How Not To Have Old Mother Hubbard’s Problem

I have a son who is almost three years old now. He likes it when I read him stories before bed. The other day while looking for a new book for the two of us to read at night, I came across one full of nursery rhymes.

One of entries in the book was a classic that many of you will probably remember. The title: “Old Mother Hubbard”. You probably also remember the first few lines of this one, but in case you haven’t or are in need of a refresher, here they are:

Old Mother Hubbard went to the cupboard, To give the poor dog a bone;

When she came there, The cupboard was bare, And so the poor dog had none.

After reading the whole nursery rhyme it is clear that inventory issues are not the primary concern, and thankfully so! But as a small business owner, the first few stanzas do remind me of how important inventory control is for just about every small business. Just ask yourself as a consumer, how many times have you been told “Sorry Sir/Ma’am, out of stock”. That line is a common refrain in the Philippines, and I believe much of the reason for it is because the use of inventory management systems are the exception to the norm rather than actually being the small business norm.

In my earlier article from October 13th titled “Happiness is a Positive Cash Flow”, I touched on the issue of inventory management and how it related to cash flow. In this article I will discuss two methods or systems related to inventory management. They are very simple but very effective methods to keep the costs of maintaining an inventory at a minimum, and at the same time reduce the chances of actually running out of inventory at any given moment. Both of the methods I outline below can be used in just about any small business setting — from a simple sari-sari store, to a full service restaurant, or any other small but inventory-driven enterprise.

The first method is known as ABC Inventory Management. I’ve also heard it called other names like 1-2-3 Inventory Management and Gold-Silver-Bronze Inventory Management. Essentially this system of inventory control aims to group your overall inventory into three broad categories. The first, category “A”, includes those items that are generally most expensive to have on hand in your business. It includes those items that are most costly to you in terms of actual cost as an input or product, and they usually take the longest to sell. For example, in a restaurant, such items include the finest bottle of wine, the best cut of steak, or most costly seafood entree. Yes, a restaurant probably makes a good profit on these items and that’s why they have them on the menu, but usually they are not the items that are ordered by most of the restaurant patrons on any given night.

Category “B” items are those that are not as costly as Category “A” items, but are still somewhat costly. And while their turnover is more frequent than category ”A” products, they are not as cheap to have on hand nor sell as fast as category “C” items. You can think of these items as those that definitely have a consistent rate of turnover, but are also high-value products that take up a good chunk of your monthly cash outlay to have on hand. For example, in a hardware store, such items would include quality hand tools, high-grade plumbing and electrical fixtures, etc. They do not include category “A” items like a full-steam bath enclosure with sauna and heat lamp, but they may include items such as a decent wall-mounted water heater, or a sturdy and well-crafted kitchen faucet.

Category “C” inventory items are those that form the bulk of your inventory, but sell rapidly and have the lowest profit margins on a per unit basis. The bulk of your sales will generally come from these items, and you probably rely on a high volume of sales from these items to maintain a positive and generally healthy daily cash flow. For example, in a sari-sari store this would include things like milled rice, packages of instant noodles, small candies, etc.

Once you have broken down your inventory into the three categories, you can then know with confidence where you should spend the bulk of your time monitoring the different items you have in stock. You will want to start by monitoring your category “A” items closest. You do not want to have too many category “A” items in your inventory as it means you have too much money tied up in expensive items that do not bring in sufficient cash flow on a daily basis. Try to not go overboard when ordering or re-stocking such items. You can always special order such items and make your customer feel special by offering a discount if he or she can wait for the order to arrive. Next, you will want to monitor your category “B” items. Again, try to make sure you don’t have any oversupply issues with these items, but at the same time don’t scrimp when ordering these items because you don’t want to lose out on a sale because you were too cautious when ordering. Sales of category “B” items really can boost gross profits, but not if you have too many on the shelf and do little to create sales of these items through promotions and marketing efforts. Finally, with category “C” items, be sure to have plenty of stock, and buy in volume wherever possible to leverage bulk discounts which you can in turn use to help maximize any profit margins on these items. Doing so will mean greater chances to maintain healthy cash flow on a day-to-day basis.

The second method I would urge small business owners to consider for an inventory management system is known as the Two Bin Inventory Management System. It doesn’t get any simpler than this system, but it works. As the name implies, you have two actual bins filled up for each of the various items you are selling. Your staff should take stock out of the first bin until empty. When it is empty, you reorder stock and start selling from the second bin. When new stock arrives, you replenish both bins and start over. With this method, you should overcome most of your inventory issues and in theory have the ability to perpetually sell your products and hardly ever run out of any items. It is a very simple system that is easy to learn and follow.

