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The "Small Business Resource Review Guru"

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David Gass Speaks Out

After 15 years of creating products, services and coaching small business owners around the world, I've decided to start reviewing all the other choices we have as entrepreneurs and give some advice on what I think about it all. I'm also looking for your reviews as well. Send them to us anytime.

19
Aug
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Good to Great

GoodtoGreat

“Good to Great” by Jim Collins is one of my top ten business book favorites.  I’ve read this book several times and get something new to use from it each time.

I would highly recommend this book to anyone first starting a business or someone who has run a business for years and is looking for a new approach.

Jim Collins took the question, “Can a good company become a great company and if so, how?”.  Collins and his research team took a list of 1,435 companies, sorting through them and  looking for those that made substantial improvements in their business over time.  Based on their findings, they decided on 11 companies that had average returns 6.9 times greater than the market’s and more than twice the performance rate of General Electric under Jack Welch.

The Good to Great list includes:

  • Abbott Laboratories
  • Fannie Mae
  • Kimberly-Clark Corp
  • Nucor Corp.
  • Wells Fargo
  • Kroger Co.
  • Walgreens
  • Circuit City
  • Gillette
  • Phillip Morris
  • Pitney Bowes

You may want to ignore the fact that a couple of these companies have filed bankruptcy in the past few years and a few have other problems.  It’s not the companies Collins and his team researched that made the book great, but rather the key concepts within the book.

The key concepts in the book are:

  • Level 5 leadership
  • First Who…Then What
  • Confront the Brutal Facts
  • The Hedgehog Concept
  • A Culture of Discipline
  • Technology Accelerators

Level 5 leaders are humble, but driven to do what’s best for the company.

First Who…Then What is the art of getting the right people on the bus, the wrong people off the bus, then figure out where to go.  As long as you have the right people you can move them around in different positions within the bus to make it work.

Confront the Brutal Facts. Confront the brutal truth of the situation, yet at the same time, never give up hope.

hedgehog Concept is one of my favorites.  It’s the overlapping of three circles based on three questions any business should ask and know the answers to: What makes you money?  What could you be best in the world at?  What lights your fire?(What’s your passion)

Culture of Discipline is all about rinsing the cottage cheese.

Technology accelerators is using technology to accelerate growth withing the three circles of the hedgehog concept.

Take the time to read the book.  It’s wroth the effort.

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12
Jul
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Small Business Lending Experts Are Clueless

The experts are out and talking about the small business lending market. I have seen “experts” on CNN, Fox, MSNBC and read their articles in the various small business magazines. I believe these so-called experts are clueless about what small business really is.

I was listening to one of them being interviewed on MSNBC and when asked about the size of loans they are talking about the response was – $5,000,000 to $20,000,000.

The expert’s idea of small business isn’t the small business I know. The businesses I’m talking to are looking for financing from $5,000 – $1,000,000. Most want between $25,000 and $200,000. If I may be so bold, I’d like to change the terminology of how small businesses are defined.

The SBA defines small business as any company with less than 500 employees and $300 million in sales. I view small business as companies doing less than $10,000,000 in annual revenue and less than 200 employees. There are three other categories of small business:

Micro businesses with sales from $1,000,000 to $10,000,000 and 25-200 employees.
Mini businesses with sales from $100,000 to $1,000,000 and 3-25 employees.
Tiny businesses with sales less than $100,000 in annual revenue and less than 3 employees.

If you are looking for financing or capital greater than $1,000,000 you are no longer considered a small business. However, this alone does not define small business. There are many other definitions as described above.

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12
Jul
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After The Corporation is Formed

If you thought filing the paperwork to form a corporation or LLC was all that was required to maintain the benefits of the entity, you were wrong. There are several things required to maintain the corporate veil and benefits of a corporation or LLC structure.Every state has a requirement that you maintain specific documents for your corporation each year. In every state there has
been case law that shows owners of businesses, who failed to maintain these corporate
records and had their personal assets at risk because the corporation was deemed invalid.

I often hear, “I thought a corporation was there to protect my personal life no matter what.” Well, sorry to those dreamers who feel this way. Remember, there is no such thing as a free lunch.

If you are going to form a corporation and want the protections and tax savings the corporation provides, you must do something in order to maintain those privileges. As in any relationship—marriage, children, friends, employees—you have to work at keeping the relationship strong. It doesn’t just happen automatically because you get married or have a child.

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12
Jul
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Great Minds Coming Together in Times of Turmoil

As a business owner you have a few certainties in your business life:

You need customers to survive.

