It’s in your system

Imagine you woke up one morning and decided you wanted to build a new garage in your backyard. So you hired a truck, picked up a few of your mates and went to one of those hardware outlets that look like an aircraft hanger. You bought sand, cement, steel, timber and bricks and by midday you were off and building.
This would be a dream with nightmare written all over it.

A garage may be a piffling structure, but every year tens of thousands of new businesses start up with virtually the same “go get a truck and some building supplies” attitude as our garage builder.
And what is even more surprising is that many people in micro-businesses, employing fewer than five workers, actually do pretty well for quite some time. But eventually the worlds collide and business problems ignite. A time bomb will explode. And if it doesn’t ruin the businesses, it can badly damage them and a hell of lot of relationships along the way.

I recently talked with an award-winning couple, who had set sales standards that few could match in their franchise system. They had great staff and plenty of business, but they had cash flow problems and they usually did their Business Activity Statement a couple of days before the deadline.
They knew something was wrong and were smart enough to go looking for experience to help them beat a growing problem.
Many of us have heard the cliche: “Small businesses don’t plan to fail but fail to plan.” And then there’s: “Small business people spend too much time working in their business and not enough time working on their business.”

There is a real-life difference between a business owner and an entrepreneur, and it’s that the business owner often works at the coalface. He or she is the shopkeeper, the plumber, the accountant, the consultant, the sandwich-maker or the service provider. They do the work of their business: put in the pipes, talk to the customer, solve their problems, send the bills and collect them as well. But they don’t think about the real product.
Most tradesmen try expanding and find being an employer and a paper shuffler for the federal and state governments extremely challenging. Many just pack it in and go back to being a one-man band.

The entrepreneur comes to see the business as the product he will grow. He or she uses systems to solve frustrating problems in the business and the systems, when they are put together, can define the business: the way a phone is answered, the way a complaint is handled, the way a customer is served and how transactions are recorded.
This is what a whole lot of smarties have done in creating franchise businesses. The guys at Gloria Jeans have a system that means both a school teacher and a journalist can throw in their jobs and become coffee shop owners with the minimum of training.

Last year I looked at the young entrepreneurs who started Sumo Salad and Wellbeing, young people who could see the customer shift to healthy food. The business owner would have created a shop and maybe opened another and then tried to manage both. But these entrepreneurs, from the outset, were looking to systematise the business so others could buy it from them. They worked on the business until it was a product they could sell.
This year the goal should be to systematise your business, not only to eliminate frustrating problems – which makes the business easier to grow and live with – but to make it easier to sell, like a franchise.

As with all things, such as building a garage, get a plan. And if you don’t have the skills to do the job yourself, find an expert to help.

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The right mix

How can I attract and retain good staff?
The success of your business is a function of many things but two important ones are having a great business plan and your staff. Like most small businesses you probably don’t have the luxury of a dedicated human resources (HR) person.

The business owner usually takes on this role. If that’s the case in your business, then develop a HR policy and procedures manual so you can effectively align your business goals and objectives and communicate them to your staff. This is all part of developing systems in your business. If something’s not on paper then, as the saying goes, it’s not on the planet.

Do you have written procedures when it comes to staff? A manual will provide clear guidelines that will comply with legal requirements and empower your staff to maximise their contribution to your business. They should be handed a manual when they start working with you – and sign a document to say that they have read it.

It can cover a vast range of topics depending on the size and nature of your business — even if you have only one employee.

We have a few pages written down. Are you saying we need to develop a proper system?
Having a few pages is a start but once you start to have people in the business other than you or your partner you can run into trouble if you don’t have a formal manual that clearly outlines the practices and procedures of your business as well as a comprehensive job description for your employee.

You see, as a small business owner you’re used to juggling tasks, but you can’t expect staff to be that dexterous. A proper job description, for example, let’s them focus on what you employed them to do!

I have mostly family working for me – do I need a recruitment strategy?
So often, the employment decision is made without following a structured process. The potential new employee might be a relative, a friend or come recommended- but does that make them suitable for the position? Will they be able to perform the tasks? Sure, it can be a quick solution but it also may not work out in the long term – an expensive exercise.

To be effective, recruitment must be planned and structured. If you haven’t developed a job description, you need to be absolutely clear what you’ll require the person to do. How can anyone give their best performance if they don’t know what they’re expected to do?

Most employees who leave a job within six months state that the job did not meet their expectations! This is a direct reflection on the recruitment process!

So it’s all about hiring right?
Getting the right staff is one thing. The next thing is to keep them and keep them trained so they add value to your business.

How do you do that?
You have to reward them! Your employees need to know that they are a valued member of your business and contribute to its success.

A lot of people say that they prefer working in small businesses because they feel more like a real person than just a number. See this as a real plus for your business and make sure that you take advantage of this – get to know what makes them tick. Make sure that you know what motivates them. Seek their suggestions on how to make your business better.

