THE REPORT BLOG

Is Big Business Using Your Company Like a Bank?

Today, the Wall Street Journal published an article about a study that found companies with annual revenues exceeding $5 billion sped up their collection of cash from customers while slowing their own payments to suppliers. As a response to the credit crunch, big businesses have found they can rely less on external funding and bank lines if they can bring cash in faster and hold on to it longer. They have been using that cash they save to pay off debt or invest in other parts of the business. Meanwhile, the study found that businesses with less than $500 million in annual sales generally took longer to collect cash and paid their bills faster than in the same period a year ago.

You don’t have to be big to improve your cash flow and use more efficient accounting practices to better finance your business. For tips from NY Report experts, read “Managing Receivables & Payables for Improved Cash Flow” and “Fix Your Flow.” In today’s economy, vendors have become much more flexible with their payment terms in an effort to keep business. Let’s stop financing big businesses and let our cash work for us.

Today’s article is available to Wall Street Journal online subscribers here. 

Get Clients to Stop Dragging Their Feet and Buy

If the pace of business is increasing, why does it seem that clients and prospects are making decisions a lot slower? And since the credit crunch has pinched cash flow for many of us, we have to get more money more quickly from clients. In order for businesses to keep pace, we’ve got to keep cash flowing. To address these changes, you may have tweaked many of your business processes, such as reducing overhead and being more flexible about the products or services you offer. But have you altered your sales process?

In the September issue, NY Report contributing editor Craig James offers some unique tips for closing faster and details steps on how to get your clients to stop dragging their feet and buy. For example, Craig suggests that in the beginning of the sales process, you ask the prospect for the date by which he or she wants to make the purchase and why. Establishing a target purchase date provides a basis for determining whether you’re on track or headed towards a delay. Visit here for a sneak peak.

The Golden Rule for Firing Employees

I recently attended a presentation given by Stephen Zweig, a partner at Ford & Harrison. Zweig is an attorney specializing in labor law - a very hot and sensitive topic these days because of the increase in employee related lawsuits as well as activity of government labor departments (e.g., unemployment, wage and hour, 1099 vs. W2).

He discussed a bunch of topics like 1099 workers, contesting unemployment claims, etc. He also spoke about dismissals. The impression that I got from Zweig's discussion was that one of the most common factors that affects the likelihood of getting sued from a dismissed employee is how you actually handle the firing. Displaying compassion when firing someone can minimize the likelihood of a lawsuit. Of course, there are a lot of things you need to do to protect yourself (like have someone else present, change passwords, etc.), but realize that you probably are putting yourself at less risk by just being nice. He also pointed out that if you are giving severance, it is a great opportunity to get a separation agreement.

By the way, when I have had the unfortunate experience of firing someone, I have always tried to be compassionate ("hey, let's say it was a mutual decision because we didn’t think it was a fit"). I have also spoken with an employment attorney in advance if I felt that the termination was a higher risk.

Your Employees Found Out About This???

I got a call from a friend of mine who owns a blue collar business. He told me that he retained a business broker to sell his business and the broker put an ad in a newspaper about the business being up for sale. My friend said that a few employees saw the ad and want to know what is going on. (Let's put aside the fact that the broker didn’t really think things through…).

My friend wasn’t sure what to tell people. We briefly discussed the following:

• Let's assume that everyone in the company found out within hours.
• Let's further assume that employees will come to their own conclusions, with many of those conclusions being incorrect.
• Accordingly, one way or another, the owner needs to address his staff – and soon.

What would your advice be?

Some Companies Are Still Kidding Themselves

Yesterday, a colleague and I met with one of our client's ad agencies to present some new ideas. The client was looking for some out-of-the-box concepts and we presented about seven new ideas. After the presentation, we asked for feedback and the client commented on how flexible we were with making what we have to offer fit the client's needs. I was surprised by this comment and asked, "Do you mean there are media companies that are not flexible these days?" He replied, "Believe it or not, there are companies that aren't flexible. Instead of being accommodating, they are talking about raising prices while their audience has decreased and they have five other clients who are looking at every opportunity that they present to us." For those of you that don't follow the media business, it is getting killed and the buyers know that. So while media companies still have compelling means of helping clients target an audience, they are in no position not to be flexible.

