marketing services to organizations since 2000. www.tsuluwerks.com

About Towers Perrin

Towers Perrin provides global human resource consulting services that help organizations effectively manage their investment in people. We offer clients services in areas such as executive and employee compensation, employee benefits, communication, change management, employee research, and the delivery of HR services. www.towersperrin.com

When Manufacturing Flounders: How Montreal spurred growth when key jobs evaporated

In the latter years of the last century, Montreal economic development specialists were in the midst of a dramatic change: their manufacturing sector was about to experience serious decline. The Canadian dollar was depressed against the US dollar, and outsourcing made manufacturing facilities move across borders and overseas. Like many of the world's wealthiest nations, Canada was watching its manufacturing sector shrink. Between 2004 and 2008, one in seven manufacturing jobs had disappeared.

Montreal was determined to not become a victim of outsourcing and other changing market forces. Montreal business and policy leaders became proactive in its actions, working to move manufacturing sector workers from the factory floor to other jobs. Montreal worked with higher education programs -- universities and technical schools -- to provide unemployed manufacturing sector workers with access to career opportunities and retraining. they surveyed their industry landscape and noticed that they had growing clusters in other market areas that had not yet been accessed. The business and policy leaders worked together with small businesses, nonprofits, corporations, governments, and support organizations to craft policies and programs to enhance those heretofore under appreciated industries. In 2007, manufacturing lost 19,000 jobs while service sector jobs increased by 97,000. This positive growth was due in great part due to a rapidly-growing video game industry.

The resulting public/private partnerships encouraged growth in these sectors by supplying a home-grown pool of talent and development-friendly policies. It was initiatives such as these that led to market stimulation and support for creative businesses like world-famous performing arts venue Cirque du Soleil. The creative sector now accounts for 30% of the region's jobs. All service sectors are growing at 34%.

Like Montreal, our local, state, and federal governments should be crafting policies and encouraging public/private partnerships when major industry segments start to decline in certain areas. Such proactive measures could have stalled and even offset the damage inflicted on Michigan as a result of the auto industry collapse. I applaud the Seattle City Council Bill 116574 for raising the minimum Business & Occupation tax threshold for businesses from $50,000 to $100,000. It will only serve to stimulate small business growth and development in these tough times as manufacturing jobs decline and major corporations implemented hiring freezes and layoffs and cut back on outsourcing to local manufacturing and other vendors.

Our own under developed industries with high growth potential will be able to keep a bit more cash in their businesses for creating jobs, marketing their services, and adding much needed capital resources to their fledgling organizations. More actions like these are needed to keep our communities focused on rebuilding a job-growing economy. Just because some jobs move south, north, east, or west doesn't mean that all is lost. If we look around a bit, we might find, like Montreal did, that we have thriving industries already blossoming in our economic gardens. We just have to tend to them and encourage them to grow.

What is your region doing to support business and create jobs? I want to hear from you!

When Big Corporate Decisions Make Huge Local Impacts: Boeing Purchase Impact on Puget Sound

Today has been a very intense day. I gleaned all of this by consuming 7 minutes of news coverage: Nearly 1 billion people tuned in or turned out for the funeral of pop icon Michael Jackson. Human rights organizations around the world are calling for the release of Iranian election protesters. The Taliban is buying children for suicide attacks. The District of Columbia will recognize same sex marriages. Nobody knows what's going on with soon-to-be-ex-Governor Sarah Palin. SC Governor Mark Sanford is still dominating with embarrassing headlines. And Boeing has announced the purchase of a 787 fuselage assembly vendor in North Charleston, SC.

Being a SC native, it's interesting to see the state garnering so much attention (I didn't see any serial killer updates in the 7-minute stretch). But having lived in Seattle for 13 years, I am vested in the success of the Puget Sound Region, small businesses in particular. Any big news that takes jobs to another region is putting strain on an already flailing small business environment in the Greater Seattle area.

When a major corporation decides to move part or all of its business from one region to another, it doesn't just affect that company and its workers. The surrounding community is impacted by relocating employees who sell their houses. The region is impacted by individuals who lose their jobs and rely on social services to survive. These impacts dent a housing market struggling to recover and stomps on already overburdened state government budgets (or should I say deficits?)

