Is Your Business Ready for Growth

Most business people want to grow their business but a question often comes up is am I ready to grow or can I afford to grow?  Those are big questions for small business owners because of the time, commitment and financial resources it takes to successfully grow a business.

The first step towards growth is to take inventory on your business. Richard Proffer, business development specialist for University of Missouri Extension, says, “I am not talking about physical inventory where you count your product but a more mental and financial inventory to see if you have lined up the right resources to grow.”

For this inventory, the business owner will need to invest time in analyzing the current situation and work on redefining the business’s goals. This analysis will allow the owner to make smarter decisions, be more accurate in the financial projections and move faster into growth when it happens.

Many business owners face the Red Queen paradox where they feel the constant strain of working and working and not getting anywhere but where they started.  This feeling is typical of entrepreneurs who have not done a good job of planning their business’s future. “Simply doing more of the same thing is usually not the answer for growing the business,” per Proffer.

The first step in planning for a business’s growth is taking that inventory and defining where the owner wants to be in the future with the business. Then the owner plans out what needs to happen with the business either in sales, employees, financials or marketing to reach the desired goal. The third step is to start putting into action processes to reach the goal in the stated time. Finally, goals need to be set so progress can be measured and the owner knows the right path has been chosen for success or where to make corrections to the plan. 

Any questions on this article please call, Richard Proffer at the local MU Extension office at 573-243-3581 or email him at profferrd@missouri.edu.  

Balance Sheet -- Does it Matter to a Business

The one of three forms a business owner often does not understand is a balance sheet. This form is one of the best methods for an owner to see how the financial health of the business is and possibly start to see where to improve the business.

The balance sheet is divided into three parts – assets, liabilities and equity.  An asset is something a business owns or has value like cash, equipment, inventory and investments. When completing a balance sheet, do not forget to include items you may not have complete ownership to like the building, a leased car etc. There are two types of assets – current and non-current. A current asset can be turned into cash quickly (usually within one year) like cash, accounts receivable and inventory.  A business owner would not normally expect to keep owed amounts or inventory past this one year time frame anyway. A non-current asset is the opposite – it is not expected to be turned into cash quickly and include items like fixed assets (land, facilities, equipment and cars.  These assets tend to be used in creating sales for the business.

The second part is the liabilities. This is where the business reports what it owes to other people or businesses.  Another name for these items is accounts payable.  Again this section is divided into current and non-current liabilities with the same time requirement as assets. Current paid off within a year and non-current longer than a year is how a business owner should look at the items.

The final section is equity and shows how much the business is worth to the owner(s). It should be the difference between assets minus liabilities. This section can be either positive or negative depending on what is happening within the business. If there is a decision to expand operations, then this section may be in the red due to increased expenses. If there was a significant in sales, the owner may decide to keep money in the business for future use and it would be in the black.

The one thing a balance sheet does not show is how profitable a business is. This is reported on the income statement (a form we will talk about in another column). As a business owner, the balance sheet provides a snapshot of the health of the business at that moment and is an aid in deciding on future plans for the business. 

Any questions on this article please call, Richard Proffer at the local MU Extension office at 573-243-3581 or email him at profferrd@missouri.edu.

Opportunity to Serve

Opportunity of Service

                If you are concerned about the quality of life in your county and live in one of the following counties: Scott, Stoddard, Mississippi, New Madrid, Dunklin and Pemiscot an opportunity to help your community/county is currently open. The Bootheel Regional Planning Commission is currently seeking active citizens who have an interest in either broadband and bringing it to their community or who have an interest in improving the quality of the workforce. Both groups are part of the national economic development plan written by the SET 7 group. The two committees are:

1)      Broadband – will work to educate the communities in the  Bootheel on the importance of having broadband presence in their community and how they can help make it happen; the committee’s next meeting is 8/23 at the Delta Center in Portageville, MO from 9-11a

2)      Workforce Development – will work to create a higher skilled workforce in the region through cooperation of many partners; the committees first meeting will be 8/19 at Three Rivers College in Sikeston, MO from 2-4p

To sign up for one of these committees, please contact Hannah Barnett at the Bootheel Regional Planning Commission at 573-614-5178 or email her at hbarnett@bootheelrpc.com.

For questions about the committees, please contact Richard Proffer at 573-243-3581 or profferrd@missouri.edu.

 

How to Protect Your Valuable Business Ideas

Every business has ideas it has developed to do things more efficiently. Or the business owner has come up with a way to produce his product in a manner his competitors cannot copy. Better yet, the owner has devised a variation on an existing product that makes it more durable in the marketplace. A business customer list is also an example. These ideas or innovations are important to a business’s success and allows them to gain competitive advantage over their competitors. 

But how can an idea be protected? They first must be tangible and able to be seen, read, touched or in some other physical form.  If a business owner has no way to protect these new ideas then the chances are they will never see the light of day. The rest of society will not benefit from these new opportunities. There are four legal ways to protect your idea: patent, copy right, trade secret and trademark. 

