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Archive for the ‘Business Strategy’ Category

by Jill Johnson, Vice President, The Corundum Group

As 2012 rolls on, we continue to watch the economy with rapt attention. This election and the handling of the pending “fiscal cliff” will both be very telling as to where markets and the global economy will head in coming years.

Congress is operating in an almost continual state of gridlock, and one of the most severe impacts of the stalemate will be felt when and if a series of planned tax increases and spending cuts go into effect the first day of 2013.

Few would argue that the shock of going off this fiscal cliff, as it is being called, would be easy for our economy to absorb.  Among the changes are the expiration of the Bush-era tax cuts, the Obama payroll-tax holiday, emergency unemployment benefits, and the reversion of exemption levels for gift and estate taxes.  The New Year will also see the introduction of new taxes to support the recently passed healthcare law.  When you look at all these factors you can’t help but hope for teamwork in Washington. Election outcomes will impact this whole scene as well as the following chart shows.

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The uncertainty around the fiscal cliff causes us to remain wary and has likely contributed to the sluggish pace of recovery we experienced during the second quarter.  According to a survey of small business leaders conducted by the US Chamber of Commerce, 90% are concerned about the impact the fiscal cliff will have on their business growth. Nearly three-fourths of the respondents believe the recent healthcare law makes it harder to hire more employees. Global factors are also contributing to a fear of the unknown, fueled by economic challenges that continue to impair most of Europe and a slowdown in China.

Chart Source: RBC Global Asset Management, CBO, GS, RenMac, BoAML, DB, Eurasia Group, ISI. Note: Figures and scenarios are rough estimates. * Bush tax cuts for households with <$250K in income, Alternative Minimum Tax patch, tax extenders package. ** Original targeted debt ceiling cuts, old stimulus expiration, overseas military draw-down.

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By Charles Lamb, Marketing Director, Central Bancorp

ImageAn article in the Colorado Springs Business Journal last month (Most Small Business Owners are Marketing Online) reminded local small business owners of key challenges they face in creating the right marketing mix to establish—and keep—their customer base, create awareness, and differentiate their product in the marketplace.

A marketing program to do all of the above is tough work, assuming most small business owners do not have their own marketing directors, graphic designers, web developers, and social media experts on hand to do the work it requires to bring in customers and build their business. So, most small business owners—as the article states—resort to marketing online. The reputation of online marketing is it’s inexpensive and easy, and that’s why small business owners rely on the internet and social media to market themselves. I have some thoughts on why this should not be your only strategy outlined below, but first there are several points within the article on which I agree:

Small businesses need to go where their audience is. This is especially important if you have just one location and where your e-presence can benefit your growth.

Participating, networking, and being found online is extremely important. How customers interact with you electronically is critical and could be a prospect’s first point of contact with you due to the growing utilization of mobile and electronic devices.

A majority of consumers use the internet to research products and services in their local area. A user-friendly and attractive website or mobile application will drive customers to your business.

What made me stop and think a minute while reading Monica Mendoza’s article—who is, by the way, a great local writer for the journal—is the second paragraph, which says that of the small business owners surveyed by Manta—an online site for small businesses—74 percent find networking online just as, if not more, important than networking in person. Yikes!

Sure, you might need a Facebook presence. And, you need a decent website. But, as a small business owner, it’s to your advantage to also invest in developing strategic alliances and partnerships out in the community. You can do this by networking and getting involved in the Colorado Springs non-profit and business communities—creating ambassadors for your brand, which will drive business through referrals. And, the good news is that you don’t need a dedicated marketing department to create decent volume of word-of-mouth marketing.

Online marketing would be your mass approach and building strategic alliances and networking would be your grassroots approach to building your customer base—and it could most definitely take both efforts to do the job of building your business. But, my point is that you cannot put all of your marketing eggs in one basket and ignore the other. All effective marketing programs have a mix of both.

For further discussion or questions, feel free to contact Charles Lamb at 719.228.1143 or Charles.Lamb@CentralBancorp.com.

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Contributed by Steve Schneider, President, CB Insurance

ImageEntrepreneurs invest their personal capital to start and build businesses. They write personal checks to make payroll, to fund equipment expenditures, and pay operating costs. They put their own money at risk in hopes of an acceptable return on their capital. Historically, investment risk taken by the successful entrepreneur has been rewarded by increased profits and a long-standing business venture. Those who opened businesses were lauded for their propensity and willingness to incur risk and for their commitment to community and growth.  