If you follow one of these two inventory control methods, or a combination of both, chances are you will probably be a leg up on most of your competition. They probably will stick to reordering only when they have absolutely no stock left on the shelf, and that will allow you to increase your business over time. As your business grows you can consider using a PC to help you track your inventory and plan accordingly, but in most cases and most small businesses, simply following one of the above two systems will likely be all you need and won’t cost you very much to implement.

So if you are a small business owner you may want to try and implement one of these methods of inventory control. By doing so you just might find your staff has fewer and fewer opportunities to use the words: “Sorry sir, no stock”

Small Business and Fire Prevention

Fires can be downright devastating in the Philippines. That is why every year a small business owner in the Philippines can expect to be paid a visit by the inspection team from the Office of the City Fire Marshal.

The Office of the City Fire Marshal falls under the jurisdiction of the Bureau of Fire Protection, which in turn falls under the jurisdiction of the Philippine Department of the Interior and Local Government. Every municipality has such an office, and one of the tasks undertaken by this office is to help promote fire prevention. It is a task that is not taken lightly. To underscore the importance of fire prevention nation-wide, every March is hailed as Fire Prevention Month in the Philippines.

After the team undertakes their annual inspection visit of a small business, the owner of the business can expect to receive an After Mission Report that includes findings and recommendations. The findings section generally includes a check-list of the following: whether you have the appropriate business and/or occupancy permits for the building you are in; whether there are sufficient exits from the building and that these are not obstructed in any way; that the electrical system is up to code and does not pose any hazards; that an automatic emergency lighting system is in place and functioning; and, that there is an appropriate number of first-aid and fire fighting devices for the premises.

The recommendations section of the after mission report generally indicates what steps, if any, the small business should take to remedy any potential fire hazards as a part of fire prevention for the building and its grounds. The list generally includes the following measures: unplug all electrical loads when not in use; submit fire insurance data and obtain proper coverage; have fire extinguishers serviced or refilled; install additional automatic emergency lighting if needed; keep all passages to fire exits free of obstructions at all times; attend a fire safety seminar; and, update/bring up to code the electrical system.

The After Mission Report will advise you on how well your small business is faring in terms of fire prevention measures. Please take the findings and recommendations seriously. Personal property and even lives could be at risk if you fail to act on the recommendations found in the report. Do the right thing and comply – the time and effort required to meet the minimum safety measures outlined in the report will not be overly cumbersome, nor will such preventative measures cost very much.

As a foreign small business owner you may think the above list is a little ‘light’. You would be right! Back home you probably took even more precautions at home or at your place of work in the area of fire prevention. Accordingly, I strongly urge you to follow the same guidelines you adhered to back home. When it comes to fire safety, an ounce of prevention really is worth a pound of cure! As a bit of a re-fresher, try and look out for the following:

• Make sure you have no overloaded circuits;
• Really look into fuse blowouts as they could be a sign of serious electrical problems;
• Get rid of and replace any frayed electrical cords;
• Don’t let trash pile up;
• Clear out and store items that are rarely used;
• Don’t allow smoking in high risk areas of your building;
• Make sure you properly use, store, and dispose of flammable materials;
• Check and maintain air-conditioning and ventilation equipment at regular intervals; and finally,
• Don’t forget to buy battery-operated smoke detectors and check them regularly.

I really urge all small business owners in the Philippines to reflect on their own fire prevention strategies. There is no need to wait for March to be reminded and take appropriate action! If there are any readers who have additional suggestions and tips regarding fire prevention, please feel free to post for the benefit of all of us! And remember, be prepared, and always be profitable!

Vanishing Act

It’s just not possible. Where did it all go? How could this be?

No, I’m not referring to one of those television ads talking about hair loss. I’m talking about how many small business owners find themselves in situations where they become dangerously short on funds.

It happens a lot more often than you might think. Small business owners face pressures on their pocketbook just like everyone else. Rapidly depleting financial resources can result in disaster for many small businesses in the Philippines, even to the point where they just might they have to close their doors for good. While small businesses can run into financial trouble for a number of reasons, this column will focus on the more stealthy ways one’s resources come under attack. Many small business owners concentrate on the more obvious problems when trying to figure out why their cash position is worsening, like looking out for employee pilferage and ‘leakage’, any misuse of inventory, and searching for mismatches between real costs and actual pricing. But there are a number of more insidious threats that can often be overlooked. Listed below are eight such threats and some suggestions on how to side step these potential financial landmines.

