Understand all the costs of your inventory:

Companies often misunderstand, or don’t properly assess their costs of inventory. A company’s inventory costs are made up of more than just the product on the shelf. They also include the per unit freight costs of every part and material in your warehouse. In addition, any time you move product from one warehouse location to another, it also adds to the costs. Holding inventory for extended periods is an additional cost. Electricity, and even heating and air-conditioning, are also costs. Damage to inventory is yet another cost, as is obsolete inventory that can’t be sold anymore. A basic rule of thumb is that inventory ties up money that you might otherwise be able to use in other parts of your business. Having money tied up in inventory that isn’t moving, or doesn’t sell fast enough, is a cost to your company every day, week and month. A number of companies simply ignore these factors and keep their analysis to the basic cost of the product or material on the shelf. However, inventory costs go well beyond that.

1. Use your economies of scale and don’t get fixated on short term inventory costs:

Every company wants to have low inventory costs. It makes perfect sense not to want to have too much inventory. However, mistakes are often made when companies become so fixated with monthly inventory costs that they actually ignore potential savings that can be accrued with better vendor pricing with larger volumes per order. By no means are we implying that month to month inventory costs aren’t important. They are very important. Rather, what we are saying is be cognizant of the savings your company can achieve when purchasing larger volumes, relative to how long that inventory will remain in your warehouse. A good rule of thumb is to remember that monthly carrying charges for inventory are usually around 3% of the inventory value on hand. So, if purchasing double your volume allows for a 10% reduction in pricing, but means you hold onto the inventory for an additional month, it makes sense to do so. Your two months of inventory will cost you a total of 6%, but your price will go down 10%. Your company is still ahead 4% in costs. Granted, this is a simple example, but there are bound to be those items you can double your volume on.

1. Include every cost variable and manage costs by quarter:

You’ll never be able to improve how you manage your inventory, and its costs, without first being sure to include all the necessary variables. It’s all or nothing when it comes to inventory costs. Be sure to include all the variables we previously mentioned, and set a plan in motion to reduce those costs. When you have all your costs mapped out, you are always in a better position to identify areas that need to be immediately addressed. Take the time to put all this information down in a table, and extend your analysis to looking at these costs over a quarter. You can still set plans in motion to improve costs month to month, but give yourself plenty of time to see the results of your actions. Measure the impact of your cost cutting measures by quarter, and take a longer term view of your inventory costs.

1. Eliminate redundancy and obsolescence:

Surprisingly, it’s really not that hard to improve your ability to tackle the problem of obsolete or outdated inventory. It’s simply a question of discipline and better coordination between sales and inventory management. What needs to happen is that you set some boundaries by which your company will not deviate from. Make sure the common parts in your inventory have multiple customers who could take that inventory. While it really depends upon the industry, a good rule of thumb is to keep inventory of common parts as long as your sales has the ability to sell that inventory to a minimum 3 or 4 customers. For all non-standard parts, that business should be “made to order” business only. In this case, you don’t hold inventory of the product, and only ship what is ordered by your customer. Of course, there is a lead time for the product, but it never remains in your inventory and therefore doesn’t add to your inventory costs. It’s up to your sales team to properly manage customer expectations and have them incorporate the lead time into their order patterns. Aside from these two areas, if you do entertain holding inventory for just one customer, make sure to have an iron clad agreement in place securing the inventory and protecting your interests.

1. Negotiate favorable supply agreements with vendors:

Understand that damage to your inventory is a huge impact on your overall inventory costs. Holding inventory for extended periods is not only a cost per month, but also represents an additional cost if those parts are accidently damaged. If damaged in your warehouse, your company is liable for that cost. However, if the risk of that damage is removed, then your costs will go down. How can you reduce the potential for damage to inventory, and at the same time reduce your month to month carrying costs? You accomplish both by negotiating a contractual blanket order agreement with your vendors that allows you to only take inventory when you are certain you’ll either use it, or sell it immediately. Granted, you won’t be able to do this with your entire inventory, and will have to abide by our first principle of using your economies of scale, but there will be items you can use these agreements with. Just be aware that your supplier will have their own monthly carrying charges and will likely put a limit to how long they retain your product. However, having your customer keep your inventory for you, frees up some of your cash, and protects against damage to that inventory in your warehouse.

