Category Archives: Entrepreneurship

Protecting a Small Business from Disaster: A Different Approach

The Small Business Administration (SBA) reports that 85% of small businesses that go through a disaster event never recover. Key to ensuring that businesses not go under is planning for business continuity. Ensuring that a company is resilient is crucial to protecting the company from failure. This is the first of four articles on preparing a small business for disaster. For this series, a small business is any establishment that has fewer than 200 employees, and/or an income of less than $25 million in earnings per year. However for any business,whether it is a micro-business, a medium-sized business, or a major corporation, these tips are practical and worth exploring.

The articles will cover the following areas:

  • Protecting a Small Business from Disaster: A Different Approach
  • Risk Analysis and Mitigation
  • Creating and Executing a Business Continuity Plan
  • Realistic BCP Exercises and Testing: Beyond DR

Business Continuity = RESILIENCY

Business continuity is not a project that ends when a document is created, signed by the Board, tested, and filed away. First, banish the word “recovery” from the company dictionary. The goal is not to recover from a disaster; it is to continuethrough the event without failing the company’s primary stakeholders: the employees, the customer, and the owners, whether shareholders or the company founder(s). A business owner should consider business resiliency as integral to their business operations. Each area of the organization should be built to continue if there is a disaster. Resiliency is as much a part of the bottom line of any business as location, information technology (IT) support, or a loan from the local bank.

Send a message: this is serious business

Do not look at continuity as an “add-on” duty. Take the approach of ensuring that the company’s existence depends on the ability to continuefunctioning no matter what happens. Continuity planning should be someone’s full time job. That person and their staff (if they have one) should report directly to the CEO or the COO. This makes it clear to everyone in the organization that continuity matters: resiliency is what will keep the organization flowing.

While the Business Continuity Manager may want to have a disaster recovery specialist on the team, the BCM manager should be someone who understands how businesses work and how resiliency can boost the bottom line. Focus on hiring someone who has the outlook that business continuity affects everyone from the janitor to the C-suite. If necessary, hire a consultant to help get the Business Continuity Management department started.

A steering committee should be formed that involves the managers or subject matter experts from throughout the organization. This may include the CEO/owner,COO, CFO/accountant, warehouse supervisor, head of retail management, or whatever is appropriate for the business. The steering committee will determine what the risks are to the organization, what the critical tasks/functions are, and what strategy to take for mitigation and continuous resiliency. The committee does not have to be static; people can be added or released as needed. But the top people in the company are permanent members. Again, this lets everyone know that resiliency is just as important to the organization as accounting, sales, and the fashion buyers.

Focus on Resiliency

Company management must be committed to looking at every area of the company and determining how to continue the business of business during a disaster.

The first issue is to expand the definition of the word “disaster” to this one, as defined in the Disaster Recovery Journal’s Glossary of BCP terms: “A sudden, unplanned catastrophic event causing unacceptable damage or loss.”

This definition is broad enough for the focus of this article. A sudden drop in stock prices that cuts the company’s cash reserves in half in an hour is a disaster because the loss is unacceptable. Has your company already secured credit that can be tapped during a sudden downturn? At reasonable rates? The head of Accounting, who is actually the entire Accounting department, survives a heart attack on Thursday and decides to retire. Immediately. Who is going to take over on Friday morning and get the payroll processed? A wild fire burns down your warehouse full of spring fashions on February 28, just as the sales circular is arriving at prospective customer’s houses. How quickly can stock be replenished?

Oh, and someone forgot to do the backups in the IT department for the last three days. So when the air conditioners go out and the servers crash from the heat (I have seen it happen), there is a good chance that the transactions for the last three days are not recoverable.

In traditional Business Continuity Plans, only the heart attack and the IT debacle are considered in planning. Challenge the BCP Steering Committee to create a list of all of the risks to the company. Do not worry about going overboard. Only colonization by Martians is off limits. Cutting the brainstorming list down to a reasonable and manageable number during a risk analysis will be discussed in the next article.