How can I understand my team better?
Anne Bartlett-Bragg, a HR consultant who not only provides professional development service and training to small business, she is also a university lecturer in human resources.

She believes that to understand a team better you could consider using a team performance profile and she recommends the Kolbe Systems. She says that by using the Kolbe tools:
o Team ineffectiveness can be diagnosed
o Strategies can be developed to enhance both individual and team performance
o You can work towards appreciating the diversity of others and how to avoid procrastination and inertia by understanding the instinctive drivers of each employee.

How often do you review or assess your staff performance?
Bartlett-Bragg says that performance and appraisal should link closely to the job description and done at least once a year and that ongoing underperformance can cost your business a lot in time and productivity.

She says that you can buy off-the-shelf performance appraisal products which are good but if you find them too cumbersome then you need to modify them and use their framework rather than the full process.

What minimum training should a business owner provide for staff?
Give all employees the opportunity to perform their roles to the best of their abilities, and with sufficient guidance and training.

Bartlett-Bragg says you should categorise training into these groups:

1. Induction training
Do you remember your first day on a job? How did you feel? Nervous, excited, apprehensive, terrified? New employees are likely to feel all these emotions and more – at once!
Ask yourself, what do you do to make them feel welcome and a valued member of your team?

Bartlett-Bragg worked with a small organisation that wanted to improve their induction process. She considered the essential issues that have to be addressed when you start a new job – payroll, paperwork, contracts, forms, all types of administrative issues. Then she asked why did we have to do that on the first day – what message was that sending the employee about the company? Not the one we wanted to portray!

So her company designed a kit and sent it to them before they commenced work – all the paperwork was clearly numbered and explained – the new employee had to do hand it in on arrival.
Then she went a step further – she wanted to get them excited about the company.

She brainstormed with the existing team members things they would have liked to have known about the company before they started. That information was then collated in a fun way and included in a separate kit – ‘Stuff you might like to know’ – it included public transport information, car park locations and rates, best places to eat (or not in this case – so bring your own), locations of major banks, favourite Friday night pubs (chosen by the team) and so on!

How would you feel receiving a pack like that in the mail, before you start your new job? The feedback has been tremendous – the new employees are already starting to feel like a valued team member BEFORE they arrive on day one!

She says that structured induction training involves planning – ensuring that someone is allocated and responsible for looking after the new employee – for at least the first month. She advises that you:
o Don’t cram it all into day one – they won’t be able to remember a thing!
o Introduce them to the rest of the team informally – have a morning tea, lunch or afternoon tea – use name tags. Ask each team member to explain (briefly) what they do and why the new employee would need to deal with them. Sometimes, one of the hardest things in a new job is working out who to ask!
o Check in with your new employee regularly and informally for the first week. Show some genuine interest and encourage their feedback.

2. Technical skills required to perform the job
Consider what technical skills are required and to what level that skill must be performed. For example, if the role requires basic knowledge of Excel spreadsheets, there is very little value sending someone to an advanced Excel course.

3. Soft skills to enhance their job and overall business effectiveness.
This is your area of greatest competitive advantage! If customer service is going to be your major focus it’s your responsibility to ensure your staff have the necessary skills to deliver that!

Consider all types of communication skills training and development sessions, customer service sessions, sales skills, negotiation skills, team building, etc.

4. Other – including updating skills and knowledge, further interests outside their role
Small and large businesses often ignore training. When was the last time staff were given the opportunity to update and further develop their technical skills – what extra efficiency and productivity might this provide the business?

What other areas are staff interested in? Again, supporting your performance management strategies with training and learning opportunities beyond the scope of their current job is a great motivator!

Where are affordable courses?
Some businesses attend Train the Trainer courses and complete qualifications like the Certificate IV in Assessment and Workplace Training to provide them with the ability to design and deliver effective training sessions themselves, and give them the knowledge to better understand and evaluate what external course providers are offering.

Why not consider some kind of strategic alliance with other businesses in your local area? The buying power of a small group is often a more economical alternative than sending an individual to external courses.

Tafe colleges, short courses offered by universities, and Continuing Adult Education organisations are also options worth considering.

Bartlett Bragg says to give your employees a statement about your vision/mission and objectives is crucial for your staff to understand what you’re trying to achieve. How can people contribute to your success if they’re unsure what you’re striving for?

She says to also provide them with a statement about safety at work that outlines your obligations and the responsibilities they have to maintain their working environment and/or report any accidents. She also says to include a statement outlining your adherence to your legal obligations to provide a workplace free of discriminatory practices and encourages diversity will clearly outline your position on these matters.

Don’t just put it together on paper, share your policies and procedures manual with your staff so they understand your intentions and expectations about the important issues.