Trying to keep inventory at manageable levels is never easy. It requires stronger cohesion between your sales, purchasing and inventory management departments. However, by using some simple rules your chances at lowering your costs of inventory greatly increase. Over time, you’ll begin to see what works, and what doesn’t. By managing your inventory with long term goals in mind, you’ll be able to identify those products where using your economies of scale is beneficial, and those products where contractual agreements make more sense.

1 What do you know about in life? If you don’t want to have a struggle at all stages of your start-up, select a franchise in a topic area you are familiar with. It is difficult enough to start a new business without having to learn about an unfamiliar product or service stream at the same time. If you are familiar with the topic area you will know what the problem areas will be, what the business potential is, and what the demands on your time and money are likely to be. You will be also less likely to be conned by suppliers or a questionable franchiser.

2 What capital do you have available? Entering a franchise arrangement with insufficient capital will mean you are always struggling financially from the start. There are many ‘once only’ costs associated with starting a business, and if you cannot meet these, your business will have a difficult birth. The next financial consideration is whether you can make a profit from the business. The franchiser may impress you with earnings potential, but you know your local area and market. Don’t fool yourself with over-generous estimations. Careful research or due diligence in all areas of finance at this point will prevent pitfalls or unexpected issues later.

3 Is there a suitable location available to host your business? The franchiser may help you to find premises, or may rely on your local knowledge. Use the franchiser’s expertise to find premises that suit the working pattern of your business. Ensure that you use available expertise such as a lawyer or accountant to check the contract for the lease. If you are investing time and money in building a business, you don’t want to find you have built it on a dodgy lease agreement where your tenancy is insecure.

4 Secure the support of family and friends. You may simply need someone to stand in a store while you have a quick lunch, or you may need to borrow money to expand the business. Whatever the circumstances, the support of people you know and trust is vital in setting up a business.  Life will be difficult enough without having relatives say ’I told you so’. Family and friends can see you through many business storms and provide a level of support and help that money can’t buy.

5 Decide which franchises meet these criteria. You have narrowed the field by researching which franchises suit your location, experience, circumstances and available finance. Now you need to make a choice as to the best franchise to invest in. You will be hopefully signing up to a long-term relationship, so don’t rely only on business data. If you just don’t like a franchiser, don’t give yourself years of grief and unpleasantness just because the relationship scored best in a survey. A franchise deal you are happy in will be much more productive than one in which the relationship is always difficult.

The guidelines listed above will give you some help in deciding among the many opportunities available. The most important lesson is that you do your research carefully, and don’t make a quick decision. Find out what the business arrangements are, but make sure you will be happy in the relationship. You will then hopefully have a business that will give you a profitable and a happy life.

So lets be clear. An employee is not an Independent Contractor — and a Booth Renter is not an Independent contractor. Even though a Booth Renter pays taxes in a manner similar to an Independent Contractor, the source of their income is very dissimilar. In addition, their obligations to the IRS for reporting income and expenses is quite different.

As a matter-of-fact, the Employee has more in common with an Independent Contractor than with a Booth Renter. Specifically concerning the Form 1099 Report of Income. Employers give the form 1099 to Employees and to Independent Contractors. Booth Renters give the Form 1099 to those they are leasing business space from.

Taxes
Employers withhold taxes, provide a paycheck and also pay Employer taxes. As an Independent Contractor, those who employed you, will pay your bill or invoice in full. You are responsible for paying your taxes. As a Booth Renter, you pay rent to who you rent business space from. The rest of the money you make is yours. It is solely your responsibility to pay taxes on it.

So remember, it is the IRS who can decide if you are an independent contractor or not. The same folks who can audit and fine you thousands of dollars! So if you really want to know whether or not you are an Independent Contractor, find out what the IRS has to say about it.

What Is An Independent Contractor?
An independent contractor is not someone who comes to work at the salon day after day, week after week, with a split commission pay plan between themselves and the salon owner. That sounds like an Employee, someone who is supposed to be on the payroll. You can be paid by the hour or you can be paid a commission and certain aspects of the minimum wage laws also would apply to you. Your Employer tells you when to come to work and when to go home. Your Clients are not really your clients, they are the Clients of the Salon Owner and you should receive a paycheck. Your paycheck should have deductions for Federal, State and Local taxes and deductions for Medicaid, Social Security, etc.