You’ll have a roller coaster ride of emotions starting and growing the business.

Without a good bookkeeping system you’ll never know exactly how much profit there was.

Competition is everywhere sooner or later.

And of course, the need for cash flow (capital).

At a minimum there will be the desire to have access to capital regardless if you have to use it or not. Capital can come in several forms. It can be a stash of cash you keep in an account only for emergencies. It can be a credit line (also known as a life line to many businesses) from a bank. It can be a credit line from an alternative financing source. It can be an investor willing to contribute capital to the business.

No matter how you establish access to capital it’s important to have that “life line”. As many of you have heard before the statistics for small business failure are very high in the first year and most don’t survive five years in business. In fact only 4% of business start-ups will ever reach $1,000,000 in annual revenue. That’s right – just 4%, shocking I know. I was surprised myself to realize the low probability of becoming a millionaire as an entrepreneur, although if you compare it to winning the lottery, your chances are much greater for success with starting a business.

So what do you need to do to get that critical “life line” so many entrepreneurs and small business owners require to survive? The answer to that question could be a series of books describing every detail of raising capital and obtaining a loan. In brief they are: Credit, Collateral and Capacity.

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28
Jun
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Entrepreneur vs. Employee

executiveboard-icon2I saw this video on my friends site at http://www.monyeandyou.com

I think it says it all.  Check it out…

Entrepreneur vs Employee from FIVOSZ on Vimeo.

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12
Mar
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Certainties in Small Business Financing

David GassAs a business owner you have a few certainties in your business life:

 You need customers to survive.

 You’ll have a roller coaster ride of emotions starting and growing the business.

 Without a good bookkeeping system you’ll never know exactly how much profit there was.

 Competition is everywhere sooner or later.

 And of course, the need for cash flow (capital).

 At a minimum there will be the desire to have access to capital regardless if you have to use it or not.  Capital can come in several forms.  It can be a stash of cash you keep in an account only for emergencies.  It can be a credit line (also known as a life line to many businesses) from a bank.  It can be a credit line from an alternative financing source.  It can be an investor willing to contribute capital to the business.

 

No matter how you establish access to capital it’s important to have that “life line”.  As many of you have heard before the statistics for small business failure are very high in the first year and most don’t survive five years in business.  In fact only 4% of business start-ups will ever reach $1,000,000 in annual revenue.  That’s right – just 4%, shocking I know.  I was surprised myself to realize the low probability of becoming a millionaire as an entrepreneur, although if you compare it to winning the lottery, your chances are much greater for success with starting a business.

So what do you need to do to get that critical “life line” so many entrepreneurs and small business owners require to survive?  The answer to that question could be a series of books describing every detail of raising capital and obtaining a loan.  In brief they are: Credit, Collateral and Capacity.

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5
Jan
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The Selling Process

Sales are to a business as the heart pumping is to life!

So why not have a system for sales.  A system is a specific, effective and repeatable way to do something. 

The READ selling process is as follows:

  • Relate
  • Establish the Need
  • Advance a Tailored Solution
  • Develop a Commitment

People are not sold, they decide to buy based on their own reasons, not yours.  Selling is not about personality, it’s about process. Keep in mind when you are selling (which is about 90% of the time in business) people buy based on emotions and justify with logic.  Have an emotional reason for people to buy something from you, but also have facts to back up why they made their decision once they go home.

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29
Dec
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Government and Small Business Don’t Mix

First, I don’t believe the government should be the ones telling banks what to lend or not to lend.  The banker is the one that needs to decide if someone is a good credit risk or not based on what level of risk they want to or can take on at the time they are going to lend. 

 

The challenge however is what people consider small business.  Politicians are always so tricky with how they use their words.  Small business is so broad it could mean a 1 person operation working from home up to a 499 employee company with six locations in 3 states generating $50,000,000 in revenue. 

 

The small business owners who really need access to capital right now are the ones that are the highest risk and the least likely to get financing.  These are the 1-5 employee companies under five years old.  They see the opportunity to grow and add jobs by taking market share from other companies that are struggling to keep the doors open because they grew too fast or had too much overhead.   These small business owners can really drive the local economies and initiate job growth again.  The challenge is they aren’t qualified businesses or borrowers 80% of the time.   They either have low FICO scores or their financials don’t justify the loan amount they want or need.  Most of these companies are seeking $25,000 to $250,000.

