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A Financial Statement Cheat Sheet for Business Owners

This is about financial statements. I’m sorry, but stay with me. Sure, social media would be a far sexier subject.  But hey, if you ever file a tax return (and you’d better), need bank financing, angel investors, venture capital or a loan from friends and family, these are things you must know.

The fact is, most business owners and startup entrepreneurs never had a formal course in business finance. With that in mind, here’s a “cheat sheet” to help you understand the three basic financial statement flavors: 1) Balance sheets; 2) Income statements, and; 3) Cash flow statements.

Your balance sheet

This shows what your business owns and what it owes at a fixed point in time, and provides details about your assets, liabilities and owners’ equity. It does not show money that flows in and out of the accounts during that period (we’ll get to that shortly).

  • Assets are things your business owns that have value and could be sold, including tangible assets such as vehicles, equipment, inventory and cash, plus intellectual assets such as trademarks and patents.
  • Liabilities are amounts your business owes to others, including loans, rent, vendor accounts, payroll and taxes, as well as obligations to provide goods or services to customers in the future.
  • Owners’ (or shareholders’) equity is your capital or net worth. It’s the amount that would be left if the business sold all assets and paid off all liabilities. This leftover money belongs to the owners.

Your income statement

This shows revenues over a specific time period – i.e. a month, quarter or year – and what you spent to generate that revenue. The literal “bottom line” of an income statement shows what the business earned or lost over that period.

Think of an income statement as a stairway. You start at the top with total sales, and then go down one step at a time. At each step, you make a deduction for costs or other operating expenses that were necessary to earn the revenue. At the bottom of the stairs, after deducting all of the expenses, you learn how much the business earned or lost.

Your Cash flow statement

This shows inflows and outflows of cash over a fixed period. It’s critical because any business needs cash to cover ongoing costs. While an income statement (above) shows profit or loss, a cash flow statement merely indicates if the business generated cash. You should also know that a cash flow statement shows changes over time, not absolute dollar amounts at a given point. The bottom line of the cash flow statement shows how much it went up or down for the period. Generally, cash flow statements review the cash flow from three key activities: operating, investing (back into the business) and financing.

Key Terms and Ratios to Know

Here’s a mini glossary of four key financial statement terms and ratios you’ll also want to know:

  • TheDebt-to-equity ratio compares total debt to owners’ equity. Both numbers come from your balance sheet. To calculate a debt-to-equity ratio, divide total liabilities by owners’ equity. If a business has a debt-to-equity ratio of 2-to-1, for example, it means that it is taking on debt at twice the rate that its owners are investing in the company.
  • Inventory turnover ratio compares a company’s cost of sales on its income statement with its average inventory balance for the period. To calculate this ratio, divide cost of sales by average inventory for the period. A 2-to-1 ratio means the company’s inventory turned over twice in the reporting period.
  • Operating margin shows percentage of profit for each dollar of sales. It compares operating income to net revenues. Both numbers come from the income statement. To calculate operating margin, divide income from operations (before interest and income tax expenses) by net revenues. Operating margin is usually expressed as a percentage.
  • Working capital is the money leftover if the business paid its current liabilities (debts due within one-year) out of its current assets.

Now that wasn’t so bad, was it?

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10 Timeless Traits of Top Entrepreneurs

Startup entrepreneurs need a wide range of skills and traits to succeed.  Some are industry-specific or tech-related and thus subject to frequent changes and updates. Others are more timeless – the kinds of skills that foster success no matter what type of business or industry you are in, or your stage of development.

Here are 10 timeless traits that should be in any entrepreneur’s arsenal:

1)    A knack for knowing your industry

The most successful startup entrepreneurs take the time to study and become experts in their industry or profession. They attend industry events, read blogs and trade magazines, and their expertise gives them credibility and a huge leg up.  This knowledge helps them “connect the dots” and know what’s really important, and what’s not, says Vickie Milazzo, owner of an education company on Inc. magazine’s list of the 5000 fastest growing small companies in America.

2)    Ability to adapt ideas from others

As Milazzo notes, being creative is essential, but it’s not about reinventing the wheel. Successful business owners know how to adapt proven concepts and approaches from other industries and companies and make them their own.

3)    Problem solver

Entrepreneurs can’t afford to wait around for others to solve their problems. They have to figure out the solutions on their own. And that makes them better business owners for when the next problem arises.

