The Australian Small Business Blog

Wednesday, April 22, 2009

Reducing Your Small Business Debt

Choice has just released a report on managing personal debt in this time of financial stress. For some small business owners this debt may have been exacerbated by debt in their business caused by the slowing economy.

As for personal debt, in business there is good and bad debt. In most businesses some level of debt is necessary, firstly to commence your business, secondly to keep your business operating and thirdly to expand your business.

Business debt can be good as long as it does not get out of control. However, there are numerous reasons why it is not viable for a business to carry high debt levels for too long.

Often business debt can come with a ridiculously high interest rate, thus taking longer to pay and using up valuable cash flow. Carrying too much debt may also make it harder to reinvest when expanding your business or looking to purchase capital equipment.

Increased debt can take away from the quality of your end product or service as you take from your cost centres to meet debt repayments. As the owner of a business, high levels of debt may also cause higher levels of stress, affecting both your personal life and the decisions you make in your business, and once your business decisions become worse your final product suffers, thus affecting your reputation and ability to keep clients.

Debt may also lower the value of your business and make it less attractive to investors. Too much debt can become a cancer in your business and can cause your business to spiral out of control with the ultimate price being bankruptcy of your business and potentially yourself.
If debt does become a problem there are things that you can do.

1. Look at how your debt is structured and what it is secured against. If you can, your debts should be consolidated into one debt and secured against an asset, for example your house, this way you have the ability to finance your debt over a much longer period of time and at a lower interest rate. It should also be remembered that the good thing about business debt is that it is tax deductible so it is usually a good idea to pay off as much private or non deductible debt as you can and examine whether you may be able to just pay interest on your business debt. This also has the benefit of giving you more equity against which to secure your business. Any debt restructuring should always be done in conjunction with your accountant.

2. Look at your life style and take less from your business to prop up your personal life. For example, should you go on an expensive holiday? Do you need an expensive car? Do you need Foxtel? Again look at the Choice report for more tips on managing this.

3. See where your business can cut costs to make debt repayments. In taking this step, extreme care needs to be taken not compromise your quality.

4. Review your business structure with your accountant. This can affect the amount of tax you pay and you ability to defer tax whilst you repay debt. Your business structure will also play a vital role in protecting your personal assets if your worst fears are realised and a debt provider takes action against you.

The most important thing to do is to have a plan, rather than hope the problem will fix itself. It generally doesn’t at this stage of the business cycle.

Over to You. What do You Think? Post Your Comments Below.

Paul Jenkin is a partner with small business accountants Andresen McCarthy Partners



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The Australian Small Business Blog

Saturday, April 18, 2009

Business Tip #3: Creating a First Impression


Many people when they begin in business unconsciously send out signals that scream “Start-up”. No-one wants to buy from a start-up, because they are unproven. They could disappear at any time without a trace. So people learn to recognise the signals- you have a hotmail account. Your address is a post office box. You have printed your business card on your inkjet printer. You only have a mobile phone number on your business card.

You might think that rectifying all these things will cost you a lot of money. There is some investment, but it is small if you understand that people will run in the opposite direction when they see these signals.

Get a proper domain name. (It will cost you less than $50 to set up a domain name with an email account attached.) Get a virtual office address from the many virtual office providers that are around the country. They will even answer the phone for you with your business name and send messages to your mobile. This gives you a proper street address as well as a landline number for people to call you on. (It’s ok to have your mobile on the card, as long as it is not the only number.) All this is cheaper than you think, with some virtual offices as low as $100 per month depending on the services provided. You can top this off with a simple 1 page template website for a few hundred dollars. Internet printers will also provide you professionally printed business cards from under $100.

You can obviously upgrade as your business grows, but with these low cost steps you no longer scream start-up!

May Your Business Be – As You Plan It!

Dr Greg Chapman

Over to You. What do You Think? Post Your Comments Below.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success.


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The Australian Small Business Blog

Friday, April 17, 2009

The GFC and the Small Business Advantage


It seems every week there is news of more layoffs by large businesses. Feed into that announcements of burgeoning deficits and negative growth forecasts and it is no wonder that highly precious, but fragile commodity, business confidence is weakening.