Small businesses are impacted by the diminishing buying power of their consumer base. Other small businesses are impacted by the loss in potential first- or second-tier supplier contracts with the corporation and its major suppliers. When these small businesses lose their revenue streams, their employees start losing their benefits and wages, then their jobs. Then those employees start relocating to find better jobs or have to rely on social services until they can be re-trained in another industry or find another job in their fields. Small businesses shutter their doors, leading to a decline in state tax revenues and job availability for the nation's 9.5% of folks that are unemployed (note that small business owners are not traditionally represented in that figure).

Such a simple business decision in one company has a huge impact on an entire region. A friend who recently relocated from Detroit can tell how she's upside down on a Michigan mortgage while clinging to her small business engineering job here in Washington state. With a new Seattle mortgage under her belt, can she afford to relocate if her job moves east?

I have joined the Washington Aerospace Partnership to help keep the Seattle area the world's largest aerospace cluster and to help the more than 650 aerospace businesses in our state gain access to the resources they need to sustain revenues and fuel a job-growing economy. If you as an organization or individual would like to learn more about this partnership and get involved, please visit the Washington Aerospace Partnership web site.

If you are in SC or other regions of the country impacted by the changes in the manufacturing sector, I would love to hear from you. I will be writing a post about how Montreal addressed a decline in its manufacturing cluster and is still thriving as the world's third largest aerospace cluster.

Part II: Bridging the Financial Gap for Small Business Owners

Last time, I discussed a few ways that small business owners can set and meet personal financial goals while managing the riskiest investment they will ever make: their businesses. In addition to diversification, treating your business as a separate entity, and paying yourself first, my friend and I discussed a couple of other key points:

• Create an exit strategy. All good things must come to an end. How do you plan to bow out? How can you create a business that will run without you? You might even consider retaining financial ownership in the company while leaving leadership, management, and operations to your team.
  
• Create a post-business spending plan. Just like a traditional retiree, you have to decide your "living expenses" once you've exited your business. For entrepreneurs, though, that spending plan can include much more than just traveling the world. What kind of legacy would you like to leave to your family or community? Would you like to start another business venture? Or would you like a traditional retirement with extensive travel plans? Whatever your goals, create a post-business spending plan to figure out what it's going to take to reach your goals.
• Know your numbers. Exactly how much money will it take for you to exit your business gracefully and take on the next stage of your life? Your financial advisor or wealth manager can help you with this. You number will depend on when you plan to wind down and the diversification of your financial portfolio. It's not realistic to pin all of your hopes on a whopping check from a company that wants to buy you out. You might have to put in a few years and sacrifice some business value as the business changes hands. Or, you might never get an offer. Having a diverse portfolio will ensure that even if you simply decide to close your doors, you will have the financial resources you needs to cover the business and personal needs.
  

Your financial team can help you sort through many of these financial points. All small business owners should have a solid financial team that includes a banker, an accountant, and a wealth manager. Each of these folks will bring a fresh perspective to your financial situation and help you get the right mix of systems, structures, and resources that are both creative and solid in helping you reach your goals. I help my clients put together a financial strategy for their business plan, then connect them with a financial team to help them with day-to-day business and personal financial needs. Give me a call today if you need to develop a financial strategy and need access to resources to build your financial team.

Part I: Bridging the Financial Gap for Small Business Owners

Today I met with an old friend who recently made the transition from corporate executive to wealth management consultant. During our conversation, we discussed one of the greatest gaps in the financial equation for small business owners. When it comes to personal financial planning, sbo's often find themselves at a loss when attempting to finance a retirement that they haven't prepared for. They are so mired in the day-to-day operations that a vast majority of their wealth is tied to the success of the business.

What are some steps that small business owners can take today to minimize risk and maximize personal wealth while running a business?

• Diversify. Just like any other financial tool, your business is one of many investments. Even with recent stock market volatility, it's the riskiest part of your portfolio. A well-balanced investment portfolio includes a balance of high and low risk investment tools and gets adjusted as your goals change or as you get closer to your exit. If all of your net worth is tied to your business, work with your wealth manager to figure out what you can do to move some of that net worth into other investments, like real estate, stocks, bonds, and money market accounts. Keeping your finances diversified will help you better navigate economic recessions and other market downturns and average out returns for the life of your business.
  
