Robert Kiyosaki, author of the International bestseller Rich Dad, Poor Dad was my guest this week on Small Business Radio in Los Angeles.  In case you missed the show, click here to listen over the Internet to an archive of the show for free.

 On this show we discuss the importance of investment for business owners, and some strategies for increasing your wealth through your business.  We also discuss his latest book, Rich Dad’s Before You Quit Your Job which deals with 10 real life lessons every entrepreneur should know about building a multimillion dollar business.  Learn Robert’s thoughts on where you should be investing your money today, how the soaring price of oil will affect your business, and what to do to leverage your business assets by becoming your own landlord. Special BonusAs a subscriber to my business update, you are also eligible to receive my Free Guide to Growing Your Business.  In this e-book we offer tips on taking your business to the next level.  Learn about niche marketing and how shrinking your market will help you see huge dividends.  Download a copy for free at:http://www.sbanetwork.org/grow
 Have a great week!

The road was wet and dark as truck after truck entered what is known as the most dangerous tunnel in Southern California. Even under excellent conditions, most drivers have grown to fear its sharp curves and dips. On this cold evening, these drivers were unaware of what was about to take place. A fiery wreck consumed the lives of 2 people, and dramatically altered the lives of many others. 

October 14th was a tragic night on the 5 freeway, just north of Los Angeles. In addition to the loss of human life, the closure of this freeway for several days prevented travel between LA and Northern California. As a major trade route that sees millions of dollar of cargo daily, shockwaves were sent through the business climate in Southern California. 

Companies often face unanticipated challenges like these. Do you have a business plan ready to execute next week for an interruption in your supply chain, recession, terrorist attack, sudden drop in the stock marketing, or a spike in oil prices? The best businesses are ready. Many have even profited from events that destroyed or damaged their competition. 

For companies that want to turn fatal blows into near-fatal blows, they must plan for the unexpected. 

How do you plan for the unexpected? David Shechtman, who was on our radios show a few weeks ago, does just this. He calls it “Scenario Planning,”which involves drafting out various possible scenarios and planning for them. 

Possible scenarios that exist for you may include: 
1) If this new product does not gain traction in the marketplace, how will we react? 
2) If our smallest competitor moves to a dominate position in the marketplace this year, how will we react? 
3) If the trucks are not able to make delivery due to forces outside our control, how will we react? 
4) If a key employee decides to leave and go to a competitor, how will we react? 

When you have a plan for overcoming these setbacks, you can move forward without skipping a beat. 

It’s likely you are very busy. If there was a quick way to plan for scenarios, would you be interested in hearing about it? 

Use your lunchtime. Take your executive team to lunch and brainstorm everything which could go wrong. Create an exhaustive list without working through it. 

At the end of the lunch, choose two scenarios and have your team jot down ideas for how to navigate those problems over the next week. Take them to lunch again in a week and discuss your ideas. Do this every week over the next few weeks and you will have planned for the unexpected. 

If you foresee this meeting venturing off onto tangents, or you believe it will not be effective, hire a facilitator to manage these lunch meetings. If you’re not sure who to contact, contact us for recommendations. 

Listen to our LIVE radio show this Friday at 4 pm PST at www.smallbusinesshour.com , where we’ll be interviewing the president of Bank of America Small Business. Call in to speak with us at (323) 443-6878 code: 226287

–Cory Halbardier

It is not often that I find myself without words. I usually have plenty to say about any topic imaginable. But recently when speaking with a CEO who had asked my advice about how to deal with a particular challenge in his business, I was rendered speechless. This CEO had recently lost a key supplier to the competition thereby disrupting his supply chain and causing production and delivery problems.

As we discussed his challenges, the CEO seemed forthright and was open to hearing ideas of how to handle this. So I told him about several other clients that had experienced the same problem and how they created a foolproof method for avoiding such circumstances in the future. I suggested he engage in some planning to create a network of suppliers with contingencies for those that fail to maintain loyalty. I suggested that in the future, he should try to avoid depending too much on any one supplier unless there was an exclusive arrangement in place. I told him that the key was doing some careful planning to identify competitive suppliers and play one against another. 

His response both stunned and surprised me. He said. “Wow, that sounds like it would take a LOT of time. I don’t have time for planning!” I asked him if he now had time to find a new supplier. He answered a sheepish, “No,” and went on to tell me about how he was working 60+ hours per week just trying to manage all of the details of his business. 

I think this is a fairly common problem with business leaders today. We spend so much time working IN our business that we fail to work ON the business. Peter Drucker said that on the average one hour spent planning is worth 5 hours of execution. Are you spending enough time planning? Do you need to take a step back and look at the big picture and identify some contingencies? 

