I’ve been appearing here and there on The Big Idea with Donny recently. Thought you might get a kick out of how the show comes together and the role of so-called experts (yours truly included) who are invited on the show.
Below are the emailed questions I received from the producers in advance of my most recent appearance. They take this and turn it into what’s called a “rundown”, which is essentially an outline of the show with talking points, many of which end up on the teleprompter. I figured the process, as well as the actual advice, might be illuminating for you. Enjoy!
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Financial:
What are the biggest financial mistakes that SBOs make?
· Not prioritizing the spending
· Not keeping track of available cash this month and in the months and year ahead
· Forgetting that it’s easier to raise money when you don’t need it
· Buying new instead of “used”.
· Ignoring what I call the “2X Factor” which makes the point that things usually take twice as long and cost twice as much than you expect
· Buying too much inventory or spending too much on advertising without testing out what works best
· Not paying attention to building business credit
· Accumulating “fixed costs” instead of “variable costs” which are far more flexible to changing status of the business
· Receiving investment and not ensuring that there’s a unified plan and timeframe. This is called, “alignment of interests,” and is critical to create.
What resources are there for people when they are in a hole?
· there are consultants who will help you build up your credit, personal and business
· utilize an accountant. Don’t just check in at tax time – make it a quarterly check-in.
· PR firms are helpful in managing any external-facing issues
Should they use their credit cards?
· Credit cards are a last-resort solution to financial problems. More often than not, they simply dig a deeper hole for you.
Should they go to a bank for a loan?
· Going to the bank for a loan BEFORE crises occur is always smarter.
Where do you turn when you can’t get a loan?
· Your rich uncle
Friends and family? Pitfalls / pros?
· Friends and family are a great way to go as long as you treat any loan or investment professionally and set expectations and communicate regularly and thoroughly about status of their investment
FYI, one of the most common laments we hear on our radio show is, “how do I get a loan if I don’t have good credit?” That’s a huge impediment and reality out there…
Legal:
What are the biggest legal pitfalls that SBOs fall into?
· Not being protected or insulated from a lawsuit – this is easily achievable by moving from “sole proprietorship” to “LLC” or “S Corp.”
· Ideas are copied by someone else b/c the ideas, known as “intellectual property” weren’t protected or enforced properly.
· Non-compete clauses are not entered into with a partner or key employee at the time of engagement and when they depart they use their experience with you to become a competitor. They can poach clients/customers, too.
· Not having people sign a Confidentiality Agreement whenever possible
· Making representations that are too grand and unrealistic with investors, which can lead to shareholder hostility and worse
How important is an attorney to a small business?
· Very. That’s why attorneys are so damn wealthy – they’re needed!
If a SBO finds themselves in a legal matter are there any resources they can go to for help?
· Attorney is first stop. If no attorney, call around people who you trust and ask for a referral.
· Internet is valuable but can be hit/miss in terms of reliable information
· If a legal issue arises, I recommend making that your leading priority until you’re certain that it’s not a significant threat. Left untended to, a legal situation can drown you. This is one area where you always want to be extremely vigilant.
Insurance
What are the biggest insurance mistakes SBOs make?
· Not getting coverage, especially basic liability coverage
· For investors, it’s effective to indicate to them that you’ll have “Key Man” insurance. Helps them manage their “downside” in the event that you’re incapacitated.
· Not getting coverage for a home-based business b/c you assume your homeowner’s insurance covers all your stuff.
· Skimping on healthcare coverage. When a medical situation arises, don’t let it eat your finances. As pricey as it is, it’s better to bear the burden of healthcare costs over a longhaul than it is to get slammed all at once.
What is the bare minimum that a SBO needs?
· Healthcare
· Liability coverage
· Short-term/long-term disability
Natural Disaster
Obviously, these are unforeseen, but how can SBOs prepare for them?
· Have an emergency procedure in place for you, your team and customers who may be present/impacted.
· Establish communication and rendez vous points
· Sounds crazy, but each year thousands of people get blind-sided. You always think, it happens to other people, not me… but alas…
What resources are there for disasters?
· www.Ready.gov – they provide both business and personal disaster planning advice and materials
Management / Employee
What are the biggest management / employee problems?
· Most employee problems result from poor selection and management
· Theft of intellectual property
· Sharing of proprietary information
· Stealing
· Working under influence of drugs
· Employee-employee discord
How do you handle a major employee crisis?
· If there’s mutiny on the bounty or one bad apple, individual meetings complemented with group meetings are effective. Anytime something goes awry, it can be a great learning opportunity for everyone else as long as embarrassment is avoided.
· If the employee has an emergency (is that what you mean?!), treat them like a family member.