• Treat your business as separate entity. Some people get this, some people don't. Treat your business as if it were a new life and get it set up as a separate entity, like an LLC or corporation. And don't mix finances between the two. If you learn to treat your business as a separate entity and stop putting business lunches on your personal credit card, you will be able to get a much clearer financial and strategic overview of your business. Like children, businesses eventually grow up and gain independence. You have to set up clear boundaries early in the development of your company, or you'll look up 20 years from now and wonder why you have a 35-year-old eating your food and leaving the gas tank empty.
  
• Pay yourself first. I know that small business owners hear this, but I don't think that enough of them "get it." I know people who have been running businesses for five or six years and have yet to take a paycheck or distribution. What's wrong with this picture? You forgot to include one of your most valuable assets in your business's financial plan: you! A business is designed to create jobs and generate wealth. Like it or not, you're actually a part of the team. If you remember to pay yourself first, you'll realize that if you're more than a few years in and still depleting your savings, maxing out your HELOC, and/or taking on another job to run your business, you haven't set proper financial goals. In your business plan, the financial plan should include your salary and benefits along with the rest of the team's. And set a realistic salary to help you meet your retirement goals. The only employer match you're going to get is the one you give yourself. Oh, yeah: you also pay double the taxes of an employee.
  

I will continue the final points on this topic next week. Stay tuned for more ways to bridge the financial gap. I am available to help you put together a financial strategy for your business plan and connect you with the right folks for your business and personal financial team.

Getting businesses out of the business of health care

The top reason that someone accepts or stays with a job they hate is that they need the health benefits.

This attitude is part the reason why Danes were recently voted as the happiest people in the world. They are free to do what they love and focus the family without worrying about being covered in case they get sick.

Now, I'm not advocating a socialist-style national health plan like Denmark's health coverage. At a recent discussion in Montreal, Canada, about nationalized health plans, even our presenter, a health care professor who has practiced medicine on both sides of the border, concurred with Niall Ferguson's assessment that socialized systems are not fiscally sustainable.

So what do the Danes and other socialized nations have that we don't?

They have portable health care coverage that goes with them, whatever they choose to pursue in life. They don't have to take on a crappy job that's a 90-minute drive from home (each way) just for the benefits.

We need health care reform. I'm not necessarily on board with the current Administration's approach. The key change that we need is to get businesses out of the business of health care management and administration.

I'm not sure that this is a job for government either. I have the following recommendations on the White House's guiding principles for comprehensive health care reform (the verbatim principles are italicized):

The Administration believes that comprehensive health reform should:

• Reduce long-term growth of health care costs for businesses and government.
  I recommend that we take the responsibility for costs out of the hands of government and businesses and put it into the hands of the people. If individuals receive their premium bills each month and regular reminders regarding coverage, they will be more aware of costs, coverage, and benefits. Businesses can then choose to contribute to an individual's privately selected health care plan. As a result, the business does not have to manage a pool of benefits and coverages. They can also elect to provide access to insurance consultants to help employees review and select the right personal coverage, but the management of the benefits and costs should be an individual choice that moves with you from job to job.
  
• Protect families from bankruptcy or debt because of health care costs. Health insurers should stop penalizing the insured for cost overruns by health care providers and make doctors accountable if they order unnecessary procedures. The standards for procedures and allowables should be made public so that if the insured has time to review the procedures, they can do so before and be aware of what the doctor should be including and what would be considered exclusions. This "magic formula" has always been a mystery. This might require insurers setting standards for procedures and new technologies and experimental procedures to be approved by feds and insurers. Insurers should also allow the insured to get second and third opinions. With more choice, better information, and the ability to research their choices, both the insurer and the insured won't be stuck with surprise bills and unnecessary debts.
  
• Guarantee choice of doctors and health plans. It would really help if all doctors could honor all major health plans. Health plans would benefit the public more if they have minimum guidelines in place that carry throughout the nation, not just in your home state. That way, if you travel, get a job in a new state, or find a specialist across the country whose services are the most beneficial and cost-effective, you don't have to fret about "networks" and exclusions. This would mean that insurers would have to work with doctors to ensure that they are properly compensated for the services they provide.
  
• Invest in prevention and wellness. This is a "duh" statement. I love my HSA (Health Savings Account) which automatically includes the cost of the annual physical in my insurance coverage (no copay, no application to the deductible). Health education with prevention and wellness should be a public school education requirement as part of mandatory ANNUAL physical education. Community classes should be easily accessible to adults for continued education through community colleges and community (even religious) institutions.
  