Not so much today. In this political season, entrepreneurs are painted as greedy or labeled as Wall Street “fat cats” In reality, most entrepreneurs across the USA are Main Streeters, like you and me. They sit across from friends and neighbors in local churches and restaurants. They get up each morning to work another day–to make a product or provide a service, train or manage staff, attempt to smartly grow a business, and to participate in and enrich a community. Each day across our country, entrepreneurs incur risk and employ others with no guaranty; only the hope of their own success.

On January 1, 2013, the financial success these entrepreneurs seek–the economic reward they pursue by putting personal capital at risk—will be severely diminished. Ordinary income tax rates for many small business owners in the highest tax bracket will increase by over 10%. A new 3.8% Medicare Tax (Obamacare) will be applied to certain investment income, such as dividends and interest income. Capital gains on investments will be taxed at a rate 30% higher than in 2012. Income derived from stock dividends will be taxed as ordinary income, rather than the current 15% tax rate – a whopping +400% increase for those in the highest tax bracket.  All this after the company itself has paid up to 35% of its income in corporate taxes. 

So what’s the big deal? Those doing well should “pay their fair share,” right? We can always debate whether tax rates of 40% income, 35% corporate, 23.8% capital gains, 40% dividend income, and 55% estate (death) are “fair.” The question today is: “Would you write a personal check to start a business, knowing that almost half of what you earn over time will go to the federal government in the form of taxes?”  Or stated another way, “Would you invest your own money to grow a business and employ more people and take more risk, knowing that upon the sale of your business the increased value derived from your investment and sweat equity will be substantially taxed, and, to add further insult, that upon your death more than half of the remaining value might also go to Washington, rather than to your heirs?” 

If you are curious why the unemployment rate remains stubbornly high, why GDP growth is anemic, and why many of our best and brightest college graduates remain unemployed, you need only put yourself in the position of an entrepreneur and ask – “Would I write that check?”

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Contributed by guest blogger Chuck Kocher, Certified Diamond Master Coach, ActionCoach

Remember those days when business folks sealed deals through a handshake, and it was all about who you knew?  Yes, those were the good old days, and I’d like to tell you that they’re still here!

Even in today’s technology-driven, global business environment—where we’re more prone to catch up with our buddies or business partners via Twitter and Facebook—a wise business strategy is to build a network of close relationships to generate sales referrals and ultimately revenue for your company. I would estimate that 70 percent of my business is developed through my key strategic partners: people with whom I have developed strong personal and professional ties, who then provide warm referrals to people they know.

Another way to put this is to create a strategy around creating mutually beneficial relationships to drive your business—and theirs. Here are a few key tips to get you started:

–  Tip 1: Make this a priority in your business life. Schedule 4 to 5 strategic partner meetings every week to build upon relationships and develop revenue channels.

–  Tip  2: Take your time and be a giver. Don’t go into the first meeting making it all about you and what you need. Learn more about your potential partner, what their business needs are, and ways in which you can assist.

–  Tip 3: Set the table. In meeting number 2 or 3, let your partner know that a mutually productive business partnership is a goal of yours.

–  Tip 4: Give again. Once a partnership has been established, give referrals to him or her as often as possible.

–  Tip 5: Build upon your network. Now that the groundwork for exchange has been completed, ask for the names of your partner’s trusted advisors and then go about making those people or firms a part of your network.

–  Tip 6: Perform well. Once your strategic partner has referred you to one of their advisors, perform well so that your strategic partner has confidence to provide you with more opportunities.

In short, it’s important to think foremost about the people around you and the networks you want to develop to generate revenue and opportunities for your business. Yes, social media and advertising are important tools for business generation—but so is building strategic partners.

For more information on action coach Chuck Kocher, CLICK HERE.

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Contributed by Todd Morris, Vice President Commercial Division, CB Insurance

Whether you are a government contractor or small business owner, cyber security is becoming an increasingly complex topic—affecting not only the integrity of information technology systems, but the security of the information contained within. As we all know, when an organization—government or small business—experiences a security breach, there are long-term and possibly even permanent consequences.

