Thursday, December 31, 2015

My six business predictions for 2016. Spoiler alert: no hashtags, squad goals or reality tv mentions

As a business advisor, I meet with around 125 business owners a year.  Some are long-term clients, others are project-specific for example, preparing for a business loan, and a few are one-time visits. 

Part of my job involves conducting detailed research, keeping current on business trends and indicators and being aware of issues that may impact my clients.

Should I start a business?
Reply Hazy, Try Again
One prediction that I can guarantee is that the first two weeks of January, we will get numerous calls and emails from someone that "has always wanted to start a business".

In many cases, we spend a lot of time educating callers about the reality of getting a business loan or starting a business. 

Based on my personal history, business climate and current client trends, here are six predictions I expect to see in 2016.

1. Mobile use is still a key factor (and increasing daily).

Forrester Research reports that over 50% of consumers in the U.S. alone are using mobile devices to go online.  From shopping and paying with an app, to reading and posting reviews, mobile is changing the way that we do business. 

Mobile device ownership has increased 30% in the past five years.  In 2011, 35% of Americans owned a mobile device;  it was 64% in 2015.

Read my earlier blog on why mobile is not a trend, it's a reality.  Another factor in mobile is getting found in search engines.  Local search tools and providing quality, fresh content will play a big part in this.

2. Customer experience is even more important than ever.


Customer experience.  Customer engagement. Customer Relationship Management (CRM).  
We hear these terms frequently, but what are you doing about it?  Do you reward your current customers? Do you have a customer database? Are you engaging with your customers on social media? How do you manage bad reviews? 

Today's customer wants more engagement than ever before.  They want to read online reviews, post reviews, have a 'relationship' on social media and interact online with other users.  Reviews can be especially influential, both positive and negative.

Nordstrom Rack User Generated Content
The online shopping experience will change as well. It is not enough to offer the lowest prices - someone will always be cheaper or faster.  

Retargeting, personalization and customer segmentation will become even more popular. Companies will be using detailed consumer data to target specific messages. 

For instance, those ads that show up in your Facebook feed after you were searching for new shoes are not an accident.  Get used to seeing even automated marketing systems sending personalized emails and texts to customers.

3. Buying a business could be more attractive than starting a business.



In the past year, we have seen a steady increase in clients seeking to purchase or sell a business. As the population continues to age, there will be more business owners wanting to sell out.  Many owners put off selling when the recession hit and are now ready to retire.  

What's an exit strategy?
ValuePlanGo.com (VPGo) provides some alarming estimates:
  • Up to 70% of current business owners plan to exit by 2020.  
  • 80% of these owners are not ready for an exit or sale.  
  • A third hope to sell, a third want a family member to buy the business and a third plan on closing and walking away.
VPGo continues on:
"The number of retiring business owners between now and 2020 will continue to accelerate.  But the number of potential buyers is actually falling.  In 2000, there were about two buyers for every one seller.  By 2018, it's only one potential buyer for every one seller. By 2025, sellers will outnumber their buyers." (valueplango.com)
What does this mean? 
For buyers: there could be some attractive business opportunities in the coming years. Industry experience can make the difference in a loan being approved and can help you learn if you even like the business.  

Buying a franchise can have some built in processes that can be attractive for a first-time business owner.  As always, do your homework. FranNet is just one helpful resource for learning about franchise ownership.

For sellers: don't wait.  Start preparing a 3-5 year plan for selling your business.  Some businesses want to reduce the tax burden and as such, claim numerous deductions and show a loss.  If this is the case though, who wants to purchase a business that operates at a loss? Finding a targeted buyer (valued employee, competitor) can yield almost double the sale amount compared to listing it with a business broker.

4. Borrowing is not going to be any easier.


I hope I am wrong on this one, but in light of two clients' recent loan declines, I don't see the lending climate changing much.  With 2016 being an election year, it tends to make banks nervous and as a result, can tighten lending requirements even further.  There are more alternative lenders and crowdfunding options than ever before, but I'd advise doing your homework before jumping in.  