Blindsided by inevitable surprises. Just when you think everything is fine . . . wham! You get blindsided by a surprise of one sort or another. A sick relative needs help with a big medical bill. Your key piece of business equipment suddenly stops working. Your vehicle gets in a wreck. You get the idea. No matter what the circumstance, you’re facing a big problem that requires a large chunk of money. Perhaps it was money you needed for expansion, or was earmarked for travel to a trade show or convention. The fact is you need to divert funds away from your core business activities to deal with such an inevitable surprise. What can you do about this? Surely you can’t anticipate every surprise situation. That is true, but you can take certain precautions to make sure you limit any potential downside. For example, you could make sure all your employees and relatives are on PhilHealth (the national health care plan). Or you could budget at the very beginning to have a back-up piece of equipment that you feel is critical to operations. And you just might want to make sure your insurance coverage is up to date on your vehicles and business premises. In other words, you really ought to plan ahead and make an effort to limit any possible disaster scenarios that could happen.

Not wanting to miss out. Sometimes your business may come across what appears to be a great deal or opportunity, but it is a deal or opportunity that you really didn’t consider or make allowances for in your business plan. Lots of small business owners face this dilemma, and it can be agonizing. Should you purchase that building that is a steal of a deal even though you’re happy with your current location and rental agreement? An equipment supplier is going out of business and having a sale - should you upgrade all of your operations equipment at bargain basement prices? These are tough calls. Sometimes you really need to go out on a limb, but if your cash reserves aren’t that deep, you better think twice and decline. There will always be other opportunities down the road.

Falling for fads. Did you just come back from a trip somewhere new and find yourself brimming with excitement over introducing a new product or service in your own market that was all the rage in the place you just came from? If it was a hit over there, it will surely be a hit here, right? Now before you go overboard, remember that fads come and go. If it will be easy introducing the product or service into you current product mix, maybe it is easy to adopt and test out on a trial basis. But if it is a product or service that will require a re-tooling of your overall business operations, you should probably douse a cold bucket of water on the idea and let it pass. Trying to latch onto the success of a fad is not a good idea. You waste precious resources on something that will fizzle out with time, and the overall experience will distract you from your main business priorities.

Wanting instant gratification. OK, your business is showing a pretty good profit after 6 months of operations, so is now the right time to go on that trip to Italy, or buy that new truck, or purchase the beach house property you’ve been dreaming of? Nope. It’s not a good time. Small businesses generally go through real irregular patches of sales with new highs and new lows (often in successive months) during the first few years of operation. Just because you’ve had good sales early on doesn’t mean you won’t hit a bump in the road. More often than not, you will feel the effects of competitors who will begin to fight to win back the market share you have taken from them. You’ll need to stay sharp and have a good reserve of cash or they just might take back the customers you have just fought to win over. Try to delay your urges for instant gratification and wait a few years before making major purchases. You just may need those extra Pesos to stay in business and keep your cash flow positive.

Relying on Peter to pay Paul. Many small businesses underestimate the amount of cash they will need to keep operating day-to-day in the first few years of business. As a result, many are forced to rely on their early sales to finance operations and get working on secondary orders and subsequent sales. This is natural in the early stages or your business operations, but it becomes a real problem and can be a dangerous strategy if you constantly rely on this method later on. If you don’t find ways to put money away after each sale, you could quickly find yourself with no cash at all in an economic downturn.

Hooked into buy now — pay later schemes. Now, there are times when you should take advantage of buy now — pay later special offers. If you are making an investment in a key piece of equipment and are offered an interest free payback period, then taking advantage of this offer is a shrewd business move. But it is not a wise move if the equipment is not essential, or will serve only as ‘window dressing’ for your small business. Remember, purchasing unnecessary equipment can crimp the cash flow of your business.

Wanting to ’Keep up with the Jones’. One of your competitors is introducing a new product or service and you feel like you should offer it too or be left out. Another competitor has renovated his shop and the new look is drawing in lots of customers — should you follow suit? Resist the urge to follow others! Stick to your business plan! You can always add your new products and services when you are ready. And you too will need to renovate some day in the future, so do it then and not just because your competitor is doing it now. It is easy to think you need to follow the herd. Try to go against the herd when you can, especially if doing so doesn’t seem to cause you any financial pain. You shouldn’t abandon your business plan just because someone else is doing something different. Be a leader, not a follower!

Hoodwinked by inflation. This one is tricky, and really has nothing to do with what you do or don’t do at all! Inflation is something that can cause real problems for everyone in society if it gets out of control. That’s precisely why it is a major concern of the central bank here in the Philippines, and with central banks all over the world. Inflationary conditions have major implications for small business owners because inflation can wipe out the purchasing power of your savings over time. If the returns you are receiving on you savings are not growing at a rate that is faster than inflation, you are actually getting poorer over time! If you anticipate needing to make capital expenditures in the future, make sure your savings are put in an investment vehicle that at least mitigates the effects of inflation. In other words, don’t leave your cash in the safe. Talk to a financial adviser and see how they can help you grow your money over time and outstrip inflation.

