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The global financial crisis is cutting deep into the economy. Consumer confidence has hit record lows. Layoff announcements seem to arrive daily. Against this bracing headwind, small- and medium-sized businesses need to batten down the hatches and weather the storm.

But how long will the storm last? And what should entrepreneurs do to preserve precious resources, outlast competitors and avoid knee-jerk reactions that turn customers off? To find out, Knowledge@Wharton, the Wharton School’s online business journal, has asked professors specializing in entrepreneurship and family businesses for advice.

In this first in a series of 12 Knowledge@Wharton podcasts, Wharton management professor Raffi Amit discusses the outlook for the economic downturn and which small- and medium-sized businesses will be most affected.

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Source: Knowledge@Wharton

We say that, don’t we? Smug and cocky: “I get it – it doesn’t take a brick wall . . .”

But there I was, in the bathroom of the Woman’s City Club in Akron, Ohio, washing my hands. I looked into the mirror and it hit me!

I must first confess that at 51, my mirror gazing moments are few and far between. I’m amazed to find wrinkles by my eyes. After all, I have kids. I yell more than I laugh! Where did the laugh lines come from?

But on this day, in the middle of a monthly Boardroom meeting led by Norma Rist, I had excused myself to use the restroom. I looked in the mirror and my reflection yelled:

“You idiot – your business model is all wrong for you. You should be going in a totally different direction!”

This epiphany wasn’t totally out of the blue as I’d been working on creating a vision for my business for a few months.

Has this ever happened to you: you lift your head from the intense focus of the work-a-day world to ask, “Where is this leading and what am I working toward?”

I had told Norma that I needed a Vision Class, the opportunity to force myself to create a vision for the future of my business; my life. Norma is the president of Norma J. Rist, CEO Consulting and is a phenomenal business coach and mentor.

This past July she gathered 18 women business owners for the purpose of creating our vision. However, I entered thinking I’d already found the answer. I didn’t realize at the time, but I had closed my mind to any out-of-the-box thinking.

To successfully create a vision, you need to remove the blinders and leave preconceived notions at the door. I realize now that I had closed the door to true inspiration before we even started.

Norma started by asking a few questions:

• What personal/professional outcomes did we require?

• What did we do that gave us the most pleasure and feeling of success?

Then based on the Jim Collins model from Good to Great:

• What did we do better than anyone else?

• What are we deeply passionate about?

• What would people be willing to pay for?

It was at the intersection of those three answers that we find our true vision. In every case, I had an answer that didn’t fit the neat little box of my vision and so I ignored the discrepancy. Hmmm. Should have been a hint, right? Call me thick-headed.

The next step was to imagine how we could take that unique slice of services or products and create a business that would benefit others. What did that look like? Who were the target customers?

Finally, how would we make money? Products? Services? Proprietary licensed materials? Online membership communities?

She actually made us put dollars to each item and multiply out the number of customers we would need to get to a million dollar business. Now that’s a vision!

Firm in my belief of my vision, I multiplied and erased and added and pondered until I finally squeezed out about $250,000 of imaginary revenue. Whew.

This was hard work.

Our inner voice is a powerful speaker. My voice whispered that I should go down a different path but my mind was loudly proclaiming the original direction.

Have you been in that place; firm in your belief of what you are doing, even though a little voice hints that perhaps there is another alternative?

Since my bathroom epiphany, I have given in to the new direction and doors are opening, ideas flow and when I put pencil to paper? My new business model comes in just shy of $6 million. Okay, it is just on paper so don’t be asking for a friendly loan, or anything.

But here is what I learned from my bathroom epiphany:

• We need a vision. A direction, a path, a plan that we can actually see achieving.

• It needs to be something that makes US feel good about ourselves. Eventually we get to making life easier or better for our customers, but first we need to feel good about ourselves as we travel down the path.

• It needs to provide a value to others – we need to make a difference. We are here for such a short time; we owe it to those who came before and those who come after, to make life just a little bit better.

• The vision needs to provide the life that you envision for your family – that might mean an income that pays the bills, puts some in savings and provides a cool family trip each year. Or it might mean rock star status. The cool thing is; it is your vision, so you get to pick.

• We need to listen to the little voice. It’s pretty smart.

So what’s my vision? Oh, it is still in the infant stages. WHAT it is, isn’t really important. What is important is the fact THAT it is – the fact that I have found a vision that is exciting for me and that I believe will ultimately provide value for others.