And finally – your staff are such a valuable asset to your business – enjoy them, develop them, and treat them how you would like to be treated yourself!

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Business structure

Want to read something boring? No? I think you better think again. What lies below is compulsory reading for anyone who does not want to go broke or be bounced by some government body designed to seek and destroy dodgy or amateur businesses.

Getting your structure right will ensure you don’t end up on the wrong side of the law and the all-important bottom line.

The starting point
Get accounting and/or legal advice especially if you are planning to enter a partnership or set up a company.
Choose your business structure with an accountant as it affects:
o The tax you’ll pay
o Your personal legal liability
o The availability of capital to establish and operate your business.

Types of structures
1. Sole trader – a one man band
My dad owned a business that supplied some of Sydney’s best restaurants with fruit and vegetables. While at University, I helped with deliveries. Dad ran the business on his own but he liked it that way. He’d get his brothers or a close mate to help him when things got hectic.

His accountant did his tax returns but little else — no advice, no business planning. He claimed business expenses but did not take advantage of splitting his income with mum, who did take orders and do other work in the business, so he could have taken advantage of her tax-free threshold.
Dad was a classic case of someone who worked hard IN his business but not ON his business.

Most businesses are sole traders. It can be the right choice when starting out. You may then be single, know the business is going to run on lean profits for a few years or prefer to keep things simple.
As you grow however, talk to your accountant about restructuring. A company may be, by that time, more suitable.

Advantages of a sole trader:
o Simple and cheap to set up
o No separate tax return required
o No registration if your name used
o Full control over business
o Owner takes all the profits
o Easy to wind up.

o Personally liable for all debts
o May be hard to sell if owner dies
o Hard to get time off for holidays.

2. Partnership – be careful!
Partnerships in business, I guess, like in normal life, are fraught with danger. In the top ten reasons for business failure, selecting partners for the wrong reasons is right up there.

A friend recently encountered a partnership story, straight out of the X Files, underlining how crazy business can get when desperate people are chasing money.

This friend was building her home and looking around for a kitchen company. A worker on site approached her (let’s call him Chris) and said his mate (Joe) was a highly skilled joiner.

They were going into partnership building kitchens.
Chris told her they were the best of friends and was excited by this business venture. He would do all the organisational work while finishing his apprenticeship and Jo would be the cabinetmaker. Their quote was good and Jo held a great reputation for his craftsmanship.

They started the kitchen. For the first few weeks they laughed as they worked. It was a marriage made in heaven. Then came the problems.

Chris was slow and inexperienced and Joe began to feel he was doing all the work. Communication problems started and the kitchen would be left for days with no work done.
My friend called Chris to see what was happening and spoke to his wife, who expressed disappointment about Joe’s casual attitude to business. The partnership was crumbling.
Joe turned up to finish off.

In the meantime, Chris called my friend to say he was working elsewhere but asked her a favour. He wanted a phone call before she made the last payment so she could write two cheques. My friend at first agreed but sensed problems. Joe did most of the work and was there to the end. Was she going to play mediator when a fight broke out about money on her property?

Chris had dropped out potentially jeopardising the whole contract. He now wanted my friend to play debt collector.
Joe turned up for the final payment. She told him about Chris’ request and he said he’d sort things out.

Joe had always been the recipient of other progress payments. My friend paid him in full and got a receipt.
Chris’s wife then started to call my friend and sent invoices demanding money and insulting letters upsetting my friend, who sought legal advice.

As you can see, this is crazy stuff and an innocent consumer has been dragged into a mess because two partners did not select each other for the right reasons.

To make matters worse, on setting up, they did not put in place an agreement on how to handle disputes, payments and bust ups. It was amateur hour from the outset and everyone connected suffered.

Solicitor, Nick Prassas of Comino Prassas, says the consumer in this case acted in accordance with her contractual agreement. “The dispute between the partners is a matter to be sorted out between them. The terms of the agreement should be the means for settling it,” he says.

This is commonsense but when people and money get mixed up with a bad partnership arrangement, no-one is safe. So get a partnership agreement drawn up, no matter how good a friend you have.

Advantages of a partnership:
o Easy and cheap to set up but a partnership agreement is needed
o Family partnerships have tax advantages eg income splitting
o Opportunity to take time off
o Combined experience and skills.

o Each personally responsible for debts incurred by any other partners
o Potential for clashes, disputes and relationship problems
o One can dissolve the partnership which could ruin the business.

3. Company – for the organised only!
You can buy a shelf company, which decreases the complexity of setting up. Ask you accountant about this. Inform the Australian Securities and Investments Commission (ASIC) you are a director or you’ll be fined. Directors have serious responsibilities and obligations, which are set out in the Corporations Law.

You should contact the Australian Institute of Company Directors as they have vital information and courses that will help you run your company properly.