This column was a bit longer than most that are written in the Small Business File, but the concepts and mitigating strategies really can make a difference for those trying to understand how you too might protect your business from potential cash shortages in the future.

Pesos, Dollars, Euros, Pounds

One of the advantages of running a small business in the Philippines is that once profitable, you can count on an income stream in the local currency: Pesos. This is a definite advantage, because ideally it should mean you rely less and less on outside sources of funds. As a foreign small business owner, the more Pesos you earn, the less likely you are to tap into your savings or outside investments which are likely to be in a different currency like dollars, euros, pounds, yen, etc.

Having a local income stream is important for two very practical reasons. The first, and most obvious, is being able to lower your overall transaction costs when meeting your cash requirements in the Philippines. If you rely on the ATM to access funds from abroad, chances are you are paying some form of service charge each and every time you withdraw money from the ATM. You may even be double-charged when both the local bank here in the Philippines and the outside bank you are accessing funds from each charge you for the transaction. If you have an income stream in Pesos, you may not have to withdraw funds as often, or even at all, meaning either fewer service fees or transaction costs and maybe none at all! This allows more of your savings to work for you and not the financial institutions.

The second reason why it is important to have an income stream in Pesos is for risk diversification purposes. In the past year, as the Pesos rallied and the US dollar weakened, many expats and others who rely on outside sources of funds saw their purchasing power fall as the Peso went from around 56 to 1USD all the way down to 40 to 1USD. Those who had budgeted living on a thousand dollars a month in remittances saw their usual monthly budget fall from P56,000 a month down to P40,000 per month. That is a huge fall, and meant a great deal of sacrifice and lifestyle changes for a good many people. On top of that, inflation was on the rise during the past year; meaning goods in the Philippines were increasing in price while the purchasing power of people relying on remittances was falling. A classic double-whammy! Those who have a small business earning a Peso income stream were much less affected by such gyrations in the value of the currency. For one, small business owners could adjust their budget easier because they knew how much they were earning in Pesos and did not have to worry about the impact a falling dollar would have on their budget. For another, they could also look at adjusting their own prices and pass on some of the cost increases wherever possible, provided such moves did not negatively impact their overall sales and profitability.

Having a Peso income stream is also important if you are worried about long-term uncertainty in relation to your savings. If you have a Peso income stream, you can rely less on your savings or nest egg that is likely to be tied up in a more stable or ‘hard’ foreign currency. Earning in Pesos can result in the ultimate protection of your savings — meeting your monthly needs entirely in Pesos, saving a portion of your business income in Pesos, and retaining your entire nest egg in a hard currency that can be invested prudently to allow for capital appreciation or if more conservative, for capital preservation.

Bottom line: Having the Peso income stream helps you when the dollar is weak, and can allow you to also retaining you nest egg which helps you when the dollar is strong. A true double-bonus!

So, how can you maximize this situation if your small business is providing you with positive cash flow? Keep separate currency accounts! Try to see if you can live on your earnings in Pesos. Invest your foreign currency savings in conservative investments that grow slowly but safely, and should you need to tap into them on occasion, try to only withdraw interest earnings and leave the principal untouched. If you are able to cover your living expenses and save Pesos, look at ways to grow your Pesos quickly. Many banks offer very attractive interest rates on Philippine Peso time deposits. One strategy may be to try to maximize such opportunities by allowing deposits to grow all the way up to P250,000 — the maximum insured by the Philippine Deposit Insurance Corporation. After 250K, one could then either open a new account at another bank and do the same, or perhaps look at converting excess savings above 250K back into a hard currency with the aim being to grow any foreign currency nest egg even further.

I hope this column gets small business owners and future entrepreneurs in the Philippines to start thinking about the benefits of even a small Peso-denominated income stream. As you can see, a Peso income stream can provide upside possibilities while at the same time limit downside currency-related risks. Good luck, and hopefully, happy saving!

Happiness=Positive Cash Flow

I recently came across an interesting quote while browsing through the magazine rack in a bookstore. I can’t remember much about the article, but the quote was memorable:

“Happiness is a positive cash flow”.

The quote made me think about a very important concept that should be drilled into all entrepreneurs and small business owners from the earliest time possible. That important concept is cash flow. I believe cash flow is a concept that can be confusing to many, because it is easy to mix-up with other concepts like profit and sales.

