Understanding the New “Money” Environment

From Biz2Biz NWA, February 2010

We’ve just come through the most difficult year most small business owners and operators can remember. If you were to visit one-on-one with them, you would find the majority still don’t really understand what happened from a financial perspective. Many would not be able to explain why banks they’ve partnered with for years suddenly refused their business. They wouldn’t know that the reason for the change depended on whether or not their bank participated in the Troubled Asset Relief Program (TARP) by taking funds from the federal government. They wouldn’t understand that if their bank did participate, the bank’s ability to be flexible with customers was forfeited to government oversight. Or that banks that chose not to participate in TARP, followed suit out of fear.
This is just one of the many changes that occurred in the financial environment of 2009. While you can’t control this circumstance, there are five areas where you can. These principles represent the chronic weaknesses of the small business marketplace, and business owners who take the initiative to follow these fundamentals are more likely to succeed.

The Business Plan
Facts reflect more than 50% of existing small businesses do not have a business plan in place. This is simply not an option anymore. A business cannot survive in the new money marketplace without a plan that identifies the business model and charts the future of the business. Especially critical for a start-up, access to borrowed or investment money is not available for businesses without a good business plan.

The Marketing Plan
Marketing has undergone more transformation in the last five years than any other business function. Marketing is no longer about advertising and sales. It’s about branding a business in the marketplace so that when the need for your product arises, your business is the first one the customer thinks about as the best place to spend money.

The Financial Plan
The small business owner and operator who doesn’t understand how to create and manage three-to five-year budgets, profit and loss projections, cash flow analyses, break even analyses, standard percents of operating line items, and the importance of an operating philosophy, does so at great risk of failure. Business really is about knowing how to manage the money.

Business Protocols
A protocol is defined as “a set of standardized procedures by which an entity conducts itself.” In the business environment, protocols are typically called Policies and Procedures. Only 50% of small businesses have these in place. Without quality practices, policies and procedures, a small business can’t compete in the new money environment.

Networking

I’m not talking about being a member of every community and civic organization on the face of the planet. The importance of networking is about belonging to groups that are actually relevant and will support and sustain your business. Are your networking activities actually returning an investment in revenue? There is a difference between networking and volunteer work, and too many small business owners blur the lines between the two.

Maxie Carpenter is a professional analyst and counselor, author, and President of MVC Advisory Resource, Inc. He is the author of I Didn’t Ask You to Dance! and Managing Difficult People in the Workplace. You can reach Maxie at www.mvcinc.org.

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