If, as a director, you have been careless or dishonest with the company’s assets, which causes the company to owe money to others, or do not act in the interests of the company, you can be personally sued or prosecuted, sent to prison or face heavy fines. An undischarged bankrupt cannot be a director.

A director cannot say they:
o Didn’t have time to understand the details of the business
o Weren’t responsible for a part of it
o Let management solve the problem.

Like all professionals, directors must take care in carrying out their professional duties. Non-executive directors have an equally important role.

Non-executive directors must:
o Be informed about the business
o Monitor its activities
o Get independent advice if needed.
You are responsible because, while the company is a ‘person’ in its own right, it only acts through decisions and actions of its directors.

How must you act?
o With honesty
o With due care, skill and diligence.

And your responsibilities?
o Know what the company is doing
o Know all financial commitments
o Get professional advice if needed
o Ask management about business
o Be involved in directors’ meetings
o Never rubber stamp decisions
o Disclose any conflicting interest
o Understand the Corporations Law
o Act in accordance with the spirit of the Trade Practices Act
o Ensure the company has necessary insurance to protect office holders, employees, customers and clients.

When will you be liable?
Your legal duty to ensure the health, safety and welfare of all your employees means the workplace must be operated without putting anyone at risk of injury or disease. You can be held personally liable if you breach this.

If proper accounts are not kept and the company is wound up, its affairs are investigated, stops carrying on business or is unable to pay debts, you can be personally liable.

You are at risk if you act irresponsibly or fail to carry out obligations you have accepted as a director. The Trade Practices Act makes it easier to sue directors personally and you can be liable up to the full extent of your personal assets.

Keep records and books
You have a duty to keep these records at your registered office:
o Minutes of any general meetings
o Minutes of meetings of directors
o Accounting/other records
o Members register (shareholders)
o Option holders (if you have them)
o Debenture holders
o Register of charges created by the company over company property
o Hold proper GST records.

Duty to report changes
To keep the database of companies accurate, you must inform ASIC if the company changes:
o Registered office or business hours
o The company name
o Directors/secretary or their address
o Allots new shares or divides or converts shares to a different class
o Creates a charge on company assets or assigns or varies a charge on company property
Each change has a form which must be lodged with ASIC.

Keep financial information
Generally small companies don’t have to lodge audited financial statements with ASIC. The Corporations Law defines a small propriety company as having any two of the following:
o Less than $10m turnover in the financial year
o Less than $5m assets at end of the financial year
o Less than 50 workers at end F/Y.
Any companies controlled by the small company must be included.

You must still keep records so accounts can be prepared and audited. There must be a systematic record of the financial transactions — not simply a collection of receipts, invoices, bank statements and cheque butts. If a computerised accounting system is used, information stored electronically must relate to records.

Advantages of a company:
o Owners not responsible for debts of company unless personal guarantees
o Greater access to finance
o Can be owned and operated by one shareholder and director
o Income splitting opportunities
o Superannuation opportunities.

o High establishment accounting costs
o Directors subject to legal responsibilities
o Higher annual accounting costs
o Compliance costs in terms of money and time are higher.

What are your duties?
Directors must:
o Consider the welfare of the company, its shareholders and creditors even before your own
o Never use information gained as a director to your own personal advantage. An example of insider trading is when a director of a company buys or sells shares before the release of a company announcement. The penalty for insider trading is five years’ gaol, a $200,000 fine or both
o If the company cannot pay a debt, you must provide a report to an externally appointed administrator within seven to 14 days.

As soon as you become a company, you MUST put in place various things.
o Put the company name on invoices, receipts, stationery, etc.
o Open a bank account in the company name. A bank will ask for a copy of the Memorandum and Articles of Association. Ask your accountant for these
o Bank all company monies into this account
o Where possible, pay all company expenses from this account
o Separate private from company expenses
o Keep company records (cash books, invoices and receipts received, petty cash vouchers, letters, sales invoices etc) for five years. The Australian Tax Office does audits to see if business records are adequately kept and that deductions claimed are business related and allowable
o Register as a group employer. Ask your accountant to help here
o Consider FBT and GST liabilities
o If your business is ever sold, Capital Gains Tax could apply
o Take out Workers Compensation for employees
o Any lease in your name must be assigned to the company.

A director may be liable to pay compensation to a company if they were a director when their company incurred debt while insolvent or went into insolvency by incurring the debt. A company may be insolvent if it is unable to pay debts. Penalties for insolvent trading are severe.

Trusts and your business

Seek advice from your accountant about which form of business structure best suits your business — sole trader, partnership, company, or trust.

You may be at a stage of business growth where it’s time to form a company. Seek help from an accountant specialising in small business about the advantages and disadvantages of incorporating.

Recent changes to the corporations law have lightened the load for small businesses when it comes to filing accounts with ASIC.