4)    Willingness to think big

We all like to check the easy things off our “to-do” list and tend to put off the tough ones. But a willingness to dive into the big issues and go for the larger accomplishments is often a success separator. “More importantly,” says Milazzo, when you start thinking big “your creativity and productivity catch fire and the momentum keeps you pumped.”

5)    Real networking prowess

Connecting to a few people on Facebook or LinkedIn is not networking. The most successful startup entrepreneurs know that real networking only happens face-to-face, and most often with people who are not their peers.  To network successfully you have to connect with people who have more experience than you do.

6)    Penchant for partnering

Successful entrepreneurs also have a knack for sniffing out others who have skills and insights that can be leveraged in new or unexpected ways. Many people are treasure troves of untapped potential just waiting for the right person to recognize what they have to offer.

7)    Confident negotiator

Negotiating skills are difficult to develop, and successful entrepreneurs tend to approach negotiating with confidence.  Having confidence gives them an edge in bargaining power as the expectation from both sides is that they will deliver at a high level.

8)    Knowing when to get help

Even though startup entrepreneurs are creative thinkers and problem solvers, the best ones also know how to ask questions and seek help when they need it. Remember that there’s always someone out there who has faced the same challenge successfully.

9)    Aggressive goal setting

Great entrepreneurs continuously set goals and work toward them. When one goal is reached, they set another and repeat the process. Having clear goals – and also a specific strategy to reach them – helps everyone in a business stay focused and motivated.

10)  Adept at building personal credibility

Top entrepreneurs also recognize the importance of continuously building personal credibility.  They under-promise but over-deliver, meet deadlines no matter what and always do what they say they’ll do. They know their business will only be as good as they are, and if they have a reputation as someone who can be counted on, their business reputation will mirror that. When customers know they can count on your product or service to deliver what it promises, they won’t hesitate to recommend you to others.

See related articles in the BizBest Startup Smarts section:

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

5 Ways to Make Service Part of Your Business DNA

Customer service expert Ron Kaufman has a radical notion that great service shouldn’t be as hard as it seems to be for so many businesses to deliver. “Service is everywhere,” says Kaufman, author of the new book Uplifting Service: The Proven Path to Delighting Customers, Colleagues and Everyone Else you Meet. “But there’s a disconnect between the volume of service we need and the quality of service we are giving and receiving. Businesses have turned a simple concept into a catastrophic cliché. They remain blind to the fact that true service comes not from demands and dashboards, but from a basic desire to take care of other people.”

Here are five keys to making exceptional customer service part of your business DNA:

1) Start by instilling a service orientation in your business.

Unfortunately, when most small businesses hire someone new, the part of new orientation that relates to customer service is often nonexistent. “This is your desk; this is your password; those are your colleagues; these are the tools we use. Welcome to the organization. Now get to work.”

“Service orientation goes far beyond induction,” says Kaufman. “Zappos is an example of one company that really gets this. Its four-week cross-department process is an example of new-hire orientation at its finest—deeply embedding and delivering on the company’s brand and core value, ‘Deliver WOW Through Service.’ Zappos understands that new team members should feel informed, inspired, and encouraged to contribute to the culture.”

2. Establish an engaging service vision.

A clear and engaging service vision will unify and energize everyone in your business to aim high for customer service. It doesn’t matter whether you call this building block your service vision, mission, core value, guiding principle, credo, motto, slogan, saying, or tagline. What matters is that your engaging service vision is actually engaging.

3. Communicate your service goals.

A company’s service communications can be as big and bold as signs in the front of the store proclaiming your commitment to customer satisfaction, or as simple as including employees’ hobbies or passions on their nametags. Service communications are used to educate and inform, to connect people, and to encourage collaboration, motivate, congratulate, and inspire.

“They’re essential because they can be used to promote your service vision, showcase your new hires, announce your latest contest, explain have you measure good service, and give voice to your customers’ compliments and complaints,” says Kaufman. Service communications keep your people up-to-date with what’s happening, what’s changing, what’s coming next, and most of all what’s needed now.

4. Offer service recognition and rewards.

Service recognition and rewards are vital building blocks of a service culture. They are a way of saying “thank you,” “job well done,” and “please do it again” all at the same time. Recognition is a human performance accelerator and one of the fastest ways to encourage repeat service behavior.