What exactly is cash flow? In a nutshell, cash flow is the amount of money flowing into your business from sales and/or returns on investments minus the amount of money flowing out of your business used to pay for business expenditures and investments. It is vitally important to closely monitor cash flow and make sure it is positive. A positive cash flow means you have cash on hand at all times or the majority of the time in a given time frame. Having cash on hand is important because it means creditors, employees and others can be paid on time. In addition maintaining a positive cash flow is important because having extra cash on hand provides a small business owner with the opportunity to inject more funds back into the business. Such cash infusions can potentially generate even more cash and profits for your small business.

Now many of you are probably saying to yourself: “Of course cash is important, duh!” Unfortunately, many small business owners fail to realize how tricky it can be to have cash on hand and maintain positive cash flow. How is this possible? Well, consider this — you may be making big profits selling your goods or services, but still have a cash flow problem! How? Easy. Profits can be tied up in inventory, accounts receivable, or unavailable to you in whole because of a payment scheme that defers or staggers payment. Many small businesses have these problems, and as you can see from these examples, profits do not always equal cash on hand.

So, if you are a small business owner in the Philippines, what can you do to create a business environment conducive to maintaining a positive cash flow? There are a number of things you can try.

First, you can try to reduce the overall number of your accounts receivable. You can do this by offering small discounts to customers who pay in full up front. Many small business owners offer utang to their more regular customers. While this can sometimes help you close a sale, try to avoid this practice if possible and instead offer lower prices for up-front cash payments.

Second, you can take a careful look at your stock of inventory. Having too much inventory is a serious problem and can force a business into bankruptcy. Start tracking your inventory and streamline your ordering so that the majority of your profits are not tied up in excess inventory. If you know certain months of the year are busier than others, stock up only in advance of those months and lessen the size of orders ahead of those months you know sales become leaner.

Third, you can try and defer your own payments to suppliers. If a supplier gives you deferred payment terms, it means you free up more of your cash up front. You will still need to pay your supplier, but you can do so at a later date. This is helpful if your business is busier in some months than others. Pay up-front and avail of discounts on inventory just before the busy months and reduce your orders and try to extend payment terms during the slower months of the year.

Fourth, you can hold regular promotions and sales. Promotions and sales may lower overall profits, but they allow you to eliminate inventory problems and can result in increased sales that usually boost your cash balance sheet. I have a friend who holds a sale during the first weekend of every month! She not only has incredible sales at the beginning of the month, but she makes room for the latest inventory available for that month.

Finally, you can try talking to your banker to see if they have a lending facility for small businesses that require temporary funds while awaiting payments from customers who have bought with deferred payment terms. Many of the most business-friendly banks offer a revolving line of credit (RLC). A RLC can help you finance your short-term working capital requirements for the purchase or sale of inventory or can be used as bridge financing while you wait for the collection of receivables. Work only with commercial banks and stay especially far away from non-bank moneylenders. The high-rate of interest charged by non-bank lenders will eat away at your profits and usually worsen your cash balance sheet overall.

I hope this week’s column gets you thinking about ways of improving the cash flow in your small business. And always remember, cash is king!

They Did It: Hidden Treasure

‘They Did It’ is a special column that appears on occasion in the Small Business File. Each week the Small Business File addresses some interesting topic related to entrepreneurship or small business management in the Philippines. ‘They Did It’ columns showcase businesses developed by foreigners and OFW’s. The goal is to provide insights into how different entrepreneurs have found success here in the Philippines, and provide encouragement to others by demonsrating that running a small business in the Philippines is not only possible, but can be rewarding as well!

This week ‘They Did It’ examines the efforts of an American entrepreneur, who along with his Filipina wife, have established an international school in Butuan City. Hidden Treasure Homeschool International follows a U.S. curriculum and caters to a roughly equal mix of expat and local children. The school’s motto is “We mold confident kids”, and the school has been doing so by providing a global education for students in Butuan since 1998.

Name: Todd and Cristie Bradshaw

From: U.S. and Philippines

Residence: Butuan City, Philippines

Business Name: Hidden Treasure Homeschool International

Business Description: A fully accredited grade-school and pre-school located in Butuan City. Hidden Treasure Homeschool International follows a U.S. curriculum. The school has complete educational facilities including a library, science laboratory, computer workstations, airconditioned classrooms, and a play area for pre-school activities.

Q: Can you give our readers here at LiP’s Small Business File some background history about how and why you started up your school in Butuan?

A: When my wife, Cristie, and I first moved to Butuan in 1992 we enrolled my eldest daughter in a preschool run by a local church here. After about a year we noticed her English language skills were beginning to errode and naturally we became concerned. By this time we had a fair idea about all the different schools available in Butuan and found none where the teachers spoke English correctly. We then moved from the city into the nearby mountains and Cristie started homeschooling our kids with a curriculum from the U.S. Not long after, my brother Greg, a teacher, joined us in Butuan and he and Cristie decided there was a market for a school that focussed on teaching the children of expatriates. Hidden Treasure Homeschool International began by teaching in an American family’s home. Later on we rented a small building of our own. Our most recent move was to our current location in the Otis Mall in Butuan City. While the full name of the school is Hidden Treasure Homeschool International, we are known primarily in Butuan as ’IS’ (International School). I joined after the third year of operation and help out with both teaching and management of the school. Today we have about 50 students, fairly evenly split between expat kids and local kids.

