Tips and Advice from Small-Business Advisors
Given recent public discourse, especially during the election season, it seems everyone knows what small business people need—lower taxes, less of a health care burden, incentives for investors . . . did we mention lower taxes? But those big-picture issues don’t always connect with business owners’ day-to-day activities, such as hiring employees, maintaining cash flow, and managing a team. We asked some local experts to weigh in on prosaic concerns that crop up repeatedly for most small business owners—finance and accounting, work force issues, and meeting and event planning. Read on to find some useful tips that may make today’s tasks a little easier.
Accounting and Finance
Shopping for a new accounting firm?
Seek an accounting firm that specializes in your business’ industry; you want a firm that is familiar with any industry-specific rules and regulations. A specialist firm will also be better able to help identify opportunities for your business and understand the issues you are facing.
The Minnesota Society of Certified Public Accountants’ website (mncpa.org/referral) features a CPA referral service that can be searched by industry. Accounting firm websites also indicate the industries in which the firms specialize.
—Jolene Sieben, senior tax accountant, Baker Tilly Virchow Krause, Minneapolis
Seeking bank financing?
Proven, clear cash flow is a bank’s most important indicator of the finance-ability of your business. The problem is that your accountant is also suggesting ways to minimize profitability to save on taxes, and that can cloud your business’s true cash flow, making financing more difficult to get.
If your business will be going to the bank for financing within the next two or three years, reconsider incurring expenses that are not essential to generating cash flow. That combination business trip and vacation to sunny Florida, paying your kids more to clean the office than it would cost to hire someone else, and other nonessential tax-inspired expenses may hurt your ability to get financing down the road. If you have essential expenses that are nonrecurring, keep good records to prove to the bank that those expenses won’t occur in the future.
—John Kimball, senior vice president and manager of SBA lending, Central Bank, Centerville
Planning for the eventual sale of your company?
A business owner hoping to maximize the value of his or her company must focus on increasing cash flows, improving the sustainability of cash flows, and improving company performance as measured by industry metrics. A solid, diversified customer base, stable operating systems, and, most importantly, a strong management team will allow the business owner to successfully exit the business on their time frame.
Identify the factors that drive company performance. Once you have measurement tools in place for these key performance indicators, develop compensation plans that reward employees for behaviors and results that improve company performance. Keep them motivated to stay with the company by spreading the compensation rewards over a few years. Critical employees are more likely to stay with the company as the future, deferred reward owed to them would be lost if they left the company.
—Ken George, partner, HLB Tautges Redpath, Ltd., White Bear Lake
Looking for ways to minimize your tax burden?
There are few commonly missed tax breaks of much significance that affect most small businesses. However, there are many narrow and lesser-known potential tax breaks that could slip by you and your tax accountant. One example is a credit for small employers of lower-income employees, when the employer pays at least half of the employees’ health insurance premiums. Another frequently missed tax break benefits employers who hire people from targeted disadvantaged groups, such as certain veterans and long-term family-assistance recipients.
Section 179 and bonus depreciation are well publicized and generally well understood incentives (to us tax geeks, at least). But there are less-known improvement-related tax breaks. One is a credit for making a building or equipment more accessible for the disabled. Another example is a credit for rehabilitating or preserving a historic building. And incentives for investing can be found in the federal new markets tax credit and Minnesota angel (investor) tax credit. There are many tax breaks out there for qualifying taxpayers in the know.
—Steven Warren, director of taxation, Lehrman Flom & Company, PLLP, St. Louis Park
Running out of traditional financing options?
With access to funding sources still a challenge, small business owners should expand their search for capital bank loans and venture capital investments. Innovative nontraditional financing sources are available.
A few examples:
- A loan from a venture capital fund to a borrower, with the borrower also issuing a warrant to the venture capital fund lender.
- A factoring firm purchasing accounts receivable at a discount.
- A loan from a nontraditional lender with repayment terms based on a percentage of a borrower’s monthly gross revenue.
By keeping an open mind and exploring a variety of nontraditional financing sources, small business owners can find the right financing source for their businesses.
—Mark Tranovich, officer, Fredrikson & Byron, PA, Minneapolis
Work Force Issues
Thinking about how to make performance reviews more effective?
Avoid suspense! Suspense is great in a novel or a play. It creates tension. It keeps us on the edge of our seats. But suspense has no place in a performance review. Managers and employees alike dread performance reviews, primarily because of the suspense. Will I get a good review or a bad review? How will my employee react when I share the news about how he or she is performing?
There are two things you can do to avoid suspense. First, be crystal clear about how performance will be measured and what good or great performance looks like. Second, confront substandard performance early. If an employee is struggling, let them know as soon as possible and help them get back on track. If an employee is doing a great job, let them know and thank them for their effort and contribution. Don’t keep your employees in suspense.
—Bruce Sevy, director, leadership assessment products, PDI Ninth House, a Korn/Ferry Company, Minneapolis
Looking to develop better supervisors?
Employees don’t quit their jobs, they quit their boss. Too often business leaders hire supervisors for their knowledge of the industry, the process, or the technology. Instead, they should hire or train supervisors to be leaders first. Although several leadership skills are important, a few are essential to success:
- Supervisors must lead and motivate their employees. Supervisors must clearly communicate their vision and direction, clarify expectations, and reward employees for good performance. They must regularly provide employees with feedback and help them understand how they contribute to the success of the organization.
- Supervisors must develop their employees. Providing opportunities to learn and grow demonstrates to the employee that their supervisor and employer care for their well-being and professional development.