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Family feud

Remember this: you should run a family business like a business – not like a family where there’s a place for all those family emotions that knit people together. I read something recently that was so spot on – family businesses often take the family to work and bring the business home.

Too often, too much emotion comes into play in a family business and this can ruin the business and put stress on family relationships. It’s important to have business meetings, but they should be run according to the rules of any meeting.

Here are some tips:
o It is important to start a meeting on time
o Issue an agenda in order to make sure that everyone is prepared for the meeting
o Send the agenda to all family and non-family members before the meeting and ask if they want any items added to it for discussion
o If anyone can’t attend the meeting, ask them to send an apology
o Conduct the meeting in an orderly fashion. Have one person chair the meeting so that this person keeps control of the flow
o Focus on the objectives of the meeting. If any issue can’t be resolved make sure a person is appointed to follow up and seek a solution
o End the meeting on a positive note. Seek to have any business issues between family members worked out as quickly as possible after the meeting. If you find that squabbling occurs every meeting it might be wise to bring in a facilitator – an independent person who can assist in cutting out the conflict
o Send out minutes of the meeting to all who attended
o If there’s continuous tension, seriously consider employing a third party to help resolve any ‘burning’ issues.

Objective eyes
Many family businesses hate seeking outside advice or using consultants and would rather struggle on with each meeting more like a battle ground. They like to keep things in the family.

A family business usually has good lawyers and accountants but they only let them get involved in the business as the need for their services arises – tax time, renewal of a lease, etc.

What happens is that family members get to a point where they’re so stressed about the business, that they don’t know where to turn.

There will often be a major turning point for one of the family members, who wants change and is prepared to do what it takes to make it happen. Sometimes it can be a spouse who’s fed up and threatens to walk out, or sometimes one of the family members gets sick – both situations necessitate change.

So how does change occur? Unravelling the issues between family members can be so complex and quite often a dispute that happens in the present can be traced back to some issue that happened way back between siblings or close relatives.

Experts in dispute resolution can help unravel some of these issues and then the family business can move on once they recognise that this conflict is negatively impacting on the family and the business.

I remember the late Jason Lea of the chocolate success story Darrell Lea. Jason was a major force behind Family Business Australia. He told me once that squabbles in his family were constant.

At one time they went public and outsiders were brought in, but every meeting was still a major fight and eventually the family decided that if they were going to fight with strangers they may as well buy back the company and just stick to fighting with family members!

Maybe a different strategy could have prevented this heartache …

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For better or worse

Employees taking employers for a ride are costing the economy hundreds of millions of dollars each year, and experts warn an increasing part of the cost is linked to would-be employees falsifying qualifications and other credentials.

“It’s an untapped and hard-to-measure problem,” says Dr Russell Smith, principal criminologist with the Australian Institute of Criminology. “It’s a global problem, where we are seeing the likes of CEOs include false information, such as degrees, to get top jobs.”

According to KPMG Forensic’s 2006 Fraud Survey, corporate fraud cost $154.9m to businesses in Australia and New Zealand during the period April 2004 to January 2006. But the big worry for employers is the revelation that 54% of corporate fraud is internal and approximately 61% of such cases are reported to the police.

Dr Smith says there is a history of unreported fraudsters re-offending.

Sally Mooney, of a Sydney-based company which runs extensive checks on potential recruits for employers, warns that there is a lot of deception by employees in the workplace.

“We conducted a survey of 1000 applicants who had been short-listed for a job and found 21% had been falsifying information,” she says.

“A common area was for applicants to leave out a job that might not have been a positive experience from their employment details.”

Identity fraud, which involves an employee ‘massaging’ employment records or personal achievement data, is on the rise. Some hopeful employees add a degree, or two, leave out a criminal record, or convert a divorce into a very happy family.

Deception could be as ‘innocent’ as losing a year, or 10, off one’s real age.

Not too long ago the analytics website suggested that there are about 500,000 false tertiary degrees in the US, including 10,000 dodgy medical degrees. The US Federal Trade Commission estimates that as many as nine million people have their identities stolen each year.

The Australian Institute of Criminology believes the overall cost of fraud in Australia is some $5bn a year.

Dr Smith says the rush to employ means that many employers leave themselves open to costly mistakes. “The pressure to get an employee through recruitment means references are not checked thoroughly.”

Drake Consulting research says it could cost an employer 30-200% of an employee’s salary to replace someone hired on the basis of deception or fraud. That means someone on $56,000 could cost the boss between $16,800 and $112,000 to simply get it right.

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Learning to sell

When a person opens up their shop or becomes a consultant for the first time, they can be surprised that they’re actually in sales. Those who work as professionals (doctors, lawyers, etc) often don’t realise the sales side of their business and the whole system of customer service behind that.

Why do some sales people have it and others don’t? What makes a person good at sales?
Brian Tracy is one of America’s leading authorities on the development of human potential and personal effectiveness. Prior to founding Brian Tracy International, Brian was the chief operating officer of a development company with $265m in assets and $75m in annual sales.