“While money may seem like the most obvious reward for employees, it isn’t always the most effective,” says Kaufman. “An auto dealership I know of learned this lesson the hard way. It paid its sales team a special bonus for achieving high levels of customer satisfaction. But when bonus payments were curtailed during a sales slump, customer satisfaction levels also fell.”

Genuine appreciation makes a more lasting impact on any employee. And there are tons of great ways to reward and recognize. You can do it in public, in private, in person, in writing, for individuals, or for teams. You can do it with a handwritten note, a standing ovation, tickets to a concert or ball game, an extra day off, dinner for the family or many other ways.

5. Create a common service language.

The whole domain of service suffers from weak clichés, poor distinctions, and inaccurate common sense. “Oh, you want service?” an employee asks. “Well, you’ll have to talk to our service department.” Or, “You want something else or something different? That’s not our policy.”

“We create meaning with language, and we can change our world by inventing or adopting new language. Your common service language should be meaningful and attractive—a shared vocabulary to focus the attention and the actions of your team. It should clarify meaning, promote purpose, and align everyone’s intentions and objectives,” says Kaufman.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

8 Ways to Deftly Handle Customer Complaints

When a small business receives a customer complaint it has two basic choices: Treat the complaining customer like a pain in the neck, or use the complaint as an opportunity to improve.

Business owners who are adept at handling and learning from complaints know all too well that one complaining customer might represent many others with the same problem who did not speak up. They’re the ones who tell others, complain about you online, and take their business elsewhere. Here are eight ways to deftly handle customer complaints, suggested by Ron Kaufman, author of “Uplifting Service: The Proven Path to Delighting Your Customers” (Evolve Publishing, 2012).

  1. Thank the customer for bringing it to your attention. “Show appreciation for the complaining customer’s time, effort, communication, feedback, and suggestions,” says Kaufman. “Always keep in mind that the customer didn’t have to come to you at all. They could have simply taken their business elsewhere.”
  2. Don’t be defensive. It’s easy to get defensive when an angry customer is on the other end of the line or in your face. Just remember that customers with complaints tend to exaggerate situations, so getting defensive will only make it worse. When a customer complains, they’re doing so because they feel wronged in some way. You don’t have to agree with what they’re saying. But you do have to hear them out. That’s how you move the conversation in a positive direction.
  3. Acknowledge what’s important to the customer. Even if you think the customer’s complaint is unfair, there is something they value that your business didn’t deliver on. Embrace that value. “What the customer wants is to feel right,” says Kaufman. “When you agree with their value dimension, you’re telling them they are right to value this specific thing.” For example, if a customer says your service was slow, then that customer values speed. You might then acknowledge that they deserve quick, efficient service.
  4. Apologize once, upfront. Every service provider knows that the customer is not always right. But the customer is always the customer. You don’t have to admit you were wrong, but you should apologize for the inconvenience. When you do that, you’re showing understanding and empathy.
  5. Express your desire to improve. When you understand what the customer values, show them things your business does that helps you perform well in that area. Calmly explain what happened. “Show you are sincere about your commitment to do well in the areas the customer values,” says Kaufman. “At the very least, you can say you’re going to make sure everyone at your business knows about the problem so it won’t happen again.
  6. Offer helpful information. Part of hearing the customer out is answering any questions they have about the specific situation. Provide additional, useful information as much as you can. If they ask a question that you don’t know the answer to, tell them you’ll find out.  And then actually follow through. These are additional opportunities for you to say through your actions that you value their business.
  7. Contain the problem. Let’s say a family is at a crowded theme park on a hot day. The youngest child in the group starts to have an all-out meltdown. Suddenly, a theme park staff member sweeps onto the scene and whisks the family into a special room. Inside, they find an air conditioned room with water and other beverages, an ice cream machine, a bathroom, a comfortable sitting area, etc. The only thing missing in the room is any connection to the theme park’s brand. That’s because this room is used to isolate customers from the brand until they’re all — parents and children —having a more pleasurable experience.  “That’s how you contain a problem,” says Kaufman.
  8. Recover. Show the customer you care about them, even if you feel your business did everything right. Businesses worry that they’ll get taken advantage of if they offer vouchers, discounts, or freebies as part of their service recovery. But in reality that rarely happens. “Offer the customer something and then explain that you’re doing so as a gesture of goodwill or a token of your appreciation,” says Kaufman. Businesses do this because they know that a successfully recovered customer can become their most loyal advocate.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

6 Customer Feedback Essentials for Small Business

Small business owners hear it all the time: To find out how your business is doing, including what people like or don’t like and what you need to adjust, ask customers for feedback. But your quest for feedback can either produce a magic elixir or simply be an annoyance to customers and prospects, depending on how you do it.