In addition, the Salon Owner as Employer, must pay their share of your Social Security and your Workers Compensation. And because the Employer pays you, at the end of the year the Employer is supposed to provide you with the Form 1099, which reports money paid to you and taxes deducted on your behalf.

Also, if you are an Independent Contractor, the Employer also is supposed to provide you with a 1099 Income Form, reporting money paid to you. But no responsibility for paying taxes. Do you see why some Salon Owners like paying you as if you were an Independent Contractor? When really, you are working as an Employee. They like not having to pay their share of ALL those Employee taxes.

Most people in the Beauty Industry who think they are an Independent Contractors, are actually Booth Renters. But as far as the IRS is concerned, you cannot be part Booth Renter and part Employee. For tax purposes you have to do everything expected of a Booth Renter, which would then place you in the Independent Business Person’s tax classification.

A Booth Renter leases space within the Salon. Space in which to operate their own business for their own benefit. Not to work under the control of the Salon Owner for the benefit of the Salon Owner. You pay a specified rent, not a commission or a split of your income. You collect and control the money and give the Salon Owner a check for the rent amount. You must have your own key to the Business as proof to the IRS that you can enter and leave as you wish and therefore determine your own working hours.

So you see, if you are in a work situation where you are called an “Independent Contractor” or you are a Booth Renter, or you are a “Booth Renter” that is being called an “Independent Contractor,” and they don’t allow you to have a key, or they can tell you what time to come to work in the morning, or the Clients pay a central cashier or cash register instead of paying you, or they tell you which products you are going to use, or you’re being paid some sort of split commission… well… maybe everything is just fine.

Unless the IRS comes knocking on the door. Then you’re going to have to explain why you are NOT the Employee the IRS thinks you are.

And about the Form 1099. At the end of the year, a Booth Renter is supposed to provide a Form 1099 to the Salon Owner. Showing the untaxed income that YOU provided to the Salon Owner. And as for your own tax return, you file as the Operator, as an Independent Business.

Booth Renters should have a signed Booth Rental Agreement. For the protection of the Salon Owner and the Booth Renter.

Why?

For a lot of reasons! The main one being, IF the IRS ever knocks on your door or the door of the Salon Owner, it is proof of who is supposed to have been paying all those taxes!!!

So… As a Booth Renter, you lease a work space for a set period of time, at a specified price that does not vary as income varies. And you work as an Independent Business Person.

This week, I was offered just such a business partnership. It would have been wonderful for my ego. It was a fantastic brand with which to collaborate and a high-profile venue, with worldwide recognition. All my family and friends were impressed. Yet, it made absolutely no business sense.
How often do we make business decisions based purely on our emotions rather than on logic, insight, and real business savvy? This was my prime example. Had I become involved in this enterprise, I would have done so for all the wrong reasons—all the emotional reasons. Though logic told me this wouldn’t be the best course of action, I could easily have let my emotions win the battle; but, thankfully, common sense won.

For me, this experience has highlighted the importance of a simple yet crucial principle: Emotions are the worst criteria on which to base our business decisions and also the worst indicators that those decisions have been wisely made. While we wouldn’t want to discount our intuition entirely when making business decisions, because that would rob us of a whole dimension of our humanity; it’s just as true that logic and clear thinking must predominate, keeping our emotions in check, when the time for a final decision arrives.

As we allow ourselves to weigh all sides of the matter objectively, without feeling bound by what others think or expect of us or the prestige a particular business decision might bring us, we enjoy greater freedom to make the choice that would benefit us most in the long run.

In a small business, we often treat our employees as if they were family. When those employees disappoint us, as so often happens, we feel hurt. We think, “How could s/he do this to me? I treated her/him like family.” While these experiences can be painful, they do teach us an important lesson: Though it’s always right to treat others well, in a business environment we mustn’t allow ourselves to take everything personally.