Continuous Resiliency

Finally, consider the day-to-day activities of the organization. What steps can be taken to ensure that, no matter what happens, the business continues to run? If the electricity goes out, do the cashiers have calculators? Do they know how to use them? If the price of gas goes up to $5 a gallon, have all of the landscapers been trained in fuel consumption, and do they use those procedures daily? If a fire breaks out at the charter school, have the students and teachers been trained in evacuation?

Resiliency requires the company management to create procedures that are not only efficient, saving money and time, but also resilient. Using laptops for every employee instead of desktops may allow the company to continue processing customer requests from the local coffee shop if the normal workspace is uninhabitable. Better yet, the company can save money on leasing office space by using telecommuters and increase the company’s resiliency by disbursing the staff to different geographical areas. If a tornado hits one area, the entire staff will not be affected, and work may be able to continue.

This article provides a general overview of what a resilient organization should look like. The next article, “Risk Analysis and Mitigation,” will provide an overview of how to determine the risks to a company and how to effectively mitigate them without breaking the bank.

Small Businesses That Thrive Overseas: Deciding Whether a Company Should Compete in the Global Marketplace

Webkinz, Amazon and Overstock all have one important thing in common. These big companies did not exclude the global marketplace when they focused on expanding their business. Today, they are major players in their fields, both overseas and at home. So, should every business owner focus on growing globally? Not necessarily. The folks at Shipwire.com talk about businesses that should concentrate on global sales in this interview.

What Types of Businesses Do Well When They Expand to Include the Global Marketplace?

Two types of businesses absolutely must have an international growth story: 1) Niche Product manufacturers; and, 2) Established online retailers.

If you are manufacturing a new toy, consumer electronic or starting a clothing or apparel line you have to make it easy for buyers to get your projects. If you sell direct-to-consumer the shipping costs has to be low and preferably locally delivered. If you sell b2b or through retailers, you can grow market share by offering distributors and retailers drop-shipping (inventory-less selling) and small minimum order quantities that can be easily restocked; both of these features require local storage.

If you are an established online retailer with a large product catalog – focus on your best sellers. Find a limited selection of inventory that will sell well overseas and focus on just increasing your sales of those products. Don’t worry about selling your whole product catalog overseas. By focusing on best sellers you can optimize your time and investment. If a buyer wants a product that isn’t stored overseas it is an easy conversation and most buyers understand that the product may take longer for delivery; however, you got the sale because you were in market with local products.

Our customers that have gained an international market share include everything from apparel and toy companies to more niche verticals like mattresses and automotive accessories.

What Are the Top Three Things You Wish Every Small Business Owner Knew About Overseas Markets?

  1. The opportunity is there for those looking to expand into key new markets for very little to no extra cost.
  2. You don’t have to be a Fortune 500 company to enter overseas market. Look for tools and resources that provide you the flexibility without the high cost.
  3. Make the international market operate like your local market: don’t ship products one-by-one to international recipients. Create working relationships with local warehouses (through Shipwire). An Internet enabled distribution center (warehouse) will help you respond to buyers like a local e-tailer.

Small Businesses Go Green to Save Green: More Comapnies are Realizing Big Savings from Eco Initiatives

Big green companies like McDonald’s continue to find ways to green up and to save. McDonald’s recently announced they are researching ways to use less potato pesticides. International aviation trade groups are looking at Performance Based Navigation (PBN) to cut the length of trips which will cut fuel use and reduce greenhouse gas emissions.

Small businesses also continue to find ways to take the eco initiative one step further and reach higher for green techniques and green savings.

Small Business Goes Green

More and more new ways to take advantage of the going green present themselves every day. Here are nine greenings that any company can implement while saving some green.