Here are six essentials for collecting, analyzing and using customer feedback in a way that both engages customers and benefits your business:

1)    Make customers feel important. This is critical for getting people to respond to your feedback requests, and for generating helpful information that you can use to make improvements or launch new products and services. In most cases, it’s not necessary to offer “incentives” (also called bribes) for customers to provide honest feedback. Most are willing to do so if approached properly. The key is to make customers feel that you genuinely want to hear what they have to say, value they opinions and will use the information to make improvements that will benefit them as well as others.

2)    Make providing feedback easy, on the customer’s terms. Provide multiple ways for customers to offer their opinions. Don’t limit your efforts to surveys and emails, or old-fashioned feedback forms at checkout. Include a feedback form on your website, and ask for feedback on Facebook and any other social media sites you use. In all cases, keep it simple. At all costs, you must avoid frustrating customers with lengthy forms or confusing questions. And try not to query customers every time you see or connect with them. This leads to feedback fatigue and can cause customers to tune you out permanently.

3)    Pay attention to timing. What you ask is important, sure. But so is WHEN you ask it. Don’t be in a hurry to solicit feedback if your business isn’t really ready to hear or deal with it. It’s helpful to first examine your motivation. If all you are really seeking is approval or a pat on the back, feedback will never help you improve. At times, for some types of businesses, asking for feedback immediately is ideal. But in other cases, it’s best to step back for a bit and do a little self-examination first. Identify what you want to assess and where you would be willing to make changes. And be prepared for opinions that you might not like.

4)    Be both specific and open-ended. Avoid vague questions such as “What do you think?”  Break it down. Ask specifically about customer service, for example, or certain product features. You don’t have to cover everything at once. If you have forms and surveys, design different ones to cover specific topic areas. The time to be “open-ended” is when you are digging for information about what customers really want. In order to find out what customers really want and how they feel, you have to avoid telling them what you want them to tell you.

5)    Leverage your online options. Today there are many low-cost and even free web-based tools and services designed to help small businesses seek customer feedback. These include online surveys (Survey Monkey is a popular choice), web-based feedback forums such as UserVoice (www.uservoice.com) and social media such as Facebook, Google Plus and others. On Facebook, one approach is to simply post a question about some aspect of your product or service and ask for feedback. It’s quick, easy and cheap.

6)    Analyze, respond and act on your feedback.  Always keep in mind that the ultimate goal of your effort to seek feedback is to improve customer satisfaction and grow your business. Take all feedback seriously. Look for trends and common themes in what you hear. By formalizing the process of analyzing and responding to feedback, you elevate its importance as part of your business DNA of listening to customers. Thank customers for the effort they’ve made to provide you with helpful information, and assure them it is both valued and appreciated. When you make changes based on customer feedback, call attention to that fact. This will make it more likely that others will provide feedback in the future.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

10 Ways to Build a Can-Do Culture in Your Business

Does your business have “drainers” – people whose negativity drains everyone else’s energy and drags your business down? Or, worse yet, are you a “drainer” yourself?

“Nobody sets out to be a drainer,” notes Jon Gordon, a business “attitude” consultant who works with businesses, professional sports teams, universities and other organizations. “It’s just that some people regularly, and inadvertently, exhibit energy-draining behaviors.” Many business owners allow it to continue, or are themselves guilty of the same behavior. And over time, the entire culture of the business becomes poisoned.

Here are 10 ways you can help build a can-do culture that also motivates your employees:

1)    Squelch negativity

There’s nothing more draining than boss, business owner or employee who’s constantly negative. Don’t let negativity be your go-to response. Respond constructively when others offer ideas.  Even if the suggestions are off the mark, hear them out. An encouraging attitude keeps creative juices flowing. Remember, as pessimism rises, performance drops.

2)    Halt the complain train

The temptation to whine can be powerful, but whining is infectious and before you know it, everyone is complaining about something. Instead, push for solutions. When you hear a complaint, ask the complainer how it should be fixed. Turn your employees into problem solvers instead of problem sharers.

3)    Ban critical email and voice mail

Nine times out of ten, the critical email you send ends of sounding harsher to the other person than you ever intended. Such it up and conduct your toughest talks in person. You’ll be able to ensure that your tone is not misinterpreted and have a constructive dialog with the other person.