Another client had a hard time coming up with the 10% down that the bank wanted to see on a $100,000 business purchase (and 10% is low; usually the lender will want to see 15-40% cash contribution for a start-up).  He said, "I'm just struggling with how a small business can ever get started with so much money needed down".  

Wrong!
A borrower needs to have adequate capital (CASH), good credit, money to contribute (not collateral), business experience and a realistic business plan to show adequate cash flow and a solid market. For more on this, here 's a good article from Inc. on why the bank won't loan you money for your business.

And I'll repeat this message again, there are generally not grants to start a business.  If I talk with a client and he or she is struggling to come up with the money to get a business license or develop a website, it raises serious red flags about the owner's readiness. 

5. Employee relations will be just as important as customer relationships



All employees are not created equal. Understanding generational differences is also important. Setting the stage prior to hiring your first employee will pay off in the long run. For example, defining what kind of owner you are, developing employee job descriptions and expectations, outlining employee benefits in a personnel manual and learning how to hire and fire employees. How much does it cost to keep disengaged employees on payroll?

Your employees can make or break your brand and in some cases, your business.

Image from Virgin HotelsVirgin Hotel launch in Chicago
Richard Branson regularly posts articles and quotes about how Virgin regards and treats employees.  

"Wholeheartedly believing that the strength of the brand is dependant (sic) on our employees, we send out hundreds of thank-you cards every year to members of the Virgin family", said Branson. "Without our amazing people Virgin would not be where it is today – and nor would I."


 
If you have read anything about millenials in the workplace, there are some common traits.  

They are computer savvy, many are not motivated by money and change jobs more frequently than Gen X and especially Baby Boomers.  It is not unusual to see a millenial's resume and notice that he or she has held four jobs in the last three years.  The boomer generation tended to stay at the same job until retirement; this is not the case anymore.  

Many business owners complain to me about bad employees yet they do not want to say anything because they don't like conflict.  Disengaged and toxic workers will bring down your workplace morale quickly if the owners do not address the behavior. You also run the risk of losing good employees to another job with a different employee culture.  

6. Social media will continue to evolve

Social media is not about selling, it is about building a relationship with your customer in an engaging, entertaining way. Invest in social media as part of your overall marketing plan.  

If you are just starting out, I suggest starting out with one or two social sites and dedicating regular time on a consistent basis. Personally, I have started unfollowing many Facebook businesses that post irregular, irrelevant content. I also recommend knowing your customers and where they 'hang out' online.  
leveragenewagemedia.com
 

Images and video will become more relevant.  Good, quality images can make or break a customer's experience to your Instagram or Facebook. For retail, hospitality or other industries that rely on visual, invest in a good camera or professional photographer.  

Looking ahead at 2016

Each of these predictions is worthy of a blog post by itself and there are surely other predictions and opinions.  It is important to be aware of trends as you make business decisions, but also look at your history and experience as you make goals for the next year. I don't know who said it, but one of my favorite quotes is, "You can't move forward if you're always looking back".  So here's to the new year!



Monday, December 14, 2015

Innovative company designs custom solutions for biotech, health and ag industries

Working with SBDC advisors on business strategies "frees up more time to invent"


By Hope Belli Tinney, Washington SBDC

SPOKANE, Wash. – It’s hard to classify the types of projects that roll out the door at Empire Technical Development in Spokane.

A few recent inventions include a temperature-controlled storage system for biological samples; a spray system mounted on an all-terrain vehicle for pollinating almond trees; and a machine to test the effectiveness of a cleaning solution on tile.

The company’s project portfolio is exceptionally diverse, especially considering most of the work is done by two partners and two employees in a 2,200-square-foot workshop.