Do you have a vision?

* * * * *

About the Author: Deborah Chaddock Brown opened her freelance writing business AllWrite Ink in 2004 after almost 17 years with the International retail optical corporation, Pearle Vision. Deborah’s background is in franchising, operations, marketing and communication, however, her passion is helping businesses connect with their target audience using the Internet. Deborah blogs at Websites People Read.

Deborah is a member of the Small Business Trends Expert Network.

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Source: Deborah Chaddock Brown

This election season the phrase “small business” seems to pop up in every debate and stump speech. But where do the candidates stand on the matters that are important to small business owners during these financially uncertain times?

Entrepreneur has a handy “Ask the Candidates” feature that shows John McCain and Barack Obama’s answers to questions posed by real small business owners as well as an at-a-glance summary of the candidates’ positions on economic issues.

The Small Business & Entrepreneurship Council has made a side-by-side comparison chart showing  Obama and McCain’s positions on “key issues of concern to the U.S. Small Business and Entrepreneurial Sector.” You can view it here. (Opens as a PDF) While the organization expresses opinions about the candidates’ stances on its website, the chart appears to be a non-partisan summary.

Other interesting reads:
Business Week interview with Ralph Nader: “Why Small Business Owners Are the True Capitalists”
WSJ’s Independent Street blog: “Small Business Speak Out About Economic Woes”

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Source: Open Forum Editors

You can feel the bad news or look for the good news. I choose to look for the good news.

In the last downturn of 2000/2001, I decided to slow my business down and take the opportunity to grab hold of personal time and do something for myself and my family.

I moved down to a four day working week (still more than ten hours per day) and spent time doing things on my personal list. In particular, I spent time studying a new skill by extending my qualifications.

Sure, I had less money, and it was tough. But when the market picked up in 2002/2003, I was positioned increase my revenue, increase my business and ready to ride the economic growth. More importantly, I was completely refreshed from a quiet period with shiny new skills to grow my business. It paid off handsomely, I rode to top and made more money than ever before.

The second piece of good news is that I planned for this economic failure. It was clear that there was going to be a major economic problem about eighteen months ago, and that’s when I started increasing my cash reserve and tightening my costs. I didn’t know when or how bad, but when the newspapers consistently talk about a “correction”, and commentators also agree, you know it’s really going to happen in the next couple of years.

When this downturn comes to an end, I will be planning to increase my cash reserve again. Maybe not for the first six months, but my business plan will have the “economic downturn of 2012″ (or whatever its going to be), and I will be reserving cash in the years ahead.  I can be sure that its going to happen, and I feel positive that I will be ready for it.

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Source: Greg Ferro

There’s so much bad news out there about the economy that I had to stop my regularly scheduled programming (the article I had scheduled to write) to talk about something more important.

That “something” is a crucial element of entrepreneurial success: maintaining a positive state of mind. And protecting that positive state of mind from influences that make you uncertain and less confident.

You see I live and run my business in the battleground swing state of Ohio. With the election going on, the drumbeat of negative doom-and-gloom has reached unbearable proportions.

Let me give you one example: we are bombarded with political ads on TV night and day. I am not exaggerating with the word “bombarded.” Anyone from Ohio or another battleground swing state knows what I mean.

Most of the ads emphasize the economy. They talk about how bad things are. We hear an Obama ad, then a McCain ad, then an ad by a group supporting Obama, then one supporting McCain’s platform, and so on — all back to back. Nearly every single commercial break.

It’s gotten so that in our house, someone will just reach over and flip channels or turn off the TV for 2 minutes. Same goes for listening to the radio in the car. This is unspoken — we never discussed this. We all started doing it because we’d reached the breaking point.

I started to find that it spilled over into my business. All the bad news was coloring my own ability to plan and make decisions. Unchanneled worry about the credit crisis and whether customers will stop spending, or this market or that market crashing and burning, can put you in an endless loop of uncertainty.

You know you should be planning a new marketing campaign, or investing to beef up your infrastructure for more throughput (in my case more content), or your sales could slow. You know you should be thinking of creative ways to grow additional revenue streams to de-risk your reliance on a single revenues stream. But the swirl of negativity around you makes you hesitate. It makes you want to curl up in a little ball, figuratively speaking, and stay safe from all the bad things happening in the world.