  1. Install a water cooler at the office and stop buying bottled water. Also use pitchers of water and glasses for attendees of meetings and conferences instead of bottled water. This reduces the amount of plastic that needs recycled and it saves money when paying for the water cooler than paying one to two dollars per bottle of water.
  2. Use the new soy based toner for laser printers versus the petroleum based toner. There are several manufacturers of soy based toner cartridges available. Check with your printer’s manufacturer before using the soy based toner. When buying new printers, buy those that can use soy based toner. Using the soy based toner reduces the oil use as well as being more eco friendly.
  3. Extend the life of your current technology by upgrading computer equipment instead of buying all new. Many computers that are less than five years old have the capability to have the processor, the storage devices, the graphics cards and monitors upgraded. This step again reduces the amount of technology items ending up in the landfills as well as saving money for the company.
  4. Include questions about reduce, recycle, reuse in all purchasing projects and requests for proposals. Buy products that are manufactured green, that provide green savings when in use, and provide an environmentally friendly disposal.
  5. Buy mobile devices that serve multiple purposes. For example, buy one cell phone with GPS functions per employee rather than buying one cell phone and one GPS device per employee.
  6. Bring going green seminars and training to the workplace through webinars and distance learning. Or, enroll select employees in some of the new green degree programs such as those at the University of Dayton and Wright State in Ohio. Using the webinars and distance learning will reduce fuel usage, save paying the employees travel expenses and utilizes technology to its fullest.
  7. Replace current lighting in parking lots or building entrances with solar lighting. Using the power of the sun, solar lighting recharges during the day saving on electricity use and electric bills.
  8. Encourage the use of web or audio conferencing for meetings. Driving or flying to meetings cost money, use unnecessary fuel and takes lots of time. Using the webinar or audio conferencing for meetings is an effective way to conduct meetings and the savings can be phenomenal. Thinkgreenmeeting.com offers web and audio meeting resources at reasonable prices.
  9. Encourage employees to rent business, leadership, and other reference books from the local library versus buying them. Library usage is up. One local Canton, Ohio library reported seeing over 11,000 more people in the first two months of 2014 versus the same time frame in 2015.

Going Green Saves Green

All of these tips will help preserve the environment while preserving cash for the company. With such simple to implement green tips available these days, there are no longer any excuses for not joining in on the green movement. Remember that small continual contributions make a long term big impact.

Tax Audit Flags for Small Business: Reduce Your Chances of the IRS Choosing Your Company to Review.

The Internal Revenue Service plans to increase the number of audits of small businesses. Knowing and understanding what the IRS looks for can help you to decrease your chances of an audit, although this is certainly not a guarantee that you won’t be audited.

Some of the “red flags” the IRS looks for are:

  1. Handwritten, sloppy returns or those that contain math errors.

    If your return needs to be reviewed because your handwriting can’t be understood, it is sloppy or it contains math errors, they will look for additional errors as well. Filing electronically is a better choice.

  2. Large compensation for corporate officers in C-Corporations.

    When corporate officers have high compensation, it means lower corporate taxes. The IRS will flag returns showing high compensation for corporate officers.

  3. Low salaries in S-Corporations.

    Sometimes employees will take low salaries and then receive profit distribution, therefore avoiding payroll taxes. The IRS will flag returns showing low employee salaries.

  4. Using the wrong reporting system.

    There are two types of accounting methods, the cash method and the accrual method. Although any business may use the accrual method, not every business may use the cash method. Be sure to know if you are required to use a certain accounting method.

  5. Using independent contractors.

    Although there is nothing wrong with using independent contractors, some companies will pay people that should actually be employees as an independent contractor. If caught, companies will need to pay taxes back, plus penalties and interest. If you use independent contractors, be sure they should not really be listed as employees. In addition, for any independent contractor that is paid more than $600 in a calendar year, you need to complete a 1099 and send to the independent contractor as well as submitting to the IRS.

  6. Miscellaneous expenses.

    When completing your list of expenses for the year, avoid using a “miscellaneous expense” category if at all possible. Divide your expenses into categories such as office supplies, rent, utilities, etc. If you have a miscellaneous expense category, be sure to include only miscellaneous items and be sure to keep documentation.

  7. Automobile expenses.

    The IRS has certain regulations regarding the deductions a company can make regarding automobile expenses. Understand whether you need to add amounts to an employee’s W2 if a vehicle is used in part for business and in part for personal use as opposed to a vehicle owned and operated strictly for business use.

Again, understanding these red flags will not guarantee that you avoid an IRS audit, however, you may be able to decrease your chances by following the IRS regulations carefully.