Sales is not what it used to be and companies that think they don't have to be flexible about what they are offering to customers are kidding themselves. Your product or service should be scaled and customized to fit each client's individual needs. While we still don't, nor ever will, do anything that comprises our integrity, we are open to making subtle changes to some of our programs so they fit the client's needs. I can't imagine that other media companies aren't doing the same.

Guest Blog - If a VC Doesn't Read It, Why Write It?

Maybe the New York Times was right, venture capitalists and investors don't read business plans. At the FundingPost VC conference yesterday, venture capitalist James Robinson IV of RRE Ventures said he never reads business plans word for word. In fact, he only looks for four key elements:
 
1. What is the problem your business solves?
2. Why are you the right person to solve it?
3. Is your business functionally good enough to execute the solution?
4. What is it going to cost and how long is it going to take?
 
Robinson thinks the Times missed the whole point. "You don't write a business plan for me, you write it for yourself," said Robinson. "It's a discipline. It helps you think through every detail of your business. And this is not a static document - it lives and breaths with your business."
- Daria Meoli, managing editor

Guest Blog - Is VC for Me?

While Rob is out of town this week, I am keeping the blog going. Yesterday I attended a venture capital and angel investing conference produced by FundingPost. The event was designed to give entrepreneurs access to advice from VCs and to give VCs introductions to some local, growing businesses.  
 
The agenda also included a panel discussion that featured Konstantine Drakonakis of Launch Capital, James Robinson IV of RRE Ventures, Brian Hirsch of Greenhill SAVP, and Mark Davis of DFJ Gotham Ventures. When asked how entrepreneurs should prepare their business before seeking funding, Davis advised entrepreneurs to make sure venture capital or angel funding is really the best solution for their businesses. Understand how you will scale your business and how much capital you will actually require. The best answer may not be to seek funding, but to bootstrap your business. Think through the question, "are we a big business in need of capital or are we a small business that needs to finance correctly?" For more details on financing a small business from a VC's perspective, Davis created a matrix, "Common Financing Mistakes: Missing The Land Grab" and posted it on his site. 
 
Drakonakis added that if you do decide to seek funding, develop a 12 to 18 month runway so you give yourself the time to plan for the next round of financing. 
 
Stay tuned this week as I will share more tips from these VC Experts.
- Daria Meoli, managing editor

Establish a Sales Pattern

Like many of us, Dharmesh Shah had no sales experience when he started his technology company. In a recent entry on his blog, onstartups.com, Dharmesh gave 14 tips for non-sales guys who are building a start-up sales team. Most of the tips also hold true for long-standing companies looking to grow or improve their sales team. Since Dharmesh writes from a perspective of a technology entrepreneur, several of his tips concerned finding patterns, repeating the patterns that resulted in sales success and eliminating ones that failed. Two in particular were:

• Don’t hire several sales people at once. Your goal is to figure out the pattern of what kinds of people are best based on what you’re selling and who you’re selling it to. You need some feedback from the system so you can continue to iterate on your hires.

• Agile methodologies can work in sales as well. Iterate! Refine your demo script, your slides, and any other collateral information. Capture the lessons learned by the best-performing people and spread it to the rest.

Check out the rest of his tips and tell me which ones ring true with you.

Should You Hire a Salesperson Who is Not on LinkedIn?

As I write this blog, I am interviewing several candidates for a business relationship management position that is open. When I get a resume (mostly from search firms), one of the things I do is Google the person. Most people don’t have a lot of G cred and that is OK. But I do expect to see salespeople on LinkedIn because they need to be using it to do their jobs (or to find a job). I like to see how many people are in their network (although I don’t assume that their network consists of prospects), if we know anyone in common (so I can get the real scoop), and recommendations (which I take with a grain of salt). But if someone in sales is not on LinkedIn, what does that say about them as a salesperson?