It’s a huge dilemma for business owners and entrepreneurs. On the one hand, we MUST stay aware of what is happening in the economy and how that will affect our businesses. No business is an island.

On the other hand, too much negativity without solutions just brings a self-fulfilling prophecy. When we hear how bad things are, we start assuming that it HAS to be bad for our businesses — that a disaster is around the next corner. Even if that isn’t necessarily the case.

We can talk ourselves into failure.

I am not suggesting that we all stick our heads in the sand. That’s not how you run a business. But we can only take so much doom and gloom before it affects us. That’s why it’s important to manage our own state of mind.

How do I do that? Two small but powerful tricks help me keep a positive motivated mindset in the midst of unprecedented bad financial news:

• - Limit your exposure to reports of bad news. Listen to news reports that give detailed facts that you can assimilate and use to make decisions. Or focus on how-to information. An article that offers tips for running your business during a recession is more useful than some panel of commentators screaming over each other about what a mess the economy is in, but never offering solutions. In other words, get news you can use. And then use it.
• - Watch what you say to yourself. Your internal voice is powerful. Your thoughts can tell you how to feel — yep they do. Change your thoughts and you go a long way toward a positive mental outlook. Catch yourself when you are thinking negative thoughts. Consciously replace aimless negative thoughts with an “action thought.” Not this: “The economy is in the dumpster and everything is crashing and burning down around us. Oh no!” Replace that thought with “Customers may be slowing down their purchases given the slow economy. Would a 2-for-one special get them to buy? And should we be personally calling instead of writing customers who are more than 45 days past due? Better talk to Joe about that tomorrow.”

Focus on what you can control. One thing you definitely have some control over is your own state of mind — keep it positive.

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Source: Anita Campbell of Small Business Trends

If you’ve cracked a newspaper or turned on the news lately, it’s all doom and gloom about the economy, market volatility and outlooks on business.  The continuing financial crisis has left business owners on edge, causing many to do just the opposite of what they should be doing.  Hopefully, you are not one of those frightened ones … making emotional versus rational, practical decisions to propel your business forward in any economy.

Looming financial questions have negatively impacted economies around the world.  No country or region has been completely isolated from the financial storm.  Here at home, companies large and small are scrapping plans to introduce new products.  Cutbacks on marketing are some of the first considered.  This is exactly the wrong thing to do. Now is the time to be bold and take action to grow your business — especially small businesses.  This economy demands that you become known, liked and trusted enough for people to buy from you.  Trusted enough for them to allow you to become their solution.

Now is the time, more than ever, to have an actual marketing plan to ensure this is the case.  And then work the daylights out of that plan.  Think about it.  When are your prospects more likely to see and respond to your marketing?  In boom times, when they’re being bombarded with advertising and promotions from all of your competitors … or, in lean times when your competitors stop contacting them? Now is the best time to grow your business.

While competitors are hunkering down, you have the opportunity to excel.  You have a wider field to let people know what makes you different in a market of many without distinction.  In most cases, the competition won’t be trying to contact your prospects “as usual.”  They probably won’t even be contacting their own clients as often.  This makes it all that much easier for you to get attention with clear differentiation in your market (what makes you special, different, THE desired choice?).  It makes it easier for your PR, ads, in-house marketing efforts, internet marketing, etc. to be noticed … that is IF you have a plan you are implementing to put yourself out in front of your public in remarkable ways.

If you paid attention to everything you saw in the news about the economy, or anything else, it could easily drive you to drink.  The media’s driving force is constant negativity.  It’s only the topics that change.  But before you give up on your business future – based on news reports – remember that the majority of people in the U.S. (approximately 96%) still have jobs and are earning a steady income.  Even if things get as bad as some predict, the majority will still have their jobs, similar to the recession of 1982, which most people have already forgotten.

You’ve got a choice and opportunity in this economy, if you reframe your perspective on possibilities.  You can hunker down with your business, hide out and try to ride out this recession.  If so, the likelihood is high that you’ll be making less next year and could even threaten your business livelihood overall.  Or, you can take this recession as a challenge to lead your field.  You can use it to transform your marketing and growth strategies to come out on top of all the rest.  Which is it?  Are you aiming to be a winner?  Or, simply follow the fearful pack?

It may be a perfect time for you to look at outsourcing, versus hiring, to get the extra horsepower you need to power up your marketing efforts.  This is more affordable than ever and a smart move for lean small business owners.  After all, you are probably very good at “what you do.”  It is the rest that you don’t normally do, like marketing, that you may need help with implementing.