- Supervisors must value their employees. Employees need to feel that their supervisor respects and appreciates their efforts.
Employees who feel connected to their supervisors perform better, provide more discretionary efforts on the job, are more committed to the organization, and are more likely to stay. This ultimately results in higher morale, reduced turnover costs, and higher productivity for your organization.
—Patricia Staaden, COO, MRA/Trusight, Plymouth
Searching for productive interview questions?
The most productive interview questions for me are open-ended questions that reveal a candidate’s thought processes, motivations, values, and decision-making skills. One of my favorites is “What’s the most important thing you’ve ever learned from your mom or dad?”
Determining an applicant’s technical skills is a major goal, but finding out how he or she will fit into the organization’s culture is equally essential. I find that asking questions like these are a great way to determine if an employee is a good fit for the organization. It’s not about finding people like you or with a similar background, but about getting a sense of their values and motivations, and whether those will be a match for the company long term.
—Steve Kenney, regional vice president, Robert Half, Minneapolis
Trying to identify potential leaders in your ranks?
Strong performance in a current role is just one aspect to consider when identifying individuals who are ready to be promoted to the next level. Potential for success in a leadership role also depends on learning agility, the capability to shift how time is spent from doing the work to leading the work, the ability to relate to and communicate well with others, and the willingness to hold others accountable for delivering results. If possible, give high-performing individual contributors the opportunity to demonstrate these capabilities in less formal leadership roles, such as project management and task force leadership before making the decision to promote them. The step from doing the work to leading the work is a big one!
—Martha Carlson, COO, The Bailey Group, Golden Valley
Meeting and Event Planning
Worried about creating the best possible event?
The most important assets of any meeting are its attendees, but they are often overlooked in many parts of the planning process. While we focus on checking off room nights, shuttle seats, and chairs in the general session from our list, and dream up elaborate technical productions and theme dÃ©cor, we rarely contemplate the small frustrations of our guests— like when an attendee finds only one open outlet in his hotel room, and it’s located in the bathroom. Or when she’s stuck at a venue that charges for Internet by device, not by conference or individual.
In addition to objective-setting based on what executives want to accomplish, we should focus on what attendees want to get out of their time with us. Yes, it is a balance. But people don’t want to sit in rows and be talked at; they want to talk to each other. People need access to their wireless communities. Attendees need to be empowered to set their schedule, participate as they are comfortable, and have time to themselves. The 15-minute break between sessions is pointless; make it 45 minutes so people can work and connect. Create an open, collaborative, comfortable environment, rather than row after row of theater seats. Focus on all of the minute details of that experience, not just the general session, and you will reap greater return on your investments and attendees will find greater value in their time spent.
—Ryan Hanson, creative producer, BeEvents, Minneapolis
Working with a small meeting and event budget?
Hosting a meeting on a small budget requires flexibility, but you can do it! Consider the type and timing for the event first. A weekday event is often less expensive than a weekend event. Make it a half-day event to avoid providing breakfast and lunch. Look for a venue that does not charge for space: Several local restaurants have party rooms at no fee (for example, Amore Victoria near Lake Calhoun); some businesses have free rooms you can reserve in advance (Lunds in Plymouth, for instance); or check with your audience for a meeting room at one of their offices. Design your own invites in Word or better yet, use an online service for registration. These are often free or low cost (EventBrite, Evite) and only charge when you collect money.
Keep AV to a minimum. Some venues have a built-in screen or monitor you can use for free or a low fee. Don’t plan on a lot of dÃ©cor. If you can’t afford catering and have an event longer than a half day, hold the event at an office meeting room and bring in box lunches and your own beverages. This is more work for you, but less expensive overall.
Other options include asking for volunteers, looking for ways to trade services for promotional consideration, or signing up sponsors for your event. Need more savings? Host a potluck; I know a woman who held an event for 130 people with a $200 budget.
—Dana Ellis, president and CEO, Ellis International, New Hope
Planning an off-site retreat?
Plan a teambuilding activity for your retreat by having attendees assume new business identities. Each division identifies one critical challenge for the coming season or year, with an issue for problem-solving. Then (surprise!) assign the problem to another division and ask them to come up with two viable solutions to present in 30 minutes.
Planning retreats and strategy sessions can be victims of “silo thinking” as participants focus on their specific goals, issues, or challenges. By turning the tables (don’t tell them until the session starts), having attendees assume a different role, and giving them real-world challenges and issues, you’ll help your group understand the benefits of working together and the impact of their own and their colleagues decisions.
—Judy Hohmann, manager, marketing and communications, Minnesota Landscape Arboretum, Chanhassen
Exhibiting at a trade show?
Trade-show exhibit graphics need to communicate quickly and concisely who you are, what you do, and what benefits you offer. That’s it: big, bold impact. Too often, I see way too much information on exhibit graphics; most attendees are not going to take the time to read significant amounts of copy.
Another very important, often-overlooked planning detail: your staff. You can have the most engaging exhibit on the show floor and still fall short of your objectives if your staff is not properly prepared for engaging with attendees. The exhibit’s job is to get people to slow down and take notice. It is up to booth staffers to have a plan and proper questions to qualify the person, get what you need, and move on to the next opportunity. Have a plan of attack. It is really easy to get caught up in all the logistics of planning for an event, but the exhibit and the staffers will make the impressions of your company that attendees take away from the event.
—Duane Griffith, vice president, business development, Skyline Displays Midwest, Burnsville