This might be the very time to do just that. For more information on planning and planning resources, check out our library of articles.

Mark Deo and Cory Halbardier, as well as other SBA Network consultants are available for keynote presentations and other type of speaking engagements. Contact Cory Halbardier at 310-320-8190 to ask about availability.

Today there is a lot of discussion about vision, mission, and goals.  In fact I see many companies investing loads of time, money and effort in coming up with their “mission statement.”  Usually this is a few inspiring sentences that are placed on plaques to hang on the wall or printed on the back of business cards or put on the company web site.  With few exceptions, this often amounts to a big waste of time!

 Tired of reading already? Click here- LISTEN TO THIS ARTICLE. The fact is few of these mission statements accomplish what they were intended to do.  That is “motivate employees to perform at a higher level.”  Ironically, however, after a month or so not even the CEO, let alone the employees can even remember one word of the mission statement. So does this mean establishing a mission for your company is a useless task? Not necessarily.  Yet in order to understand how to make mission planning a valuable tool we must first understand WHAT a “mission” is.  In short, a mission is a course of action that a company decides to pursue.  It is the road they will travel in order to ensure they arrive at their ultimate destination.  It is their plan for achieving their vision.  A mission is not something we say, it is something we do. Mission Statement Development
A mission statement describes “how” you will achieve your vision.  It describes the “road” that you will walk.  It outlines your values and is a summary of your plan to accomplish your goals, Here are some basic guidelines in writing a mission statement:
1. A mission statement should say who your company is, what you do, what you stand for, and why you do it.
2. An effective mission statement is best developed with input by all the members of an organization.
3. The best mission statements tend to be 3-4 sentences long.
4. Avoid saying how great you are, what great quality and what great service you provide.
5. Examine other company’s mission statements, but make certain your statement is you and not some other company.  That is why you should not copy a statement.
6. Make sure you actually believe in your mission statement, if you don’t, it’s a lie, and your customers will soon realize it. Step-by-Step Mission Plan Development
Answering the following questions will help you to create a verbal picture of your business’s mission:
– Why are you in business?  What do you want for yourself, your family, and your customers?  Think about the spark that ignited your decision to start a business.  What will keep it burning?
– Who are your customers?  What can you do for them that will enrich their lives and contribute to their success–now and in the future?
 -What image of your business do you want to convey?  Customers, suppliers, employees and the public will all have perceptions of your company.  How will you create the desired picture?
 -What is the nature of your products and services?  What factors determine pricing and quality?  Consider how these relate to the reasons for your business’s existence.  How will all this change over time?
– What level of service do you provide?  Most companies believe they offer “the best service available,” but do your customers agree?  Don’t be vague; define what makes your service so extraordinary.
– What roles do you and your employees play?  Wise captains develop a leadership style that organizes, challenges, and recognizes employees.
– What kind of relationships will you maintain with suppliers?  Every business is in partnership with its suppliers.  When you succeed, so do they.
– How do you differ from your competitors?  Many entrepreneurs forget they are pursuing the same dollars as their competitors.  What do you do better, cheaper or faster than competitors do?  How can you use competitors’ weaknesses to your advantage?
– How will you use technology, capital, processes, products, and services to reach your goals?  A description of your strategy will keep your energies focused on your goals.
– What underlying philosophies or values guided your responses to the previous questions?  Some businesses choose to list these separately.  Writing them down clarifies the “why” behind your mission. Mission Statement Example:
Here is a great example of a mission statement for a food company: “Xyz Inc. is a spunky, imaginative food products and service company aimed at offering high-quality, moderately priced, occasionally unusual foods using only natural ingredients.  We view ourselves as partners with our customers, our employees, our community and our environment.  We aim to become a regionally recognized brand name, capitalizing on the sustained interest in Southwestern and Mexican food.  Our goal is moderate growth, annual profitability, and maintaining our sense of humor.”

I was watching the World Cup this weekend and saw a game in which Mexico and Iran played their way to a 1-1 tie at the end of the first half. Ranked 4th in the world, this was certainly a disappointment for Mexico. At halftime, their coach made what many considered to be a crazy move- he changed two of his players to start the second half. In the World Cup, you are only allowed to substitute 3 players for the entire game. This meant that if he had any injuries, he would have to make his last substitution, and any further injuries he’d be stuck. Well, 5 minutes into the 2nd half, Mexico’s best player went down with an injury and the final replacement was made.

Sounds like a huge mistake, right? Well, his 3 substitutions were the major factor in scoring two more goals in the second half, and Mexico dominated the rest of the game, easily beating Iran 3-1. Their coach clearly saw an opportunity that he was able to exploit by taking a risk- had he played it safe, the players responsible for the last two goals wouldn’t have even been on the field.