The challenge in this arena is to remain human while still stepping back just far enough to see the situation objectively—at least from a business standpoint. Though we may still feel personally hurt by an employee’s failure to live up to our expectations, we must nevertheless subordinate those negative emotions to our better business judgment. This will free us from being ruled by our emotions and responding in an emotional manner and will allow us to draw instead on our powers of logic to separate those personal feelings from the requirements of running our businesses effectively. It will also make dealing with our employees on a professional, employer-to-employee level, far easier.

One way to remain more objective in a business environment is to discuss issues rather than actions or people’s specific involvement in them. Rather than stating that an employee has done something wrong, try discussing the problem itself in a less-personal way. Make up your mind to be failure-tolerant, knowing that every failure presents an opportunity for learning and growth. This will make your employees far more likely to recognize their own errors, without feelings of defensiveness and without feeling as if they’ve been attacked, criticized, or put down.

Approaching problems as shared challenges to be collaboratively overcome for your mutual benefit—and that of the company for which you both work—will give your employees greater buy-in where your company’s vision and objectives are concerned, which can help build greater loyalty. In this way, they will begin to see that failure isn’t necessarily the end, but can instead be the beginning of greater success in the future. This will not only empower your employees to seek new ways of improving their own performance but will also give them an incentive for doing so.

Failure tolerance will also help you as a business leader by taking your dealings with your employees out of the emotional realm and placing them squarely into the realm of reason, thereby creating a less emotionally charged, more balanced and business-like atmosphere at work.

Dealing with emotions can be tricky in business, whether those emotions are our own or others’. That’s why it’s helpful to realize that, though we may experience an emotion—and even recognize and accept its validity—we aren’t required to allow that emotion to control us or dictate our reactions to others. Despite that emotion, we are still completely free to use our better judgment to determine the most appropriate response in any given circumstance. Keeping our heads when emotions threaten to overwhelm us will provide the mental space we need to deliberately choose to do the things that will be most beneficial to our businesses—and at the same time, to ourselves.

When we know why we are here, we can use that knowledge for the purpose of planning our lives. Now, having said that, it is not always to find the answer, so plan a few hours and perhaps begin with mediation and look again at your values, needs and strengths before you begin. You may want to continue to refer to them during this process.

I will share with you what mine are just to give you an example to work from. These began, in the planning process, much longer and then I was able to ‘pare down’ because I know what the longer description means and takes into account. The information you will be determining in the questions that follow will become your work sheet.

I also find it does not matter which you create first, personal or business, perhaps the one that is easiest. HOWEVER, I do advocate that we create a life we love and then design the work around that. The exact opposite of the way society does it.

I like visuals so here is one for you:

I relate Vision to the eyes on the body – what do I see is possible, perhaps not even during my lifetime…but something I am holding (visioning) for me.

Mission: I relate to the hands, what is that I can do to assist this Vision along?

Purpose: the heart – who do I need to BE in order for this to happen? Who am I being as I go about doing each and every day? Is it someone that is at peace, someone I am proud of, someone is living the purpose I came here for? What does that feel like?

My Personal

Vision: That each person will awaken to the God within and live their worthiness. (The shortened version that I refer to daily is: I know and live my worthiness.)

Mission: To assist others in this awakening process by loving, connecting and demonstrating happiness, joy and peace. My own awakening occurs as a result of this. (The shortened version is: To demonstrate happiness, joy and peace.)

Purpose: To model God’s gifts of love, enthusiasm and connection.

Professional

Vision: Through partnership (coach & client; nations, families, businesses) the world will prosper in wealth, wisdom, and understanding.=

Mission: To inspire, ignite and model integrity, leadership and prosperity.

Purpose: To evolve spiritually in order to model peace and inspire others.

Work Sheet:

Answer these questions (be very specific and do the first one last as you’ll want to use a combination of all the others). This will be a little long, but you will always hold the larger, longer version in your head and it will create the vision you want for your life. Then when you shorten it to a few words, the short words will represent the longer version to you – no one else need know the longer version. Just the repeating of the mission/purpose statement (short version) will attract the longer version or ‘big picture’ to you.

