Resolutions

It's New Year's Eve and I am certain that you have tons of resolutions that you are going to make or have made. Some of these resolutions likely involve your small business. After a particularly rocky year, I am sure that one of those resolutions is: make more money. I don't know of anyone, even the very wealthy, who had a bonanza year financially. Even the richest of the rich, guys like Kirk Kerkorian, Robert Tchenguiz and Adolf Merckl are practically going broke, losing billions of dollars of value in their portfolios by the day.

I could be wrong, but the battle cries of the recession has been universal - except maybe for hospitals, shrinks and people who work with the dead - they have really capitalized on the consequences of excess stress and financial shock, I would imagine. Yes, all indicators are the the country is in a recession (as are many countries across the globe) and 2009, according to the economists, pundits and their statistics, is not going to be a heck of a lot better - it may even get worse before it gets better. (Be still your heart!)

I think that one of the ways a small business owner can assure that 2009 is worse than 2008 is to adopt a doomsday attitude and to believe that it will get worse. Negative thinking is singularly the worse thing that can happen to a challenge. In order to succeed, one has to remain certain that one can overcome the core challenges that one faces. One has to stay positive. And focused. One has to resolve to master the challenges, to get on top of them, rather than have the challenges get on top of one.

As a small business person, one of my resolutions this year, 2009, is to remain optimistic. And like president-elect Barack Obama always says, I will adopt the mantra, "yes, I can."

What about you? What are your resolutions for your small business?

Politics

What, or who, is not impacted by politics? Arguably, even the wine you drink is a decanter of politics going down your throat, gulp by gulp. In his book, Wine Politics, Tyler Colman makes the argument that “government, environmentalists, mobsters and critics influence the wine we drink.” It should not come as a big surprise that the wine business is mired in politics. Wine making in the U.S. alone is a $25 billion dollar industry. Globally, the wine industry is in the region of $240 billion dollars with the Chinese market rallying hard for global dominance in a decade or so. That is why there are so many stakeholders. With the kind of cash flow involved, how could it ever be free from the influences of “politicians?”

Small businesses are not free from the influences of politicians either. Small business owners have to be very mindful of their politics, as a matter of fact. In making the argument that small businesses have to mind their politics, I am not really talking about who you will vote for in the next presidential elections, although, that is a part of it. After all, both Barack Obama and John McCain indicate that they have strong ideas of the roll small businesses will play in the economy, the extent to which they will be taxed, and the amount of federal aid they can expect in the years to come. In this context, a small business owner’s politics might be influenced by a candidate’s take on such things as taxes, immigration, healthcare, funding and other matters such as job creation and recession. So it is important to be active in that process, as to do so is a small business owner's way of protecting their interests.

But what I am really talking about with this blog entry is the politics of doing business – and the extent to which a small business practices good politics with customers/clients and prospects as a part of their strategy for growth and profitability.

What is meant by "practice good politics." Well, for one thing, a small business has to have good PR with clients and competitors. There is such a thing as bad publicity and bad PR when you are a small business. Depending on what the issue is, negative PR can actually destroy your business. That is why the small business owner may want to think about their political strategy as it relates to not only their customers, but also to the competitors, the media, and their environment.

A small business must understand how to attract and keep customers, what to say, how to present their products and services to optimize the number of positive responses and ultimately, the small business owner must understand the sheer dollars and cents that are generated by their politics. Is it a game? Yes.

Good politics involves leadership, likeability, customer service, product proliferation and availability, quality of services and products, strong social and economic networks, crisis management, cost benefit analysis, knowledge and information, sharing values, work ethic, pricing, proper exercise of power, accountability and transparency.

In a sense, every small business, even if it is a vineyard in Napa or Bordeaux that distributes 500 bottles per year, should think of itself as a spa. That's right. A spa. It should think of itself as the Ananda Spa in the Himalyas. Or better yet, the Pezula Spa in Knysna, South Africa. Have you been there? Me neither. But I hear it is a thesis in "business politics." Pezula is situated on the coast of the Indian Ocean between soaring cliffs and the Knysna Lagoon. I am told that it will surely demonstrate rather than explicate how small businesses practices good politics, why it is important to do so, and how profitable it can be.

Arbitrage

A former acquaintance of mine (I call him Wall Street Tycoon) likes to live large. He drives a Bentley, lives in the middle of the Village of Southhampton, New York; and only dines at restaurants where the bill for dinner for two is close to two hundred dollars.

But he's broke. One day, utterly perplexed by how he continues to live at the level he does when he complains that he's literally being crushed by the weight of his debts, I asked, "how do you afford it?!" He replied, "arbitrage." He stomped me for a moment. "Arbitrage?" I asked like a dummy. "What do you mean? What is arbitrage?" "Look it up in the dictionary," he said.

I looked it up. It means "the purchase of securities on one market for the immediate resale on another so as to profit from a price discrepancy."

Sounds brilliant? It is, if done properly. When handled by amateurs, however, global recession can be the result - I am talking the apocalyptic colapse of major economies. So be careful. Be so very careful.

The small business owner has to become adept at arbitrage, to handle it like a pro. Donald Trump is someone who seems to do that well. As does a lot of highly successful business people. They use other people's money to make money for themselves. Obviously, Donald Trump is not broke like my Hamptons acquaintance. At least I don't think so. The fact that his latest project in Chicago is said to be about $1 billion dollars in the red at this point is academic. He'll find a way to restructure, leverage and pull a rabbit out of a hat. I am sure of it. He is king of aribitrage!

But both of these men, in their own capacities, know how to leverage debt, and leverage other people's money to amass either a fortune (as in Mr. Trump) or the high life (as in Wall Street Tycoon).

Arbitrage. But don't let the roof fall in on your head.

Currency

Where are you supposed to get money to run your small business? You're broke. Your 401K just got swept away in the Wall Street tsunami. But you have a vision. It's this great start-up you want to try. It's a dot com. You really believe in the premise, in the idea. You know you are cut out to be a tech entrepreneur. Everybody knows it. Silicon Valley here you come. But you need money. Where's the money?

Well, you always have your parents. But if that fails, you can try to find a private equity attorney to help you approach some venture capitalists who might be interested in your idea. Venture capitalists and angel investors are still doing deals and they are still one of the best sources of generating currency for your business - especially if you are a "start up" with a techy mission. But make sure you have a good business plan. Nobody is going to take you seriously if you don't have a business plan. They will think you are an amateur.

If you are not a start-up (maybe you want to start your own accounting firm or your own law firm, or a health food store) then venture capitalists may not be the way to go. You may need to seriously consider asking the bank for a loan. Now, the banks are not exactly feeling all that generous right now. But that is bound to change in the months to come. How long can there be a credit freeze before the whole world colapses? It's a matter of time before the banks are giving money away again, and small businesses are going to be at the top of their agenda - especially if they are backed by the Federal Government if the loans are guaranteed. Everybody seems to understand that small businesses are the backbone of the economy and without small businesses, this recession will turn to a Depression. They can't afford that. So small bussinesses are going to be in a very good place very soon.

But what if you do not qualify for a loan for some reason? Or maybe you don't want to go into debt. Well, don't you have lines of credit from your credit cards? You must have a few dollars on the bank? A CD? Retirement accounts? What about real estate? Any equity there?

Another way to generate currency for your business is to take side jobs, like waitressing, bar-tending or babysitting. These types of jobs allow you the flexibility and time you going to need to develop your business and your idea. The only problem is that most don't offer health insurance. So don't get sick.