He has had successful careers in sales and marketing, investments, real estate development and syndication, importation, distribution and management consulting.

Tracy is a man who knows more about sales than most other people in the entire world and while this might be a big call, he’s certainly up there. All around the world, his writings and lectures are well attended by people who know a lot about sales.

So where did the knowledge come from?
I started off as a poor boy. I didn’t graduate from high school. I worked at labouring jobs and finally stumbled into sales when I couldn’t find a labouring job, and then I spun my wheels for months and months and months until I began asking why is that some sales people are more successful than others?
I began to ask people, and it became almost like a blazing question for me. I began to ask top sales people what they were doing differently from me and the most amazing thing is they told me. They said show me what you’re doing and I’ll critique it for you’.
So I realised that selling was not a matter of talking. Selling was a matter of, first of all, separating prospects from suspects.

In brief, a prospect is someone who needs your product, wants your product and can use and afford it – but Tracy goes into depth with the definition.

You’re not looking to selling things to people that they can’t benefit from, you’re looking for people who can most benefit from what your product does for them. That’s a critical difference in selling – junior sales people sell what the product is; professionals sell what the product does, because all people ever buy is improvement, Tracey says.

They buy to improve their life or work in some way. So you need to be clear what is it that your product or service does to improve their life or work, and then you find people for whom this improvement is a real value and for whom the benefit is greater than the amount that you charge. So that is a prospect, he says.

So if you’re wanting these prospects to buy your goods and services, what do you have to know about them?

One of the things that we teach – and we spend all day on this – is this: who is your perfect prospect? If you could identify your perfect prospect – age, education, background, income, experience, knowledge, need and capability of buying – who is your perfect prospect for the benefits that your product or service offers?.

So once you’ve developed a profile for your prospect, what next?

Where can you find those people? And then, how can you appeal to those people – what value do they seek from you, why would they buy, why wouldn’t they buy. So everything in business, from the beginning to the end, is this incredible intense focus on the customer and how you can help that customer improve his or her life or work in some way.

Some people are great at customer service, but they still don’t generate enough customers. What are those sorts of people doing wrong?

What they don’t realise is that customers have two major fears – it’s the same in Australia, it’s the same worldwide. First, they have a fear of being taken advantage of. And why did they have this fear? Because they have been. That’s the normal nature of commercial society, people will be taken advantage of.
Second, they have a fear of being hustled or manipulated, being talked into something that’s not in their best interests because it has happened in the passed.
Therefore, the second part of professional selling is to establish a reputation of belief and credibility with the prospects. The person knows you and likes you and trusts you and believes that what you’re saying is true. I don’t mean this to be manipulative – it has to be straight forward and honest because in the final analysis you can never fake it, he says.

Good business people are cognisant of how important it is to build and maintain a high quality customer relationship with a prospect.
The best sales people, the best businesses, are those who their customers like and trust and feel confident doing business with, so it’s really an essential part, he says.

How important is it to understand the needs of a customer when it comes to selling?

It’s absolutely essential. In fact, there have been millions and millions of dollars of research done and what you find is that the customer is not really on the field of play until the customer realises they have an unsatisfied need that you can satisfy.
So therefore the focus in building trust is to ask questions about the customer situation in his or her needs, he says.

Tracey refers to articles in The Wall Street Journal and the Harvard Business Review that mention a recent study on this. It was found that people had three types of needs.

There are clear needs, there are unclear needs, and there are non-existent needs. And when you meet with a person for the first time, the biggest mistake that people make is to assume that they have an existing need of which they’re aware.
Many people have needs they didn’t even know that they were aware of, and the only way you can uncover that is by asking really good questions and listening closely to the answer until it becomes clear to you and to the prospect, and the prospect says ah yes’ and realises they need that. Only then can you start talking about your products or service, he says.

How important is research? Have those who are poor at sales not researched their potential customer bases or markets?

The 80/20 rule applies to selling as to every other field. Approximately 80% of sales people are mediocre because they’re lazy. I’ve trained a million sales people and I’ve worked for a thousand corporations. They’re lazy. They do the very least to get by, they don’t make any effort to learn as much as they can about their product, their competitors’ products, and especially about their customers.
The top 20% however, are different. These people are ambitious and eager to make a good life as sales professionals, they see this as a professional field, and they’re veracious about learning. They read everything they can, they listen to audio programs, they attend courses, they study their product and their competitors’ product, he says.

I asked Tracy to give some examples of people in this 20% category.