4)    Avoid the Monday morning load-up

Don’t overwhelm your employees with a mountain of emails or lengthy to-do lists before the week is even underway.  Boil down and bundle your orders, and parse them out in steps. Flag the ones you consider most important so others know where to start first.

5)    Spot the busy bee bamboozle

Don’t confuse activity with progress.  And that applies to you as well as your employees. Just getting through daily routines can make anyone appear busy. But that’s not progress. Set goals and hold yourself and your employees accountable for results.  Make sure these are results that matter and that are visible to others and valuable to your business.

6)    Seek complete communication clarity

It’s amazing how the simple condition of “clarity” contributes to a positive vibe.   When people are clear on where the business is going, and what they need to do, they are free to be positive and productive. When employees are stuck trying to track you down for clarification, productivity and creativity suffer.

7)    Get your organization act together

Being disorganized is a drag for everyone. Sure, some things fall through the cracks when you’re busy, but chronic disorganization is a disease that drains others who have to cover your tracks.

8)    Don’t sacrifice quality for expediency

When there’s a lot of work to do, there’s a tendency to hastily clear your plate, either by cutting corners or passing the buck to others. Taking the time you need to do the job right sets up your employees and the rest of your business for success, and encourages others to take on projects with confidence and energy.

9)    Recognize real-time success

Don’t get so caught up in what’s to come later than you forget to acknowledge what’s happening now. Employees don’t need applause at every turn, but they do need to know that you can be satisfied, and that they aren’t just hamsters running in a wheel.

10) Set zero tolerance for Low performance

“Simply put,” says Jon Gordon, “low performers drag the rest of your team down. They create resentment and generate more work for everyone else. And if you let them linger for too long, your best employees will move on. Hold everyone accountable for achieving their goals and meeting performance standards. If someone constantly misses the bar, take action.”  But be careful. You still want to encourage risk taking and allow people to fail. The key is that they’re out there trying different things and innovating.

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

9 Ways Small Employers Attract Lawsuits

Lawsuits filed by disgruntled employees or independent contractors against small businesses are one of the most vexing problems that business owners continue to face. Many are constantly on edge, fearing frivolous legal actions that can ruin the business even if the complaint has no merit.

Other small businesses – and especially those new to the employment game – may unintentionally violate employment rules simply by trying to be nice to employees by providing flexibility, or to save money for the business.  Either way, it’s a serious and longstanding problem for almost any type of small employer in the U.S.

Here are the top mistakes that small employers make that lead to lawsuits:

1. Classifying all employees as “exempt” from overtime rules. Under employment law, there are two basic employee classifications. In general, salaried employees are exempt from overtime and various other time-off or rest break rules that apply to hourly or “non-exempt” employees. Businesses get in trouble because it’s easier to pay everyone a salary rather than deal with hourly wage requirements that apply under both state and federal law. But merely paying someone a salary does not guarantee they are truly exempt, and job titles don’t either. An exempt employee is normally someone who is a high-level executive, administrative or professional.

2. Making people “independent contractors” because hiring employees is more trouble and expense. This is a bright red flag for the IRS. Just because you want the employee to be an independent contractor – or the employee prefers that status – does not make it legal. There are strict and detailed rules around what qualifies as independent contractor status and you’ll need to follow them.

3. Failing to provide supervisors (or yourself) with any training about harassment or discrimination. Too many business owners think that training just isn’t necessary. But the best defense against a discrimination or harassment complaint is making sure that you) or anyone in a managerial position in your business) know the rules on sexual harassment, discrimination, disability, safety and wage-and-hour laws.

4. Letting employees decide what hours and how many hours they want to work each day. Most employees are restricted by law as to the number of hours they can work without overtime pay. Alternative workweek schedules are an exception, but employees can’t simply decide they want to work 10 hours, four days per week. A valid alternative workweek schedule requires that employers follow specific steps to institute such a program. Failure to meet requirements can mean penalties and back pay for overtime.

5. Withholding a departing employee’s final check if they haven’t returned company property. For most business owners, this seems completely reasonable. But in some states, final paycheck deadlines set by law carry hefty penalties if not met, regardless of whether the employee still has keys, a uniform or whatever.