• Improve patient safety and quality of care. I echo a few points above. Just keep it competitive and keep the consumer/insured informed. Doctors must allow time for patients to consult advisors and family members before procedures can be done. The pressure to have procedures done can be overwhelming.
  
• Assure affordable, quality health coverage for all Americans. Affordable and quality can be relative. The first step is to set some minimum requirements for affordability that adjusts for inflation/deflation and for quality so that it meets acceptable health guidelines. A government plan is not the answer, though basic catastrophic care and annual physicals would lead to more prevention and lower costs. Our GDP is too closely tied to our being sick. More choices in catastrophic, preventative, and supplemental care plans with nationwide competition would drive up quality and down prices through increased competition.
  
• Maintain coverage when you change or lose your job. I cannot believe that they went after Microsoft for bundling IE with Windows, but we still associate health care options with our employers. The average employee today sticks with a job an average of 4 years, which is a drastic change from the Baby Boomer era (job tenure of 10+ years). Increasingly, more and more people are working as free agents and are responsible for choosing their own health care. Removing health care from compensation packages will allow people to focus on meaningful careers and not sacrifice quality of life. Employers can focus on innovation and job-growth, not plan management and escalating health care costs. The result would be fewer layoffs and more job satisfaction. It's criminal to think we're sacrificing quality of life (which ironically impacts wellness) just for benefits. All plans should be portable nationwide with international care coverage options.
• End barriers to coverage for people with pre-existing medical conditions. Coverage should truly be accessible to all. If the health care industry is doing its job with education, some preexisting medical conditions can be prevented. For those that aren't, patients should never be denied coverage. All patients should have the option to review less expensive, experimental treatments when feasible. Some standardization or approval methods might be needed, but it will continue to drive innovation.
  

I would also like to propose a couple of other ideas:

• Make tax-free savings plans available (like HSAs) to cover cost of premiums in case a person loses their job or to cover gaps in premiums provided by employers. These should be available independent of the insurance plan you choose (unlike HSAs).
  
• Incentivize individuals with tax credits for maintaining healthy lifestyles and reducing health care costs. Who says that we're too old to participate in the President's Physical Fitness Test once we graduate from high school?
  
• Keep insurers, businesses, and governments out of health care decisions. If a patient gets a variety of opinions and finds the procedure that will best help him, it should be covered without going through a series of approvals and reviews. The decision should be made between the doctor, patient, and the patient's family.
  
• Provide more incentives to businesses and communities to provide wellness and preventative care programs to their employees and to the public. Tax credits, stimulus funds, and other programs can be designed to reward businesses and organizations for making education available. They would also be required to demonstrate a measureable decline in health care costs and an increase in health and well-being.

Even with our private health care system, the insured subsidize the uninsured. The uninsured use the most expensive care service - the emergency room - for routine check ups and colds. We all pay for that through the rising cost of medical services and health insurance premiums.

It's time we stop kidding ourselves and realize that we're already paying for a socialized system that's putting the management burden on employers. A complete revamp of our medical system should allow for national (if not international) portability, put individuals in charge of their health care, stop penalizing patients due to inaccessible information and guidelines, release businesses from health care management, and create an economy that rewards health instead of illness.

I could go on, but I would prefer to hear from you. I'll keep you posted on future discussions on this and other topics affecting employers and employees alike.

Celebrating Small Business in This Month

Small Business Week is May 18th to May 22nd. Keep an eye on the Small Business Administration's Event Calendar for a preview of Wrangling New Assets from Existing Profits on 5/19 from 1pm to 2pm. These and other events are available for review on the Washington SBA web site.

Of course, a week isn't enough to celebrate small business. The entire month of May has been declared Small Business Month by the Greater Seattle Chamber of Commerce. Check the GSCC small business web site to learn about all the great events taking place throughout Puget Sound to help your business grow.

News Flash: Merchant Banks Seize Small Business Cash

Cash Vanishes from Merchants' Accounts

Citing the increased risk of bankruptcy, credit-card processors are increasingly demanding—or simply seizing—cash reserves from entrepreneurs

If you're a small business owner or CFO that processes credit cards, I recommend that you review the BusinessWeek Online article, then check with your merchant bank and processor to ensure that you don't wind up in a cash flow crunch. To be surprised with an account drain is the last thing you need with tightening credit and slow receiveables.