In business sometimes we try to take the safe route all the time. We protect ourselves, waiting for a problem that may never come. By taking a chance, we can maximize our efforts. What opportunities do you see in your business? How can you take a risk to capitalize on them? Risk is an essential element of business. Do you want to play it safe? Or score a goal? Click here to read another article on risk in business.
I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email mark@markdeo.com.  

Have a great week!

We’ve all heard the phrase, “on the wings of eagles.” But what does this mean?

Few are aware of the fact that an eagle knows when a storm is approaching long before it breaks. The eagle will fly to some high spot and wait for the winds to come.When the storm hits, it sets its wings so that the wind will pick it up and lift it above the storm. While the storm rages, below the eagle is soaring above it. The eagle does not escape the storm. It simply uses the storm to lift it higher. It rises on the winds that bring the storm.Think about how appropriate that picture is in today’s business climate. Are we not facing a variety of storms? -Economic storms, political storms, sociological storms and even cultural storms? Continued war, the burst of the dot-com bubble, corporate and political misconduct, downsizing and corporate cutbacks dominate local and national newspaper headlines. How is this affecting your business or your ability to maintain and grow your business?Let’s face it, many of today’s small business owners started their businesses amid economic prosperity and have yet to experience such raging storms. With this in mind, I’d like to propose some strategies that can help all of us weather the storms and rise above the clouds not unlike the eagle.

1. Ignore the Hype – First and foremost, experts say, don’t panic. It’s important not to buy into the hype but to be realistic about our business environment. For me that means staying away from the TV news, and the local papers. They are filled with doom, gloom and dread and short on facts or suggestions for improvement. Instead I read the Wall Street Journal, the On-line agencies, Fast Company, Business Week, Kiplinger’s and other business publications.
2. Diversify – According to the Small Business Administration, Southern California, because of its diversity, is well-poised to weather economic storms. Other good news is that even though Southern California is experiencing a slowdown, the economy is still growing, just at a much slower rate. “It’s like we were going down the highway at 80 miles per hour and now we’re going about 30,” I heard a colleague say recently. “It feels pretty darn slow, but the fact is, we’re still growing.” So think about what you can do to diversify. What new markets can you address? What new products or services can you begin to test? What new areas of service can you begin to employ?
3. Think Strategically – To strategically outwit economic storms I recommend that small businesses incorporate an economic outlook into their strategic plan. Each company must examine its strategic focus and ensure that it’s pointed in a compatible direction with the economy. While companies often have the strategic answers they need, it is sometimes difficult for small business owners to be objective. A consultant can help companies examine and validate their strategic focus in relation to the economy. Step two, is for small business owners to focus on managing the business. Small companies often grow at a rapid rate and spend most of their time focusing on fulfilling customer’s needs instead of managing the business. Small business owners should manage the company’s financial statements, look for things that are out of line, make sure there is no excessive waste and ensure correct company procedures are being followed. Entrepreneurs are probably the worst offenders in becoming too focused on the marketplace and not focused enough on management. Often they need to either step back and take a hard look, or empower someone else to inspect the management process for them.
4. Be Proactive – Weathering storms also requires having safeguards in place prior to the start of hard times. For example, instead of waiting until you need cash, a line of credit or other resources, have these items in place prior to the start of a storm. Make certain your human and financial resources are intact at all times – in good times as well as bad. Make sure you save money out of your business and put your credit line in place while times are good, then you’ll have these resources in the event that you lose a key client or the economy slows down. Also, don’t put all your eggs in one basket. It’s OK to have a niche, but it’s important to not be so specialized that if one area of your business gets slow, you can’t survive. If a business has one client that represents more than 30 percent of the company’s revenue, that company is vulnerable and needs to work on gaining additional clients.
5. Establish Budgets and a Contingency Plan – I am continually shocked at the number of businesses that are operating without any type of budgeting contingency plan. Or they may have budgets but they rarely adhere to them. When times get a little tough many of these entrepreneurs respond by slashing the highest expenditures. When reducing expenditures, small business owners shouldn’t blindly cut budgets such as marketing and advertising. Instead, review the budgets for these activities and try to determine return on investment. These may be the very activities that will keep you alive in a storm!
6. Build Relationships – Relationships with customers are critical at all times, but particularly during slow economic times. During these times, everyone is looking to reduce expenses, so your customers may be looking to other suppliers. Be prepared to justify the cost of your products and services by being able to explain the benefits as opposed to the features of your products and services. Create loyalty by providing extras that don’t really cost you more, but give the customer more. On the plus side, such storms often result in new business opportunities, particularly in the area of outsourcing. With larger businesses downsizing, outsourcing may become a more attractive alternative. Small businesses may find themselves in position to provide a product or service to a larger entity. In addition to building relationships with existing and new customers, building peer and colleague relationships is important. You should always have a network of peers and colleagues in place so you can draw on their resources and expertise. Get these networks in place when times are good. Work as smart when things are good as when things are bad, and you’ll be ready when the storm breaks out.