Q: What Aspects of running a school do you like the best? Least?

A: Of course, watching kids learn and grow is the most rewarding part of this business. Some people here are very embarrassed about speaking poor English, so it is particularly nice to see shy Visayan kids learn English well and become confident and outgowing. What I like least is dealing with all the bureaucracy; reports and red tape. I can understand why extensive reporting and regulation is required given the number of educational scams that have occurred over the years, but it doesn’t make having to comply with all the cumbersome requirements any easier.

Q: What are your keys to success?

A: For us the key has been keeping the student to teacher ratios very low (6:1). This has very dramatic results with children because of the extra attention and ability to correct learning obstacles early and effectively. Our school has gained a favorable reputation largely due to this factor.

Q: What are the biggest challenges in running a school?

A: Our success is also our biggest challenge: tuition fees need to be fairly competetive in Butuan, but our fees need to be relatively high in order to support our higher overhead due to the low studernt to teacher ratio. Our competitors, of which there are now several, have a typical ratio of 25 or more students to one teacher.

Q: What are your future plans for the school?

A: In the next five years we plan to raise enough capital to build a new campus, which in turn will allow us to get accreditation to open a high school as well. Our goal is to be the premiere international school in northeastern Mindanao.

I would like to thank Todd and Christie for providing us with some insights into what it is like to run a successful international school here in the Philippines. Hidden Treasure Homeschool International truly is a school unlike any other in Caraga!

Business Outreach Activities

Have you ever noticed how some small businesses seem to always get a great deal of good press and are almost always spoken of in a favorable manner? When I ask successful small business owners what is their secret to gaining consistent, positive reviews from their customers and peers, they almost always point to their commitment to excellent service, or offering the highest quality possible at the fairest possible price. But when I probe a little bit deeper, I usually find that there are additional factors at play that help reinforce the positive image these businesses have in their communities. More often than not, the small businesses getting the best press and positive reactions in their communities are those that are engaged in simple outreach activities.

One of the simplest and most effective ways of engaging in outreach to build the profile of your small business is to be a sponsor or co-sponsor of a special event in conjunction with a well-established and highly visible non-profit organization within your community. If your small business shares many of the same goals and a similar vision with a non-profit organization, there is a great opportunity for you and your business to help a worthwhile cause. The benefits are numerous. First, you get to work with like-minded people in supporting a cause that is important to you and your community. Second, you gain advertising exposure that you would normally have to pay a premium for. Third, you gain contacts in the community that can help you later on. In essence you are building bridges that can result in collaboration down the road that could be very profitable for your small business. And fourth, you demonstrate that your business really is a part of the community and people do take notice — your success ultimately depends on your community’s vitality, resilience, and ability to meet local challenges, so being a participant in helping meet a local challenge means you are a part of a potential solution and doing your part to support the growth and development of your community.

The opportunities for such collaboration are endless. You can provide support in cash or in kind. For example, your small business might want to sponsor a kids sports team in need of uniforms, or help in efforts to raise funds for the elderly and who are in need. My business works with the city we live in every year to provide snacks and refreshments during the local fiesta to make sure judges and contestants at different activities are comfortable and enjoy the volunteering they are involved in. We also sponsor a local softball team by paying membership dues and providing team uniforms. Other foreign business owners in our city have sponsored barangay basketball teams and tournaments, have helped raise funds for great organizations like Habitat for Humanity, or have raised funds for improving the local shelter for street kids and abandoned children. You don’t need to go overboard with the size of your contribution — small cash amounts go a long way, and in kind contributions like providing meals or refreshments or tables and chairs really make a difference.

There are other ways to raise your businesses’ profile in a community. Giving presentations at local organizations and institutions is almost always a great way to gain favorable press and exposure. Does your small business do something in-house that may be of use or of interest in the wider community? For example, the owner of a driver-training school might want to give a short presentation on vehicle maintenance as it relates to the safety of the vehicle and on the road. Or the owner of a day-spa may want to offer a talk on nutrition and how it relates to health and well-being and effects on the body. Such presentations and talks can be given at colleges and technical schools, or at community centers or the local library. The key is focussing on a message that resonates with the community and how you and your business are not only interested in the issue, but also in sharing you experiences and learning what others in the community have to say about the issue as well. Offering these kinds of presentations may also set you up for another good outreach activity — being asked to participate on professional panels.