Success isn’t for the fearful.  It is for those who believe in themselves and choose to lead the field when others fail to do so.  Leading, when others lack courage and you are open to a more effective approach.  Leading, when the vulnerability of “not knowing” a particular skill set calls for enrolling specific talent and help from others who do “know” the parts you may lack.  For businesses to be successful long term, in any economy, requires that business owners be response-able in any economy.  It means changing with the flow of constant changes in technology and the many ways it will impact your business,

These ever more rapid changes are a predictable part of business today - election year, or otherwise.  Financial challenges, or not, lightening speed change is here to stay.  So, why fight it.  Embrace it with the great options available to you with the talents of others to support your cause.  Outsource projects  and use  virtual assistants. Find competent coaches for the CEO who are specialists in marketing and business development. Letting technical wizards be your friend and support versus something to avoid. These are all part of effective strategies for long term business success.

In fact, if you are that leader of the pack, next year could turn into your best ever!  The answers for your future business success are held in your decisions to make clients as passionate about what you offer as you are.  There is no better time.  Now, as always, it is up to you to make the right choices to build a case for your business!

To Your Success!

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Source: Sandra Lee

I’m married to my high school sweetheart… We dated six years before tying the knot several years back.

I’ll have to confirm this with my beloved bride, but I’m pretty certain if on Day 1 I said, “You seem like a nice gal… I’m a nice guy. Want to get married?” Things would have turned out quite differently…

That’s cute Kyle – get to the point.

Here’s the point: If you are advertising to prospects in a “shotgun” manner such as this:

“You don’t really know our business, but here’s a bit about us. Give us a call and let’s do business!”

Your advertising is going to flop. Response will be low. Folks won’t notice you and few will call.

Duct Tape Marketing teaches us that we need to build Know, Like & Trust with a prospect before any business will take place.

One of the ways we do this is by using a 2-step approach in your advertising – an approach that concentrates on “dating” vs. “let’s get married!”

A couple examples of a 2-step approach:

“Ten Key Accounting Tips for Small Businesses. Visit this website for your free report.”

“Call for your Self-Employed Tax Reduction Toolkit”

We aren’t going from “don’t know ya” to “tying the knot.” We are instead building Know, Like & Trust with our prospect… “let’s date…let’s get to know each other…here’s some free information…”

This 2-step approach leads to higher response, more measurable results and certainly a great shot at the second date…

Kyle Hunt is the founder of Your Marketing Guy and a Duct Tape Marketing Coach located near Ann Arbor, Michigan. Find more information online at www.YourMarketingGuy.com

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Source: Kyle Hunt

There are two sources of problems for small businesses during this financial crisis.

First, with rising prices on supplies, gas and even employee health insurance, small businesses that are already struggling, cash flow negative or break even are going to see their costs unavoidably increase. Businesses in these situations are inherently unstable, and become higher risk for lenders. During a time of economic uncertainty (or potential recession) they are less than ideal credit risks.

The second source of problems comes from the lenders themselves. Lenders buffeted by the recent shocks are losing faith in their own good judgment, and fear is creeping into the credit market as well as the stock market.  Good companies with positive cash flow that should otherwise have no trouble obtaining loans see that some sources have dried up completely.

The good news is that good lenders who know their business are still around and operating. And these are the better sources of debt anyways. Additionally, some financiers have identified opportunities in the debt market and are raising funds to address any illiquidity that might arise. Although they frequently entail “venture debt” premiums, this is an option available as last resort.

For a small business, a few steps to take are readily apparent:

• Conserve cash - reduce expenditures and unnecessary, long-term investment.
• Don’t be afraid to renegotiate pricing with unprofitable customers.
• Renegotiate vendor contracts as possible.
• Owners should be prepared to “self-fund” loans in order to get the company through the storm. That may mean putting off an expensive vacation or home renovation.
• Maintain day-to-day activities. Business as usual - important for keeping the revenue coming in, and maintaining confidence with customers
• Consider strategic partnerships within the supply chain (and even with competitors!)

A couple of examples: a small IT company with about $1M in revenues, negative cash flow and $200k in debt found itself unable to extend its lines of credit (and meet payroll). It was forced to take a hard look at operations, reduce workforce, and renegotiate contracts to become cash flow positive.