Personal

In my personal life I am committed to: (doing what, with who, because)

For recreation I enjoy:

My home environment will be:

My retirement home will be:

My hobbies, passions or interests are:

I will maintain (or regain) my health by:

Professional Life:

In my professional life, I am committed to:

I will concentrate my practice in the areas of:

My office environment will be:

My financial plans are to:

My business philosophy is one of:

examples: integrity, courage and truth, dedication to servicing my clients, providing superior coaching , providing service that exceeds the expectations of my clients, being known for my expertise in my field, a commitment to organization, automation and aggressive growth, being accessible to my clients.

~~~~

The shorter you can make them the better, then you will post these near your computer or phone, so that you can ask yourself each day, are my priorities supporting my Vision, Mission, and Purpose?  Does my calendar/schedule reflect this? Do my interactions with others reflect this? (You may keep a longer version in your journal so that it totally spells out what you are committed to.)

If you need guidance (other than me, feel free to ask) you might do some mediation on these areas. Perhaps one where you actually meet Jesus, God, Spirit, Buddah (whatever you wish to call this universal presence) and have a conversation around these matters. Listening carefully for the answers, but not beating yourself up, if you don’t get anything.

It’s a process. Enjoy the process. I find that when we have clarified these matters, our lives just work more effortlessly and we are much more effective.

Brainstorming Small Business Ideas

Did you know brainstorming is a common practice in the corporate world? It is particularly popular in research and development, and in marketing focus groups. Small business owners and prospective small business owners can also learn how to benefit from brainstorming sessions.

How Brainstorming Works

Brainstorming is a creative process. It involves thinking about a topic for a few minutes, then having a period of time where you write down everything that comes to your mind over the course of several minutes. Some brainstorming sessions go for hours.

The main idea in brainstorming is to turn off inhibitions, negative thoughts, and cognitive filters. In other words, you want to write out everything that comes to your mind, without worrying about whether it will bring any positive results. When done in groups, every person in the room simply blurts his thoughts out loud while one or more people writes them out on a board.

It is only after the brainstorming session ends that each written word is analyzed critically. Those that don’t apply at all are removed from consideration. Then the rest are looked over carefully and the most promising words, or the ideas they represent, are written down for future consideration. In this way, creative ideas you might normally dismiss are given more deliberate consideration.

The Application of Brainstorming for Small Business Ideas

Brainstorming generally works best in groups, as there is a definite synergy formed from the combinations of creative ideas into new ideas that no one person in the group might have. But even for an individual, brainstorming can be effective.

If you already have a small business with employees, getting employees together to brainstorm on something such as what other products they could up-sell to your customers could be very effective. You could also have brainstorming sessions for improving customer satisfaction or increasing community awareness of your business. Any aspect of your business you want to expand or improve can benefit from brainstorming.

If you’re thinking about starting your own small business, but you need some ideas, you can have your own brainstorming session. It may take a little longer to do it yourself. If you do it alone, it may help you to write down all of your ideas and then come back to them in a few days. This allows your mind to change tracks from openness to critical consideration. But, you may also find that your mind keeps drifting back to one or two specific ideas you had during the brainstorming session. You may have new small business ideas imprinted in your mind without even needing to consider the whole range of things you wrote.

You may be getting some idea now about how useful brainstorming for small business ideas can be. If nothing else, it is a quick, inexpensive method of jump-starting your creative process.

• Introduction
• The type of business; its aims and goals
• Suggested name of company
• Address/location
• Ownership and discussion of legal ratio, and the experience of the owners
• Estimated funds required and the probable sources of the funds
• Analysis of the market
• Where is the market?
• What are the trends?
• What is the competition, who are the competitors?
• Product analysis
• What is/are the product(s) and/or the service(s)
• How are the product(s)/service(s) ahead of competitors’? Where do they fall behind?
• Who will be the suppliers?
• What are the materials required (for manufacturing company)?
• Where will the materials come from (for manufacturing company)?
• What are processes/methods of manufacturing?
• What are the machinery required for manufacturing?
• Financial analysis
• Source and estimated amount of initial capital
• Monthly budget of operating
• Projected cash flow for the 1st year, and the expected returns during the 1st year