6. Firing an employee the wrong way. The simple step of being sensitive when firing an employee can go a long way toward avoiding lawsuits. Employees who consider legal action after being fired often do so because of the emotional aspects of being unjustly terminated. Treat the employee in a similar fashion to other similarly situated employees. Get professional advice on proper termination procedures before you proceed.

7. Being nice to employees by letting them take lunch breaks whenever they want to. Many employers – especially new ones – are surprised to hear this one. But in some states, such as California, employees must be provided at least a 30-minute meal break if they are working more than five hours. This is an unpaid, off-duty period. Failure to provide this can result in penalties and additional wages.

8. Failing to accommodate sick or disabled employees. Businesses with more than 15 employees are subject to the Americans with Disabilities Act (ADA) – and California laws take that down to five employees. Employers have been sued for firing someone who is sick, obese, depressed, injured on the job or otherwise limited.

9. Hiring the wrong employee.  Your most valuable defense against lawsuits is to hire the right employees in the first place. “Wrong” employees create a negative work environment, harass co-workers, offend customers or vendors and will sue your business. Don’t hire in haste, conduct background checks and carefully screen all applicants.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

4 Rules for Fostering Innovation in Your Business

Innovation is one of today’s most popular business buzzwords.  Most small and growing businesses – and especially startups – say they want to innovate. But most never get there because they are focused only on cost and efficiency, and not creativity, leaving little room for fresh ideas. In fact, many businesses today are actually anti-innovation without even knowing it, says Ed Hess, a business professor at University of Virginia’s Darden Graduate School of Business.

In today’s “do-more-with-less” environment, innovation can be too messy and inefficient to take root. Many business owners seek stability through structure and predictability rather than less-predictable innovation. But the mechanisms that help grow a business are much different from those that simply keep it from falling apart. In order to grow and innovate, you have to be willing to explore a little and put up with some uncertainty and ambiguity.

To instill a mindset of innovation at your business, you’ll need to adopt some different ways of thinking. Here are four “rules” for fostering innovation in your business:

1. Efficiency and scale don’t always rule the day: Typical business management practices in companies of all sizes favor efficiency and avoiding risks.  But being innovative requires taking some risks and trying lots of different things. And that, of course, means that some won’t work out. But those “failures” are like down payments on the things that do work and that will help your business grow.

2. Not everything needs to be certain: The fundamental nature of innovation is that nothing is certain.  Businesses that are best at innovating are dominated by ambiguity and change.  You just have to get used to it and create an environment that allows for experimentation, invention and exploration. It might be nice to talk about achieving near “perfect” performance, but growth experimentation often produces much the opposite. Variance – the enemy of efficient, cost-effective operations – is the norm when it comes to innovation.

If you want an innovative business, be careful about how strongly you insist on efficient, waste-free execution. You can easily end up killing any and all inventive ideas, as the path to innovation is not a straight line.

3. Innovation does NOT have to be revolutionary:  Sometimes, thinking smaller is the best way to foster innovation. All too often, entrepreneurs think that innovations – and just about any goals for that matter – must be big and audacious. They don’t. Get over it.  Setting – and achieving – small, proximate goals and innovations is a better way to keep the ball rolling.  In fact, most innovations are small, incremental things that are close to the core activities of your business – be they products, services, processes or all of the above.

Innovations can and should build on things that have already been done – they don’t have to be revolutionary. Says Hess, “The kind of ideas businesses should want to generate are all about creating new value for customers.”  We shouldn’t care if it’s already been tried, looks like something old in a new package or is borrowed from another industry. What’s most important is that it creates value for your customers that no one else has yet offered them.

Remember:  The best innovators learn how to combine existing things differently or transfer concepts from different industries or domains.

4. Innovation and effective execution can co-exist: Sure, innovation is often a messy process that is prone to failure. But don’t try to isolate it within certain places or people in your business. In other words, don’t feel like you need to segregate innovation from the rest of your business, where you have people who “execute” and others who “innovate.” They can go hand in hand, and the bridge that helps connect them is learning, according to Hess, who is co-author along with Jeanne Liedtka of The Physics of Business Growth (Stanford University Press, 2012). When you encourage employees – and yourself – to learn about new things and avoid “my way or the highway” type thinking, you will foster innovation in your business.

Finally, says Hess, understand that “growth experimentation” is a game of probabilities and the sooner you get customers actively engaged in your experimentation game, the more likely you will be to win.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

5 Worst Ways Business Owners Waste Time

Most of us believe that cell phones, email and other tech devices help business productivity.  But tech devices and some common business practices can actually be big time wasters.  For example, are you and your employees constantly checking email or web sites? Do you have an open door policy, a schedule full of meetings, and a hefty mobile phone habit?  How are you doing on that “to do” list?