The first one – patent – is the most common way. Here the inventor files a disclosure on the invention with the U.S. Patent & Trademark Office (http://www.uspto.gov/) to review. This office is responsible for making sure the idea is able to patented.  There are three types of patents: utility, design and plant.  

With an utility patent, you obtain protection on how a product is used and works. 

The design patent then only pertains to the way the product looks.

Finally the plant patent is aimed to protect new species of plants that are bred.  There are some types of plant creation that is not covered so make sure you check into the possibility if you invent some new types of plants.

The second type of protection is a copyright. These protection devices are also managed by the Federal Government at the Library of Congress 

(http://www.copyright.gov/). This method protects an author’s rights to original creative works. An interesting website on copyright is www.templetons.com where they have an article on the top ten myths of the topic.

Next, we have trade secrets which are handled entirely differently.  They are not protected through Federal registration but through the legal system on all levels – federal, state and local laws. Some factors that determine if your idea is really a trade secret is:

1)      How many people  know it outside the business (hopefully none is the answer)

2)      How many people, within the business, know the secret (hopefully few)

3)      How is it be safeguarded

4)      How important would it be to competitors

5)      How much did it cost to create this idea

If a business wants to protect information, it should keep in mind the above five questions as those efforts will help a court realize you are serious about this idea. As you can see from the questions above, a trade secret deals with the operations of the business and not information dealing with payroll for example.

The final way to protect your idea is through a trademark. These protection techniques are registered at the state level (usually at your secretary of state office of the U.S. Patent & Trademark Office (http://www.uspto.gov/). Here you are dealing with a recognizable sign, design, or expression that clearly identifies the product or service of a particular company.  An easy example is the Coca-Cola trademark for Coke. Trademarks have their roots as far back as the Roman Empire where blacksmiths would mark their swords. 

So even if you are a small business but have creative ideas, you can gain protection for your ideas. 

Small Business Succession Planning Means Success in Small Towns

Many small rural towns in Missouri has a large population of aging Baby Boomers. They are retiring at the rate of 10,000 day or over 4 million annually according to the Washington Post. But what are they doing with their business assets when they retire?

This high rate of potential small business closings has sparked a lively conversation in rural America about business succession planning. By doing succession planning, the current retiring owner can sell the business and it remain open and serving the community. This activity is a big win for the current owner, future owner and the community. So why don’t more retiring business owners do succession planning?

Research from University of Minnesota Extension indicates there are three barriers to rural succession planning. The first one is a lack of a discussion on the importance of succession planning. The second one deals with barriers to the actual process related to finances, time and confidentiality. The final one having other available resources to assist in the planning and actual transfer of the ownership.

With the Small Business Administration saying small businesses create over 64% of all new jobs in the United States, they are the real lifeblood in any community but of particular importance to small rural Missouri communities. Besides jobs in small towns, they also provide a broader support base for a town by being active in civic functions, social events. The concept that the place where these businesses exist is also the home for the business owners creates a very strong tie. That tie helps make the local small community stronger which creates the case for the business to stay in business when retirement happens. It can be said that the smaller the town the bigger the impact the business has on the town.

Before a community can work on the first barrier, they need to realize that there are actually two transfers happening simultaneously when a business is sold. The first one is “transfer of ownership” which is the sides of legal, taxes, and finances and is pretty cut and dried. The second is the “transfer of leadership” and deals with knowledge, management capacity and the social capital to the new owner. The first one is very important to the retiring owner while the second one is very important to the community. To address this lack of conversation, an effort to educate the current business owners on succession planning needs to be conducted.

The second obstacle is often times in the workings of the current owner and a lack of knowledge on succession planning. It can range from overestimating the business’s worth to not telling others their business is for sale to inadequate records. Surprisingly, though, sometimes the selling owner wants to stay involved in the business after it has been sold which can hamper the new owner’s ability to operate. Sometimes it is the owner taking the easier approach and just closing the business. Again, education appears to be the best solution to remedy this situation.

The final obstacle is the actual sale.  Many rural communities do not have access to business brokers to help make the sale smoother between the seller and the buyer. Finding financing to buy the business is another big factor. An interesting finding in the research by Minnesota Extension indicates that older business owners do not want to sell to older citizens. At a time when the baby boomers are retiring and have more available capital to use, they are seeing the door closed to them by their own kind. A lack of community resources is another reason for a difficulty sale. If a community has no local bank, accountant, attorney or a pro-business local government, then the potential owner has no-where to turn for advice.

Research suggests that if rural businesses can be kept open instead of closing that business retention is created but even more, business expansion happens. Minnesota Extension found that new owners reported hiring more people, growing their customer base and increased sales. That is another success story that would not have happened if the business just closed.

So Missouri small towns are at a point where retiring baby boomers want to do something locally but may not have the resources. The same is true for existing business owners who want to sell their business but do not know how. The answer appears to be the meeting of the minds and having conversations about succession planning.

If you or your community would like to have a conversation about succession planning, feel to contact Richard Proffer at 573-243-3581 or email him at profferrd@missouri.edu.