Probably one of the best examples is Sam Walton of WalMart. On the list of the 10 richest people in American, the richest multibillionaires, five are descendents of Sam Walton.
He started off with a little store in a little town called Bentonville, Arkansas, and he had this idea of satisfying people by finding out what they really wanted and then looking everywhere to get them the lowest prices and when he could manage it to buy in bulk.
So we have lower prices – he always passed on 50% of his savings to his customers in lower prices. There’s a lot of controversy about WalMart today, but WalMart is a great company because it’s focused single-mindedly on selling the very best quality at the lowest price to people who can afford the very least, the littlest guy in society.
So what Sam Walton will do is, from the time he started his business, he would travel to other towns to visit other stores and walk around the stores and take notes looking at what they were doing right to satisfy their customers and then come back and incorporate it into the WalMart approach, Tracy says.

When talking to Gerry Harvey recently, I mentioned that when I was listening to what he does it reminded me of a top-notch athlete who is focused 24/7 on success. Is this the hallmark of great sales people and great business people?

I say that there are many qualities that are helpful to success and there are two that are essential – one is focus, which is being absolutely clear about who you are and what you want, and the second is concentration, the ability to concentrate without diversion or distraction on your most important goal.
And both of these are learnable skills, by the way, and very few children have them and you can learn them by practice, he says.

But what do you say about people who are in sales who have done nothing to actually teach themselves the skills of selling?

Recently, I heard from an expert in retail selling that it’s not smart to start off with the question can I help you? and most people in retail with no training will ask that question and annoy the customers.

That’s all they know. Many companies are started by people who are not sales people. We’ve done hundred of thousands of dollars of research – there’s two types of companies. There are companies with an entrepreneurial CEO. This is a person who worked his way up, sold his way up, and built a company. Then there are companies that are run by non-entrepreneurial CEOs. These are people who moved in from a different field and never went through the selling experience. These people have no sense for how important the sales are.
IBM got into serious trouble in the late ’80s and early ’90s and they were even talking about breaking it up. The reason was because the last of the great sales guys, Thomas J Watson Jr retired in about 1986/87 and they said we are a big company now, we can run this company with accountants’. So the person they put in charge was an accountant and the accountant felt that selling was a completely unnecessary part of IBM and began slashing sales budgets, marketing budgets, slashing rewards – basically completely, as they say, disrespecting the sales function – and the company in three years was almost like a ship turned over in the water.
And when they brought in a new president, the first thing he did was bring in McKinsey and Company, spending $3m finding out what was wrong. They reported back that low sales was the problem, and high sales the solution. What’s the key?, he asked. Get your sales people out there face to face with customers, helping them solve their business problems, and get them off the phones and out of the offices’.
And within 24 months they turned the entire company around. Every single business that gets into trouble, somebody has to say let’s get back to selling, let’s get back to getting face to face with customers and helping them with what they really want and need.

Peter Switzer’s tips

  • Appreciate this reality – when you’re in business, you’re in sales
  • Work out your prospects
  • Research these prospects intensely
  • Identify your prospects needs
  • Write scripts for your sales staff so they know how to talk to prospects and customers
  • See selling as a profession
  • Seek sales training
  • Be honest and ethical in your dealings
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29 Characteristics of an entrepreneur

So you want to be an entrepreneur? Years ago, after the exploits of Christopher Skase and Alan Bond, the word ‘entrepreneur’ fell into disuse because of the negative connotations attached to it. But hard working business owners have in more recent times resuscitated the word.

Bob Cowan, who in his time, secured multi-million dollar contracts with the US Navy to supply recompression chambers, might prefer to be known as just a ‘bloody hard worker’!

When you employ over 40 workers and you wind up building these recompression chambers for Uncle Sam for many millions of dollars, then go broke, have to sell your house and move your family into a caravan while you fight for your dream, then you are an entrepreneur in the real Henry Ford meaning of the word.

Important business lessons
I remember attending an excellent conference a few years back called ‘Encouraging Entrepreneurs – How to Build on Their Ability’ at the Australian Graduate School of Engineering at the Warren Centre in Sydney. This was not an academic blab fest, but looked to people who had actually done it, searching for the lessons everyone in business needs to learn.

The experts at this conference warned entrepreneurs they were in danger of being left behind if they didn’t embrace technology.

We agreed the new formula for success was to add new technology to existing markets, or to find a new angle. And we forecast that the most successful entrepreneurs will be small to medium operations with a technology bent, and Asia will be the place where a lot of the future will unfold. How the future becomes real!

While it sounds like we were blowing our own trumpets, while we were ‘crystal-balling’ we came up with seven personal attributes of a good entrepreneur:

6.Good health

The final sentiment may have you wondering about new businesses facing high risks as they do not have good cash flow, and that’s why good people are essential. I can’t remember who said it, but 80% of a business is people, and a good business is a function of good people. And let’s face it, sometimes finding good people, comes down to luck.

Exploiting opportunities
I’ve got to admit that we did get one presentation from an academic at this conference. Happily, he did not put me to sleep. Trevor Cole, who is the executive director of the Warren Centre, lucidly defined the entrepreneur and showed us what characteristics they possessed.