 

When I talk to the banks about programs for these companies they send you to their credit card division where the approval process is strictly driven by FICO score and years in business (which these clients lack.)  The government and news talk about small business lending and getting it going again, but what they refer to are the companies with 100-500 employees and are looking for $500,000 – $5m in loans.  I’m sure these companies can help create jobs also, but the reality is there are A LOT more 1-5 employee companies than 100-500 companies. 

 

The SBA community express loans do help the smaller 1-5 person operation but most small entrepreneurs aren’t aware of these loans and banks aren’t interested in spending a lot of time writing them.  It is still a lot of paperwork with little money for the bank, so they prefer to write larger loans and lower their risk with bigger companies.  I don’t blame them for that.  A great resource for the 1-5 person business is friends, family and smaller angel investors.  They can even look at peer to peer lending sites such as www.prosper.com.

 

So in my opinion the politicians are just a lot of talk, posturing to look good in the media so people think they are “small business” friendly.  It’s actually an oxymoron to say politician and “small business friendly” in the same sentence.  Government won’t create the free market jobs, they just need to get out of the way and let the small business owners do it themselves.

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12
Dec
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Earn.com Post


Growing a Business

Get your Earn.com Accreditation and logo by visiting www.earn.com

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10
Nov
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Small Business Lending Experts Are Clueless

Recent news in small business lending:

• CIT Small Business Lending the #1 lender in 2008 with $771,391,550 in loans filed Chapter 11 bankruptcy

• Advanta Credit Card company has filed Chapter 11 bankruptcy

• JPMorgan Chase to add $4 billion in small business loans

• Bank of America extends nearly $78 billion in small business credit in 3rd quarter

The experts are out and talking about the small business lending market. I have seen “experts” on CNN, Fox, MSNBC and read their articles in the various small business magazines. I believe these so-called experts are clueless about what small business really is.
I was listening to one of them being interviewed on MSNBC and when asked about the size of loans they are talking about the response was – $5,000,000 to $20,000,000.

The expert’s idea of small business isn’t the small business I know. The businesses I’m talking to are looking for financing from $5,000 – $1,000,000. Most want between $25,000 and $200,000. If I may be so bold, I’d like to change the terminology of how small businesses are defined.

The SBA defines small business as any company with less than 500 employees and $300 million in sales. I view small business as companies doing less than $10,000,000 in annual revenue and less than 200 employees. There are three other categories of small business:

Micro businesses with sales from $1,000,000 to $10,000,000 and 25-200 employees.

Mini businesses with sales from $100,000 to $1,000,000 and 3-25 employees.

Tiny businesses with sales less than $100,000 in annual revenue and less than 3 employees.

If you are looking for financing or capital greater than $1,000,000 you are no longer considered a small business. However, this alone does not define small business. There are many other definitions as described above.

The one thing the definitions above don’t consider is the stage of business the company is in. There are many companies that have been around for 10 years and generate $250,000 in annual revenue, while another start-up company could sell $250,000 in their first few months in business and the 10 year company will get the financing while the start-up won’t. A lender is more likely to grant financing to the 10 year old company than the start-up because of the history of the company. The history will lower the risk of lending.

As you categorize your business in one of the categories above: small business, mirco business, mini business or tiny business, you also want to define the stage of business as well. The stage of business along with your credit qualifications and collateral will determine whether you will get financing and the amount.

The stages of business are:

Idea – You have an idea but have not yet generated revenue and hired employees.

Start – You have taken the idea and either started generating revenue or hired employees.

Growth – You are seeing a significant growth in revenue compared to the previous year.

Maturity – Growth in revenue over previous year has stopped and it’s either stagnant or declining.

Innovation – The company has moved from maturity stage to development of new ideas.

Our group of companies Business Credit Services (www.bcscredit.com), The Company Corporation (www.incorporate.com), and Earn.com (www.earn.com) are focused on the businesses in the Micro, Mini and Tiny category. Our parent company Corporate Service Company (www.cscglobal.com) is focused on the small business ($10million and greater) all the way up to the Fortune® 500.

If you are looking for financing and hear one of these experts talk about small business, ask yourself what are they referring to: small, mirco, mini and tiny. When you speak to lenders define the type of small business lending they provide. Is it loans and / or lines of credit? Is the financing they provide under $100,000, under $50,000? Do they provide $5,000 loans or credit cards?

The point, define small business before you start working with someone who says they work with and lend to small business.

David Gass – Founder
Business Credit Services, Inc.
www.bcscredit.com

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