Business North - Business Mentor
		with Daryl Erdman

Napoleon is said to have told Gaspard Courgaud at St. Helena on April 16, 1816: “It takes more courage to suffer than to die.”

So what does that have to do with economic times in 2009? Well, quitting is always a choice: not always a good one, but certainly easier in many cases.

Previously, I shared such a decision I faced after my businesses were hit with a 100-year flood in Rochester, MN. Going forward with bankruptcy and simply closing up the business would have taken far less effort than the recovery process. But as I considered bankruptcy liquidation, I could not escape the responsibility for all of those dependent upon the business for their livelihood.

As you fight through the tough issues of this current economic crisis, I know your frustration.

A friend who owns a construction business in Minneapolis recently said he still has work and is hanging on pretty good, even though his bank had just reduced his line of credit by 50 percent. He told me this was a real kick in the seat from a vendor (yes that is what a bank is) with whom he had dealt for many years, always paying on time. Hardly alone, his situation is further evidence that credit remain tight.

As I wrote last month, a National Association of Seed and Ventures Funds survey of 5,000 early stage venture investors found 75 percent of new companies are having trouble finding any form of bank financing. Meanwhile, 42 percent have lost all their credit lines.

Such small and mid-size businesses have proven over and again to be the main engine of economic growth and jobs development. It would seem that everything possible should focus on helping, not hurting these companies in these times. After all, they didn’t cause this mess.

From my reading, however, they are getting little help from federal stimulus programs.

Minnesota ‘shared work’

But there is help. Here’s one program available in Minnesota, according to Carol Walsh of the state Department of Employment and Economic Development. She e-mailed to me details of the agency’s “Shared Work” program that allows an employer to divide available work hours among a group of employees instead of initiating a major layoff. It allows members of the employee group to receive partial unemployment insurance benefits while working reduced hours — a win/win for all. The result is a morale boost, increased work flexibility and better productivity.

The great thing about such a program is that it helps a company maintain its core values.

Most smaller businesses I am familiar with have a strong sense of responsibility to their employees, and in times like these nothing can destroy that quicker than forced layoffs. This is a program worth exploring for all. More program details are available at www.deed.state. mn.us/sharedwork.

Another tool for helping businesses through these times is carefully identifying what has driven — and is driving — profitability. In my own companies and as a teacher to many more, I know little time is spent worrying about this when business is expanding. In this economy, however, we all need to better understand how profit breaks out by customer and product line. Resources are tight so discretionary funds need to be spent wisely. You need to concentrate them in the areas delivering profit!

This means slicing and dicing a P & L statement with more sophistication than may have done before. But get out a calculator, and with a little careful analysis identify the customers and products that are your better profit producers. Then do everything you can to grow that piece.

Easier said than done you say? You already know I am fanatic about customer service. Once you identify your most profitable customer, try a few of these tips from the Harvard Business School to build your business with them.

• Beat the deadline. Finish the product or work efficiently, accurately and ahead of schedule.

• Ask proactive questions. Be a partner with customers. Show concern over their issues and help solve them.

• Know when to defer. Be a competent expert and show deference when necessary.

• Give feedback. Thoughtful and constructive feedback can further cement your relationships.

• Don’t be afraid to refer. If you are unable to deliver, be honest about it and refer them to a peer supplier for assistance.

Get on top of collections

Cash is king today, so you need to focus on your accounts receivable, an area that can quickly get away from you as your customers fight the same cash flow issues you have. Simply, you cannot let their issues become yours. The Commercial Credit Agency Association estimates you can expect to collect about 90 percent of every dollar of debt due by 30 days and when debt is in arrears six months or more, that collections rate drops to only 52 percent.

Writing in the May 5 issue of Forbes magazine, Glenn D. Porter laid out some suggestions to help keep your receivables current.

• Maintain solid accounting controls. Order a weekly accounts receivable aging report, broken down at 30, 60, and 90 days.

• Prioritize wisely. List delinquent accounts by age, by size and the importance of the customer. Collect the easy ones first to keep cash coming in.

• Know your customers. Know how to work each one to get payment. Keep records of contacts and responses.

• Ask for a commitment. Pinpoint how soon the customer can pay, then follow up if it fails to meet a deadline.

• Be flexible, to a point. Remember, everyone is running very tight, so be prepared to be creative with payment. It always is better to stretch payments than discount them.

• Meet the tough ones face to face. No one likes to be confronted in this manner, so be respectful. Ask questions, explain billing procedures and make sure there are no outstanding issues you need to respond to.

• Ask for a check. Collecting takes tact. But it is important to be specific about the purpose of your visit.

I hope these suggestions provide you some help to get through these times. Please send an e-mail or make a phone call to discuss what works for you, what doesn’t, and additional suggestions I might share with our readers.

Erdman is chief executive of Strategic Growth Resources, a business acquisition firm. He founded entrepreneurial programs at the University of St. Thomas in St. Paul and the University of Iowa. You can reach him at derdman@concertoventures.com, or by telephone at 218-326-6939.

• Hanging tough: Failure is not an option. -6/30/2009
• Position to grow in tough times -6/8/2009
• Surviving in tough times -5/5/2009
• The entrepreneurial mind -3/18/2009
• The recession, philanthropy and entrepreneurs -2/19/2009