In short, unstable times create opportunity. Remember you are not alone. Your competitors are also going through this downturn. Spend more time and be willing to invest in ways that you can differentiate yourself externally as well as manage your internal business more effectively and you will get the jump on your competition. In this way, you, like the eagle, will be able to ride the trade-winds as you soar above the raging storm below.

It were not best that we should all think alike; it is difference of opinion that makes horse races.

-Mark Twain

While reading an essay from Seth Godin’s “The Big Moo” I was struck by the concept being proposed that efficiency in business is being calculated in all too narrow a manner. Typically, we look at how we can streamline our processes- remove any and all waste, come up with uniform ways of doing things, and then calculate our efficiency solely based upon the resources we put in and the output we get based on said input. So a typical efficiency equation is we put in X resources (usually boiled down to a dollar amount) and we get back Y units of production in return. From a pure numbers standpoint, this seems to make a lot of sense. It is the justification used for offshoring jobs, moving manufacturing facilities, and for encouraging teams of workers that all think alike and do everything in the exact same way. Studies have shows that this type of environment will maximize your traditional efficiency.

How does this work in an ever-changing business world? Just ask the airlines, or telecommunication companies, or municipal electrical companies in California- the world changed on them, and they were stuck with very little diversity of thought in their organization. All that efficiency went out the window overnight when they found that their old line business practices just didn’t work anymore. The airlines still haven’t figured it out save for a few, telecommunication companies are offering the United States products that Europe and Asia passed by years ago, and our electric companies in California are stuck waiting for fractions of pennies on the dollar from fraud settlements with Enron.
Perhaps if they had not been so intent on maximizing efficiency in the traditional sense, they could have been more adaptable. One client of ours was in the mail order catalog business. They would send out X number of catalogs, and get Y orders in return. Sounds very traditional- they maximized efficiency on these offerings- to an extent. They also were constantly thinking of other business models, and encouraging diverse opinions from their employees. When they mailed a million catalogs on September 9th, 2001 their existing business model evaporated overnight when the mail shut down. Yet they were able to very quickly transform their business to one that is a telesales operation focused on Fortune 500 companies, and have an even more profitable business now than before. Had they completely maximized their traditional efficiency, they would not have tested new methods of doing business- and they would be out of business now.

How can one justify sacrificing efficiency when financial types will want to look at the black and white numbers of it all? We must reconsider what the equation used to determine efficiency consists of.

What if the change our organization faces were given a risk factor? Let’s call it R, for risk. This shall represent the downside- perhaps we have a 2% chance per year that the market will change drastically and our current business would no longer work. There might also be a higher percentage chance, say 20% that things will change to an extent that we must make changes in our business to keep up.

Now, the things that cause inefficiency in our business I will call F, for friction. Traditional business methods will stress minimizing F to the point it is eliminated. I would suggest that you keep a small amount of it around. Now, our efficiency equation becomes X (resources) goes in, and we get Y (output) minus F (business friction). I will call the efficiency E for short.
This can be stated as: E=(Y-F)/X. Now if we add the risk factor into the mix, we can figure out a way to actually increase our efficiency to the point it is greater than before we included risk and friction in the equation!
Let’s state that the efficiency only works in an unchanging world- so the left side of the equation actually becomes E (Efficiency) times the chance that things will remain unchanged, or 100% minus R. So our new efficiency equation can be stated as:
E*(100%-R)=(Y-F)/X. Which by simple algebra becomes E=(Y-F)/(X*[100%-R])

Let’s put some numbers in as a quick example. A factory spends $1,000,000 a year to produce 1,000,000 units. This yields a traditional efficiency of 1 unit per dollar. If they were to encourage some diverse practices, they may find that their yield goes down to 900,000 units for the same dollar amount, so their friction (F) is 100,000. If their risk factor is 20%, plugging this into our equation we get an efficiency of 1.125 units per dollar! 

This may appear complicated, and in some ways it is, but if you can find the proper balance of Risk factor and Friction in your business, you can not only avoid catastrophic business failures, but also be more adaptable to change.

All too often in business we strive for uniformity. Uniformity of thought, or practice, or opinion can be stifling to the ability of a business to adapt to the changing needs of the marketplace. So go out, find diversity in your business, and embrace it for what it is- an asset to your business.
 This article was written by SBA Network Sales Technology Specialist Matt Walker.  He may be reached at mwalker@sbanetwork.org.