Participating as a guest panellist at a public forum or lecture is another way of raising the profile of your small business. Sometimes the community is interested in a topic related to your business endeavour, and in such cases you may be called upon to present your ideas on the subject or maybe even be asked to offer what you feel is positive and negative about proposed projects or changes that may be under consideration in your community.  As a guest panellist, you will be able to share your expertise on the subject, and if you do so in an honest, but culturally sensitive manner, you may not only raise the profile of your business, but be asked for further input in the future. For example, I have been asked to participate as a mock-interviewer at a local college to help graduating students get a feel for how upcoming interviews might be conducted. Other foreign business owners I know have been asked to participate in panel discussions on the future of the industry they are associated with. The key is to be tactful, but informative, because your inputs may help shape upcoming decisions that have a lasting impact on your community. If your participation and inputs demonstrate that yours and your businesses’ support is for the community first and foremost, then you are much more likely to attract loyal supporters to you and your business which is extremely important for long term business success.

So, as you can see, there are many ways you and your business can be involved in simple outreach activities that can not only boost the public perception of your business, but can also result in positive impacts for your community at large. By their very nature, small businesses are much more closely tied to their local communities, so don’t be afraid to participate in activities and events that raise your profile and help attract loyal supporters and new contacts and customers for your company.

Business Cards

Hello Everyone! I’m finally back to writing columns after a very much needed road trip through western Canada.  Four thousand kilometers driving; great times with friends and family; scenery that I had taken for granted. Now I’m finally back at my ‘home-base’ in British Columbia and can return to regular columns once again. Thank you to all who wrote in while I was on my break. It is wonderful to get such great emails and messages from people all throughout the Philippines. I’m glad to be back writing and stirring up thoughts and conversations on small business and entrepreneurial issues in the Philippines!

This week I would like to discuss the role of business cards and their importance to small business operators in the Philippines. Generally speaking, business cards are often given an even higher importance in most parts of Asia than they are in other parts of the world. In most of Asia, the Philippines included, business cards can serve as an important extension of oneself. Many people take great time and effort in making sure their business card is designed in such a way that the card properly emphasises all the best qualities of the person and the company he/she represents. People don’t want their business card to be lost, forgotten, or thrown out. I have friends in different parts of Asia that go so far as to suggest that they would ‘lose face’ if they found out their business cards were discarded in such a fashion. For this reason, I generally keep just about every business card I receive while in Asia and store it away. But this column will not focus on storing/filing business cards. Instead I would like to focus on how you can make sure your business card can stand out in the crowd and not get lost among all the others.

Just about everyone agrees that when it comes to content on business cards people should really stick to essential information. That means name, title, phone and fax numbers, and email. In addition to this, your company logo should be positioned in a clear manner, and if you have room, a tagline or company slogan. This is all the information you need on the front of a card. Any more detail usually means a cluttered card that is hard to read. The only exceptions I can think of are adding any professional accreditations if they are important to your line of work (i.e. like PhD if you have one and are a consultant), or a picture in place of a larger logo if you really need people to recognize you immediately (i.e. like if you are an artist, writer, speaker, or realtor). Remember, often times more is less. Cluttered is confusing.

The back of the business card is another matter entirely. While it is not essential that you utilize the back of a business card, often it can be useful for marketing purposes. While I like to write notes on the back of business cards so I can remember something special about the person or product the card is from/about, more and more I am noticing people using the back of the card to include a discount offer or in a way that the card can be used as a coupon for some sort of special or customized service. This is a great way to incorporate a direct-mail component into your business card. Sometimes this approach can pay for the whole cost of printing the cards if you net a single sale from this tactic!

What about card weight, finish, color? All of these are important considerations when it comes to portraying a specific image. Try and go for high quality, weighty paper that is almost as rigid as cardboard. The card will last longer than those made of cheaper, less sturdy papers. White backgrounds are considered most appropriate for professional service businesses. Colored backgrounds can be attractive for businesses that prefer a more casual or artistic flair. But be warned — a very bold color may stand out among a bunch of white cards, but if the color gets in the way of the message or makes it difficult to read the essential information, it may defeat the purpose and cause you to lose out on a sale.

Lastly, don’t forget to get your card ‘out there’. You and your business can always do with as much exposure as you can get, so don’t be conservative with your stack of printed cards. Always give out more than one card when you meet somebody new. Let them know you’d be pleased if they passed the extra on to somebody they know that might be interested in your product/service.  Attach a card with every service invoice. Include a card or two in business correspondence.  And finally, keep some on your person at all times — you never know when you may bump into a potential client!