“The whole philosophy behind the company is to build technology that is reliable and innovative,” said Peter Bean, CEO for Empire Technical Development (ETD). Not only do they know how to build things, but they enjoy thinking about how to build things better.

But one thing he and partner Maxwell Yardley hadn’t built before was a business from the ground up.

Local commitment, international reach

Peter Bean, left, and Maxwell Yardley of
Empire Technical Development
Early on Bean called Alan Stanford, a certified business advisor with the Washington Small Business Development Center (SBDC).

From the beginning, Stanford said, he was impressed with EDT’s engineering capabilities and potential for growth.

“They ‘MacGyver’ stuff together in their workshop to test out their theories without spending millions for stuff that doesn’t work,” he said.

EDT  is the kind of technology and manufacturing company that can have ripple effects in the region, he said: “EDT keeps local residents employed locally, and it has good reach into the international economy.”

Stanford is one of 29 SBDC business advisors across the state who provide one-on-one, confidential, no-cost advising to entrepreneurs who want to start, grow or transition a business. The Washington SBDC (http://wsbdc.org/) receives support from Washington State University, the U.S. Small Business Administration (SBA) and other institutions of higher education and economic development.

“I have the utmost respect for Alan’s experience and expertise,” Bean said, adding that their one-on-one meetings covered a variety of issues, including financing, marketing and capital.

International export advice, too

Although EDT had started on a shoestring budget, the company soon needed more capital to fund growth and development. Stanford guided them through the process to obtain an SBA loan and talked them through countless other decisions about how to structure the company and move ahead.

Since much of EDT’s business is international, the partners also met frequently with SBDC export advisor Vern Jenkins.

“There’s a huge, whole range of areas that these people are able to give advice on,” Bean said. “Those guys are very good at finding ideas that can help people like us.”

Having the resources of the SBDC network at their disposal meant Bean and his colleagues didn’t have to reinvent the wheel when it came to setting up business systems and growing their company. And that leaves more time for inventing other stuff.

“One of the things that differentiates us is that we have a pretty good engineering workshop right here in our office,” Bean said.

Elegant, economical solutions

Because they are a small shop, he said, they have the flexibility to experiment and try different approaches quickly, saving both time and money. Any given problem might have dozens of solutions, but EDT searches for the “elegant solution” that achieves maximum desired effect with minimal effort or resources.

That’s the challenge, he said, and it’s what makes the job fun.

“It’s just fun to create something,” Bean said. “We keep on building new toys.”

Those “toys” are often designed to solve difficult problems, particularly in the areas of biotechnology and agriculture.

From pollination to cold storage

For instance, the company recently built the ETD Cerinthus, an electrically powered, automated pollen distribution system for use when natural pollination is either inefficient or impossible.

The machine allows orchardists to spray pollen into trees at a variable rate without having to stop and refuel or stir the pollen to prevent blockages. For growers scrambling to compensate for a serious shortage of bees, for example, the device could literally save their harvest and their livelihood.

There is nothing very fancy about the pollinator, Bean said, except that it does what it needs to do with a minimum of fuss, bother and expense.

EDT also has created a system capable of storing many thousands of biological tissue samples at temperatures down to -80 degrees Celcius. It allows scientists and researchers to retrieve individual samples, or groups of samples, with variable search criteria.

“These systems are designed and tested at the facility here in Spokane before delivery to foreign research facilities, hospitals and medical universities,” said Jenkins, the SBDC export advisor who has been helping EDT find international sales targets.

Most of their clients right now are overseas, Bean said, but he’s hoping that as Spokane develops further as a regional center for healthcare and biotechnology, the local client base may grow as well.

Contacts:
Peter Bean, Empire Technical Development, 509-808-6050, peter@empirelabauto.com
Alan Stanford, Washington SBDC, 509-358-7892, alan.stanford@wsu.edu
Vern Jenkins, Washington SBDC, 509-358-7998, vern.jenkins@wsbdc.org