As an example of a solid company pressured by its bank: a company that had been in business for 20 years, had about $5M in revenues and 15% EBITDA margins. Unexpectedly, the bank cut its revolving credit, which was used to maintain inventory. Since there was consistently level of assets and cash flow to collateralize, as well as a long history of stable performance - the only explanation for the change in lending is because of the bank itself.

Best of luck, and remember that just like reports of wars and plane crashes, much of the news focuses on sensationalist journalism that doesn’t affect most people’s day-to-day lives.

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Source: Daniel Berch

As a small business owner, you need to understand how technology is changing the customer experience. The folks at Razorfish wrote a report called “FEED: The Razorfish Consumer Experience Report” to help people understand these change and to explore the coming trends.

According to Razorfish, “…today’s consumer is more technically adept, open for experimentation and—most importantly—active than ever before.” Its recommendations include:

1. “Act more like publishers, entertainment companies, or even party planners, than advertisers.”
2. “Create content that engages and ‘reaches’ consumers across channels, provide valuable services over mere advertising, and master an increasingly complicated and expansive content distribution model.”
3. “Rethink the way they create relationships (or conversations) with consumers before it’s too late.”

The report also examines the impact of widgets, RSS feeds, “advertising as a service,” Twitter, online video, iPhones, and new design standards. In short, this is something you should read to stay on top of Web technology and digital content. You can get it before your competitor by clicking here.

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Source: Guy Kawasaki of How to Change the World

The food related segment of franchising is the largest of all franchise types. From fairly upscale restaurant chains, to bagel shops, to coffeehouses, to fast food restaurants, it is a huge segment, and one that pumps a lot of money into our economy.

I was reading a story over at Smart Money online, a couple of weeks ago, and something I read caused me a little concern;

“Sharon Zackfia, a restaurant industry analyst, said in an investor note Friday morning that GE Capital has halted new franchisee franchising, although it will continue to honor pre-existing financing agreements.”

That is certainly an interesting development. Even more interesting was this story in AdAge that has to do with McDonalds franchisees getting loans for upgrades:

“Tightening credit conditions are crimping plans for marketers as diverse as giant General Motors Corp. and relatively small household-products company Method, have prompted Bank of America to halt loans to McDonald’s franchisees. They need the capital to frantically build coffee bars in the chain’s 14,000 locations for what was planned to be an April coffee introduction.”

Folks, this is all about lattes. Tasty, high profit, lattes.

While you digest those two new developments related to franchise financing, I will scour the news bureaus for some positive and uplifting US financial news.

Found it. Laura Ashely is reporting an earnings increase for its retail stores. Clothing seems to be quite the hot commodity.

Whoops. Scratch that. Laura Ashely is in the U.K. Sorry . . .

Anyway, what is the story with this economy? The Congress is finally done arm wrestling, with the winners getting a year’s supply of pork, and the bailout specifics seem to be redefined every other day. The Presidential candidates are engaged in some kind of bizarre dance over the state of the US economy, and the US consumer doesn’t seem to have too much influence concerning this debacle.

The franchise industry is certainly being affected by our current financial squeeze, and that is not good.

Do you know just how big franchising is? The 909,000+ franchised businesses in the US account for more than 11 million jobs! Read more about the economic impact of franchising.

We should all be a little concerned if big lenders are taking a serious pause at franchise financing. It looks like McDonalds, one of the most recognized brands in the world, doesn’t even have the financial clout to persuade underwriters to consider financing a few thousand fancy coffee machines.

(Think that McDonalds will have any trouble selling some nice coffee concoctions at their restaurants? This blogger doesn’t! Heck if I had a nice credit line, I would loan them the money. McDonalds has a great track record of correctly marketing their new offerings.)

The franchise industry will probably take a hit for awhile, like just about any other industry. In times like these, I feel that one needs to be a student of history. History shows us that over time, stocks will outpace any other investment. The stock market always comes back, and this time should be no different.

The proposed bailout needs to work. I hope that this 110 page document includes some major magic. The markets all need to be able to breath and the lenders need to lend. Small business drives the US economic machine. The machine will run out of gas, if it is left to idle.

* * * * *

About The Author: Joel Libava is a Cleveland, Ohio franchise consultant and marketer. He blogs at The Franchise King blog. His website is http://www.JoelLibava.com.

Joel is part of the Small Business Trends Expert Network.

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Source: Joel Libava