Good luck packaging and printing your own business cards. If you are a small business owner with a creative or important tactic that works for you with business cards, please pass on any suggestions on how you have made your own cards stand-out among the crowd!

Gone Fishing . . .

Hello Everyone,

I’m currently on vacation in Canada. Normally I’d like to upload a new post for the Small Business File, but the nature of my travels has me in different places and without normal ammenities that help in making a regular e-column come to ‘print’. That’s code for my two year old has greater luggage requirements than me, so I had to leave the laptop at home in favour of a set of toy construction vehicles, a portable DVD player and his favourite story books. There is a silver lining to leaving the laptop at home — it means I have a chance to keep both of my eyes open for great small business opportunities and ideas from Canada that may just work in the Philippines. Thanks for your understanding, and I look forward to uploading a new post in a couple weeks time.

Keys to a Successful Business Partnership

Last week in the Small Business File’s inaugural “They Did It” column there was a reference to how Ivy’s Vine Resort was formed as a partnership that included foreign and local participation in the running of the business. That mention is the inspiration to this week’s column on what are some of the keys to developing and nurturing a successful business partnership in the Philippines.

Partnerships hold the promise of great potential for business success. They combine talents and resources that may not be possible otherwise. But they also have the potential to be a nightmarish business structure and the source of constant headaches if not developed properly. Previously we discussed the advantages and disadvantages of a partnership and how to go about forming one [see Monday, July 28th's, Ownership Structure and Formation of a Small Business]. What follows are some considerations to help realize the benefits of partnerships and limit some of the key problems.

A first consideration should be a determination if the overall goals and personalities of the main partners are similar and compatible. While it is fine and often beneficial for there to be some degree of difference in relation to goals and personalities, in general it helps if the main business goals are the same. A good friend of mine backed out of a partnership intended to expand the reach of the business because he found out early enough that the ultimate goals of his potential partner were too different from his own. My friend wanted to build his business up and expand it, while the partner wanted to build the business up and sell it.

Likewise, it helps if the personalities of the partners are fairly compatible because nothing slows down the progress of a business like constant divisions and disagreements. Such divisions can hamper not only the attainment of strategic business goals, but can be harmful in achieving efficient and effective day-to-day operations and procedures. For example, another business colleague of mine opened up a business with his brother-in-law. My friend wanted to abide by all the rules and regulations expected of him and the business, but the brother-in-law was only interested in making as much money and as quickly as possible. This of course created a huge problem, because any legal trouble for the business could harm both partners financially in the form of fines and penalties. More importantly, the big difference in personalities posed a greater risk to the foreign businessman, as any legal problems could also jeopardize his immigration status in the Philippines! The result was a formal termination of the partnership after a great deal of time and expense had already been committed. If they had recognized their personality differences earlier and the conflicts it would cause, perhaps they would not have spent as much time, money, and energy as they both did.

A second consideration should be a clear understanding of what strengths and weaknesses each partner brings to the partnership, and what the division of labour and responsibilities of each partner will ultimately be. I’m not referring to the legal definitions such as equity participation and liability. These issues will be clearly spelled out in the articles of incorporation or partnership agreement that is submitted to the SEC. What I am referring to is more personal. You and your partner(s) should be able to list down exactly what benefits each brings to the business, and similarly list those assignments each should have limited involvement in with the business because others are better suited to those tasks. By listing down strengths and weaknesses, it becomes easy to agree on a division of labour for the partnership. Each partner can explicitly ’see’ what they need to do and what others need to do to make the partnership work. This division of labour helps with the next consideration involving conflict.

Conflict within the partnership should be expected as it is only natural that there will be some disagreements from time to time. Even if you have personalities that don’t clash and have established a clear division of responsibilities, there will invariably be some issues that bring about disagreement between partners. Successful partnerships almost always decide on a means of conflict resolution at the very beginning of the partnership. Your business can become sidetracked over even small conflicts, especially if egos get involved. This is disruptive at the very least, and can cause a successful business to dissolve entirely in extreme cases. If you and your partner(s) establish a system for resolving conflicts at the outset, you can evade any potential decision ‘land mines’ that could cause severe strains in the partnership. For example, you might agree beforehand that one partner has the final say on decisions in one area of the business and you in another. You may also decide to have a rotating leadership so that every year you alternate as to who has the final say on difficult business decisions. No matter what system you do decide on, the important thing to remember is that a system is in place to keep the business moving in a positive direction.

By considering the above suggestions prior to entering a partnership, you should safeguard yourself from a number of difficult headaches that can really impede your small business’ start-up and long-term success. I am sure a number of readers would like to receive even more tips on how to create a successful partnership agreement and working environment.  Comments and suggestions from those actively involved in partnership agreements would be greatly appreciated.