• The breakeven point (the point of time when you start making profits—‘ah, at last!’
• Marketing strategies
• Products and services offered
• Pricing of your product(s) and services
• Identifying the target segment of customers
• Define the market size
• Advertising plans with the medium(s) of advertising—indoor advertising, outdoor advertising
• How the products will be distributed and sold
• What about the servicing of the products (say, if you are manufacturing or importing electronic goods, or furniture)
• Special promotional offers
• Hiring Policies
• Estimated manpower requirement
• Skills required
• Salary, wages etc.
• Defining the hiring policies
• Marking out the responsibilities
• Training needed
• Management
• Type of business organization (ownership/entrepreneurship, partnership, private corporate, public corporate, non profit, etc.)
• Details of board of directors
• Details of officers

Does it look perfect? Do you think you can go about it?

Great! Get going.

Remember, don’t be too rigid with your chalked out plans. As you actually proceed with your startup company, will find, you have to accommodate many changes and alterations. Allow changes as you proceed. That’s the way things happen. That’s the way the world goes. The business plan is there to help you, not to prevent you. So, make changes in your plans as required. And best of luck. Your next step is to get business capital.

Congratulations! Welcome to the world of business.

The first step to start a company or business is situation analysis, or understanding your business. This is very important. With an incomplete knowledge of your business, you might end up in a bowl of soup, if not in an ocean.

Why on earth do you need a situation analysis? To understand your customers (who are your customers, where to find them and what is their relation to your product or service) analyzing the location of your business— you won’t do much good to setup a refrigerator manufacturing unit in Greenland, would you?

And finally, to understand the competition (sorry friend, that’s one part of business which you can’t avoid—you cannot have the fruit without facing the seed). While you hope for the best, you should always be aware of the factors that might lead to the failure of your business— that’s what you gain from understanding your business.

Before you actually startup your company, try to do a little bit of research in your own way about:

• Who are your target/likely customers?
• What is their age group?
• Geographically where do these customers live?
• What is the income of your customers?
• How frequently are the customers likely to you your product/service?
• What medium of advertising is most effective for your customers? (eg. if you are selling toys you can go for comic book or if your company is bigger, you can go for kids’ TV channels.)
• Who are likely to influence your customers’ buying decision? (eg. If you are selling/manufacturing foodstuff for kids, your promotion should not only take care of convincing the kids, but also their parents—they are the decision-makers)

Your location

• Does the location have enough footfall? Or is it that you’ll have to play solitaire throughout your working day?
• Does the location have good public transport, and parking facilities?
• Are the space-hiring and other costs (like electricity) reasonable?
• Is the space available enough for your business? Is there scope for expansion?
• How expensive is it to remodel the office space to fit your purpose?
• Find out about the companies which closed down in this location and why they closed down.
• Is it possible to run your business from your home? That would save you a lot of cost and time.

Facing the competition

• Find out who are your competitors
• Where are they ahead of you, where will you be ahead of them?
• Which groups of customers go to your competitors? Why are they going there?
• What are the pricings of your competitors? Are your pricings lower initially?
• How do they advertise?
• Are more new competitors likely to come?
• What technological advantage do your competitors have?
• Do your competitors have the advantage of a big brother (franchisor) backing them? Is it going to affect you?

We are shocked at how few businesses evolve their channels of communication. The small business revolution is rooted on agility, depth of client familiarity and the evolutionary mindset.

PICK + CHOOSE

There are tons of channels emerging every single day.  And while we advocate keeping on the leading edge of technology, we equally say pick and choose your channels.  As you refine your efforts on one, you can experiment with others.  The key during these periods of experimentation is to diversify the channel but keep the message consistent.

This will keep your venture focused on results and ensure that a discplined and detailed reflection is applied to fresh channels.  This helps avoid dilution of your effort and the potential for distraction and diffusion.
MASH-O-RAMA

With so many applications emerging, we are witnessing the rise of the cloud computing culture. The street name for this is mashing. What does it mean?  Just what is sounds like.  You mix and mash together applications that fit your vision and needs.

Here is a great site:
www.mashable.com

As small business owners, the day to day duties can bury our vision.  It can blind us to the pursuit of the big picture.  Often we can get so bogged down in the nitty gritty of the day to day challenges, that we start plowing through the heap of problems versus building a precision crafted venture that flourishes.