One thought on how to protect your funds: Use a separate checking account for your merchant account funds, then transfer them to your main account later.

Another option: Use a service like PayPal to handle transactions from a major new initiative that might dramatically increase the volume of your credit card transactions.

The Importance of Connecting for Success

Last week, Phyllis Campbell, the Pacific Northwest chairman of JP Morgan Chase, gave a wonderful presentation at the Puget Sound Business Journal Live breakfast about leadership and personal success in the current economy. Emory Thomas, publisher of the Puget Sound Business Journal, and Campbell discussed the importance of values and integrity in leadership and about the value of diverse networks for business success. She shared that one of the four points that she learned through her years as CEO at US Bank and The Seattle Foundation, and as an active corporate board member is to always "get ready." The "for what?" she stated, wasn't important. It is critical to be prepared for whatever challenges - or opportunities - might present themselves.

During the Q & A session, I asked for her view on how small businesses and emerging leaders can get ready for what's coming next in the economy and in our communities. Her advice: Connect. Don't pull back when times get tough. It is important to reach out, leverage your network and make meaningful connections. Connecting isn't a personal pursuit: it's about working together as a community to leverage opportunities, give back, and grow.

What have you done lately to connect with your community? I want to hear what you're doing, so please post your comments here or send me an email.

New Action Event for Business Owners, CEOs and Executives

Big Thinking for Small Business and Nonprofits

Just because you're a small business or a small nonprofit organization, you can't be thinking big. I love Michael Gerber's The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It. He talks about a woman who bakes wonderful pies and starts a business selling her terrific pies. Unfortunately, she has been sucked in by the Entrepreneurial Myth and doesn't understand the complexities that go into launching a small business.

Like the woman in Michael Gerber's book, you need to understand that though you're a solo-preneur or have just a small team, your organizational chart looks similar to those of the big guys like Microsoft and Boeing. The only difference is instead of having 4,000 people to fill in the organizational chart, your name is filling in each of the slots. Even if you don't have a team member with the title of "Chief Financial Officer," someone is responsible for -- or irresponsible with -- your finances.

If you have launched a new business or are developing a nonprofit organization, I urge you to spend 20% of your time working on your business, not in it. That means, instead of working the register, baking pies, or making introductory phone calls, use that time to step outside of the day-to-day operations and think strategically. Is what you're doing bringing you the best return on your investment? Are you staying on track to fulfill your vision? What new products, services, and outreach can you be doing to increase cash flow, leverage opportunities, and improve efficiencies?

Spending time each week to focus on the strategic side of your business will help you keep the big picture in mind and make better decisions to improve your bottom line. If you lose sight of these and other key strategic questions, you will find yourself off track and missing the mark on the entire reason you started the organization in the first place.

If you need help setting aside time to work on your business instead of in your business, I encourage you to sign up for one of our Strategy String workshops during small business month. If you prefer one-on-one conversations for your business, drop me a line and ask me about ConsulCoaching and Advisory Sessions.

Financing for small business

In my recent Council for Small Business meeting, we took at look at the hottest topics impacting small businesses this month. As usual, the topic of finance came up repeatedly. Banks simply aren't lending like they should. Some banks and organizations like the SBA are leveraging stimulus funds to make it easier to access capital. Venture capitalists and angel investors are also looking for entrepreneurs and startups with solid business plans. This uplifting article tells of how six small businesses owners financed their dreams through various sources.

If your bank isn't lending to you, consider microlending programs, family members, personal credit lines, and grants in addition to venture capitalists and angel investors. A word of advice: don't use your HELOC for any purchases not related to improving or maintaining your home. If you need assistance identifying the right financing sources, your local SBA, SCORE office, or chamber of commerce can provide you with counselors and financial expertise.

I will post the notes from our meeting on the Greater Seattle Chamber of Commerce's LinkedIn group later this month. If you are a chamber member, please join this group to get the details of the discussion and to learn about next month's exciting program and opportunity exchange.

If you need resources for your small business, drop me an email. I can point you to some of the right resources you need to get your business off the ground and keep it moving forward.