The reaction from businesses when this occurs is to become risk adverse. It’s all very well to attempt to remain positive, but if the fundamentals are rotten, you just become like the Black Knight in Monty Python who has lost all his limbs and still thinks he can beat King Arthur. Therefore expansions are deferred. New projects are put on hold. Upgrades are delayed. With many businesses, the layoffs or liquidation, while directly as a result of the downturn, were often an accident waiting to happen. Decisions avoided until the cash flow pain made those decisions unavoidable. Evidence of this is being seen with the US automakers.

For small businesses, the impact is far less spectacular, however, it is still there. Until a few years ago, 70% of the employment growth came from small business which resulted in unemployment falling below 4%. While there does not appear to be a lot of evidence that small business is laying off staff in significant numbers, it does appear, with the fall in job ads, that they aren’t employing at the same rate.

However, there is reason that there should not be same doom and gloom in the small business sector as for large business. Larger businesses tend to be more highly financially leveraged and have tighter margins. These factors along with their larger market shares, mean they are the first to feel market shrinkage impacting on their bottom lines.

Without these pressures, small businesses are able to be more positive as long as they take steps to address the changes in the economy. This may mean repackaging their offers due to the changed market conditions.

They understand that while there is a lot to be concerned about, there will be oases of opportunity that they can uncover. One advantage of being small is that these oases don’t need to be large. (Small oases are uneconomic for big businesses and big ones are rare in a major downturn.)

While there might be a lot of desert between oases, if a small business can find one they can prosper for a long time while those around them dehydrate. These oases, niches in business-speak, may be different to the ones that exist in the good times, but they can be just as commonplace.

If you have a pre-existing niche, you may find that your oasis is turning to desert. If you stay where you are, you will feel the same pain that larger businesses feel: stranded as their green pastures die off.

Re-examine your strengths and look for the new opportunities that arise as the market place changes. How have people’s needs changed? They may not want to buy new equipment, but may be prepared to lease it. They will certainly need to maintain their existing equipment if they don’t replace it. People eat out less, but they still eat. How has your market changed and how can you respond? Small businesses can do this quickly. That is their advantage.

The oases will always exist and you may need a water diviner to find them, but sitting where you are waiting for an oasis to find you is wasting your advantage.

Over to You. What do You Think? Post Your Comments Below.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success.


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The Australian Small Business Blog

Tuesday, April 07, 2009

Sales for People who hate Selling


Are you someone who could sell ice to Eskimos? Not everyone is a natural salesperson, but in business, nothing happens until a sale is made. So what do you do if you hate selling, or you can’t find staff to sell for you?

You can create a marketing strategy that does not rely on strong sales skills. Imagine someone just comes into your business and when you ask: “How can I help you?”, they say: “I want to buy that and here is my money.”Does that sound too good to be true? Well it happens all the time. Look what happens when you go into McDonalds. The person just says: “May I take your order please?” They don’t spend time explaining why their burgers are superior to everyone else’s or that their prices are the best. They don’t have to, because this is all done by the marketing that the buyer is exposed to prior to entering the store- and when they enter, they will buy.

McDonald’s has chosen this approach because they are using low skill labour and they don’t want to go to the expense of teaching their low wage, part-time and casual staff how to sell.

If you create a marketing strategy that sells your buyers before they contact you, you don’t have to be a super-salesperson to make a sale from an enquiry. The marketing does all the hard work for you and all you have to do is to take the order.

To do this, however, you must have a marketing system. A good marketing system will attract enquiries so you don’t have to cold call, and pre-qualifies buyers so that the tyre-kickers and time wasters are filtered out.

Then a sales pipeline is used through which you move your buyer, step-by-step. Each step is a test where the buyer must make a new commitment to you before they move to the next. At the penultimate step they have decided that they want your product and it is value for money. Then all you have to do is ask them: “May I take your order please.

This requires a lot more planning than you will see from salespeople in a used car lot, where arm wrestling seems to be the most important skill. We are no longer talking about hunting the buyer – instead we nurture them.

There are few really natural sales people that you can hire. (The very best start their own business.) Yes, your employees should have sales training, but boost it with a well defined sales pipeline so even people who hate selling can sell for you. This also removes the dependence on a star salesperson who could leave your business at any time (and probably will).

So even if you have staff that could sell ice to Eskimos, don’t you think their skills would produce more sales if you also used a sales pipeline, and sold Eskimos something they really want, like central heating, and then you can sell them an icemaker for their drinks so they don’t have to go outside.

Over to You. What do You Think? Post Your Comments Below.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success.


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Dr. Greg Chapman is also the author of
The 5 Pillars of Guaranteed Business Success

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