“Many workplace practices that were once considered good for business have become major time-wasters today,” says Phil Cooke, who has advised major companies on time-saving techniques for 30 years.  Here are five time wasting practices that Cooke claims are most dangerous to your productivity:

1. Starting your day on email

If the first thing you do every work morning is dig into your email, you can easily be bogged down for hours simply answering messages.  Avoid the email vortex.  Try this instead: When you first get to work – the store, shop, site, office or wherever that may be – do at least one of the most important things you need to do that day (email doesn’t count!).  Then, and only then, check email.  This change alone will boost your productivity.

2. Forgetting the power of priorities

Business owners too often spend enormous amounts of time dealing with trivial tasks.  And the worst part is when we still feel like we’re accomplishing something important.  Remember this: Never do minor tasks at the expense of major projects.  Don’t fall victim to what others think is urgent.  Set your own priorities.

3. Being permanently tethered to your mobile device

Put down the mobile device occasionally. Chances are, you don’t really need to check it for text messages, voicemail or email every five minutes.  Entrepreneurs always feel the really big call or message could arrive at any moment.  Get over it; and get on with it. Otherwise your mobile device relationship can be counterproductive.

4. Not Shutting the office door

Whoever invented the “open door policy” must never have run a business and probably didn’t accomplish much, says Cooke.  Sure, you need to be accessible; just not every minute of every day.   Unexpected calls and visitors are huge time wasters, What’s more, research suggest that it takes nearly an hour to get back on track after an interruption.  Schedule set hours for meetings and visitors.

5. Taking all calls

You don’t have to answer every call.  “I’ve seen people interrupt important meetings, sensitive negotiations and more to deal with minor phone calls,” says Cooke.  Don’t be afraid to let callers leave a message.  If you’re in the middle of something and can see the caller isn’t a critical contact, leave it for later.  You’ll waste less time, accomplish more, and the caller would rather have your full attention anyway.

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New SBA Study says IRS Small Biz Audit Crackdown is Bogus

Ten years ago, a landmark IRS report claimed that small business owners under-report income by $80-100 billion yearly and account for over half of the U.S. “tax gap” of owed by uncollected taxes.   As a result, small business owners have been subjected to increased audits and reporting requirements, including the controversial new 1099 rule.

But now for the truth:  A new study just released by the U.S. Small Business Administration (SBA) Office of Advocacy says the IRS crackdown on the backs of small biz has been bogus all along.  And that comes from independent research commissioned by the Feds themselves – not some anti-tax business group.

After reviewing 10-years’ worth of IRS small business audits related to the innocuously-named “National Research Program” (NRP), outside researchers found that a mere 1% of all issues examined resulted from intentional failures to report income properly. Yes you read that right – one percent. In other words, 99% of income underreporting is unintentional, and undoubtedly the result of a vast and utterly confusing array of tax rules and regulations.

And here’s the real gut punch for biz owners:  While small business was tagged as the tax cheating culprit, the new study says that large corporation tax gaps are scarcely being measured at all, and that the IRS has been using estimates dating back to the 1970s and 80s to calculate corporate noncompliance.  What’s more, says the new report released by SBA:  “The IRS focused its tax-gap study on individual tax returns, and on returns not subject to withholding or third party reporting, which skewed the study unfairly toward small business.”

Over the last five years, audits of returns typically filed by biz owners have soared, while those for corporations with $10 million or more in assets have actually dropped 13%.  These are figures reported by the SBA itself.

But which type of audit pays off the most for taxpayers – small biz or big corporation?  No contest.  According to the new whistle blowing report, the IRS collects an average of $9,350 per auditor hour spend examining big biz returns, but only $1,034 per auditor hour spend auditing small business.

The new study concludes with this:  Unlike large corporations, small businesses lack the resources and expertise to negotiate with the IRS.  Indeed, 71% represent themselves in audits. They are overwhelmed by the complexity of the tax code.  Only aggressive outreach and education designed to help small businesses understand their tax filing obligations will significantly reduce the tax gap attributed to them.

BizBest will email the full 54-page report in PDF, free of charge, to anyone interested. Email your request to editor@bizbest.com, and be sure to include the email address you’d like the report sent to.

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