As such, it’s wise for all businesses to take note of the recent amendments made to the General Services Administration Acquisition Regulation (GSAR).  These amendments will affect contracts awarded after January 6, 2012 that provide the GSA with technology supplies, services, and systems with security requirements. The amended acquisition rules are meant to strengthen the security of services procured via prime- and sub-government contractors.

Contractors are now required to produce IT security plans within 30 days of the contract award, and they are required to submit written proof of IT security authorization within six months after the award—along with verification that their IT security plan remains valid annually.

According to the GSA, the requirements for submission of an IT plan will be in solicitations that, again, include information technology supplies, services, or systems in which the contractor will have physical or electronic access to government information that directly supports the mission of the GSA.

While these amendments to the GSAR place a new responsibility on government contractors to provide IT security plans, it is a necessary and appropriately cautious step in the right direction to securing sensitive information.

 Contact Todd Morris at 719.477.4275 for information on an upcoming cyber security seminar to be held at Bancorp Plaza at 8:30 a.m. on Tuesday, February 7, 2012.

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Contributed by Gary Markle, President, Central Bank & Trust

The U.S. Small Business Administration recently revamped their CAPLines program after engaging financial industry leaders in all 50 states to implement changes benefiting SBA lending partners—such as Central Bank & Trust—and small business owners.

According to the SBA revised guidelines, the new CapLines program gives small businesses more flexibility to finance the contracts, subcontracts, and purchase orders they compete for and win. “By addressing the short-term and cyclical working capital needs of small businesses, the revolving line of credit will help them manage their cash cycle, scale up, and create jobs,” the SBA explains.

From our perspective as an SBA lender, these revisions make this once-underutilized lending program more attractive and allow us to fund a borrower’s short-term working capital needs under the SBA guidelines. For businesses that are growing and have been awarded new contracts, banks now have the capacity to do revolving lines of credit up to $5 million utilizing their own credit parameters. This means business owners can work directly with a dedicated SBA lender and process their line of credit expeditiously.

Key benefits of the CAPLines program (which can be found at SBA.gov):

– Small businesses can pledge accounts receivable, inventory, contracts, and purchase orders to secure an SBA revolving line of credit.

–  The SBA will no longer require small business owners without buildings or equipment to use their personal assets as collateral to secure working capital.

–  Small business subcontractors can now obtain an SBA-guaranteed line of credit to finance their work on a contract with a federal prime contractor.

To understand the benefits and details of the CAPLines program, small business owners should work with a lender who knows the SBA policies, procedures, and systems to deliver and service this type of revolving credit. The small business owner should also know who they’re talking to, who’s processing the loan, and who’s making the decisions that potentially affect their future growth.

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Contributed by Steve Condon, President, The Corundum Group

It’s a tricky act, and sometimes perfecting it comes through difficult lessons.

Many firms have learned since 2008 how to operate at optimum efficiency without sacrificing quality. For certain, it was a painful transition for many. But many executives we talk to say it’s been a valuable exercise.

As we lumber toward a recovery that will surely come to pass at some point, the balancing act shifts a bit.

Consider the following scenario:

Company A hires Company B to provide a valuable consulting service. The two companies have worked together for almost 20 years with very few serious issues arising along the way. Company B is a reputable firm with a long history and a successful track record and has already undergone extensive restructuring efforts in order to keep business running smoothly and within budget restraints.

However, in recent months Company A has noticed several instances of less than quality work coming from B, including slow response time, missed deadlines, and even the occasional error or inaccuracy in a project. The staff at Company B seems to be scrambling and constantly apologizing. Company A’s level of dissatisfaction rises to the point where a meeting of the minds occurs to determine whether or not this relationship can continue.

Again, assuming B has exhausted their resources in terms of internal organization, process refinement, etc., it now has two choices:

  1. Hire
  2. Risk losing a client

While it may cause short-term strain on firms, we believe in the long-term this challenge will become more prevalent and will ultimately be a good thing. What this scenario represents is the scale tipping to the other end.

Lean staffs are no longer able to handle any increase in volume. It may not be a shocking or even noticeable rise based on the sluggish improvements we are seeing across the board, but over time we believe firms will be pushed to expand their workforce or risk losing business to a competitor.

As hiring picks up, voila, the recession will be over!

Well, perhaps it won’t be that easy—and all signs point to the fact that it won’t be a quick change. Yet this shift in balancing lean operations and quality service standards will ultimately create more jobs, which is a major key to sustained recovery.

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