He said that people shouldn’t think they were an entrepreneur just because they started a business. Everyone in business innovates – some well, other poorly, but entrepreneurship is one level above innovation, according to Cole. The core attribute of the entrepreneur is an ability to make decisions, but essentially they stand out because “they search for change, respond to it and exploit it as an opportunity”.

Bob Cowan certainly did all that. His story gives this title of ‘entrepreneur’ a good name again. Bob was no ‘fancy pants’ engineer, but a tradesman who started up a sheet metal factory 25 years ago, virtually in the bush. But that did not hold him back from seeing an unusual opportunity and exploiting it.

The lucky break came on a fishing trip to Cairns, where a mate was talking about recompression chambers and how US naval contracts were available for someone who could knock them up economically, but to a high standard. Bob observed how they look like basic sheet metal work, so, as he put it: “I educated myself … built a mobile recompression chamber … the US Navy wanted it!”

While the idea to the receipt of payment ended up being years, his first contract brought in $2m, Bob’s second with the US Navy was worth $10.2m. While this sounds like good money, it is in fact repayment for a job well done – and one done the hard way.

Along the way, Bob had a continual battle with governments who could not share his dream. The quest resulted in Bob and his family living in a caravan until ‘pay dirt’ was hit.

At one stage, he had a gutful of bank knock-backs, so he went down to the head office of a bank in Sydney (which would no doubt prefer to remain nameless). He provoked them to ‘get off their bums’ and come onsite to see what recompression chambers were all about. The ensuing visit shocked the lenders and made money matters easier after that.

The Cowan success story is all about persistence, focus and determination to win, and considering the value of the contract and the toughness of the client – the US Navy tested the chambers at the North Pole before they gave the deal the not! – the success is Olympic-like.

Money for nothing
That emotion aside, in listening to Bob’s tale and others at the conference, it is sensible to observe that many entrepreneurs, and businesses generally, need to look more carefully at how they source their funding.

It is easy to ‘bag’ banks – and definitely they don’t always do their job professionally in assessing the true merits of a project. But there is no value in bellyaching about it: you have to accept reality and do something about it!

Memtec’s Quinn alluded to this in his presentation to the conference. He stated that since money is so important, why don’t we all put more work into our presentation to the banks?

When we go begging to the bank for money, we should make sure that the business plan is first-class. There should be audio visual aids as part of the presentation, and every trick know to mankind should be employed in order to jump one of the biggest hurdles facing the business heading for gold.

Peter Switzer’s 29 characteristics of the entrepreneur
Check out these characteristics that are typical of those people who call themselves entrepreneurs:

1. Can’t work for anyone else – like to be the boss

2. Egalitarian – like to be the boss, but they’re not elitist

3. Takes action – they are not daydreamers

4. Their business doesn’t make them a champion – from an early age, they are champions in the making

5. Often launch with very little money

6. Speak their mind

7. Handle rejection

8. Like to prove others (doubting Thomas’) wrong

9. Know how to get around obstacles

10. Believe in being hands on

11. Don’t mind being alone

12. Can cope with failure

13. Like control

14. Future focused – don’t get caught in today

15. They tick faster than the clock – they never watch the clock

16. Adrenalin charged

17. Manage time well

18. Goal oriented

19. Into self improvement

20. Often want to move faster than time

21. Strong work ethic

22. Having nothing is no barrier

23. Often have a naïve confidence in their own ability to do things

24. Respect staff

25. Understand the importance of systems in the business growth process

26. Not afraid of making mistakes

27. Make decisions even if they are wrong ones

28. Don’t like to be penned in – look for challenges

29. Retirement is not an option

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Marketing magic

Can you learn by reading about other’s success?
The whole point of reading about successful small business operators is simple – you want to be told something you don’t know. You want an edge you can take to market that will end up with you having a first-rate business. It’s what’s called the copycat strategy.

The great artists are copied by the up and comers and Ian Thorpe was inspired by Kieran Perkins and Perkins got his lift from Stephen Holland.

Virgin’s Sir Richard Branson is often held up as a great pioneer of new business and rightfully is lauded for his inspiration to other aspiring business operators.

Though he can teach anyone a whole pile of valuable lessons, the one that is at the core of his smart decisions has been to pick a hole in the market where he could drive his Virgin juggernaut into.
A recent stunt to move into superannuation is a classic example of what I’m talking about.

Branson-like observations are at the core of many successful small business operators. Let me give you a case in point.

Where do ideas come from?
A couple of Kiwis celebrating an All Blacks victory over the Wallabies 18 years ago was the setting for a sleeper of a business with the provocative name of Holy Sheet!

The bed linen store opened its doors in 1990 in the bohemian Sydney suburb of Newtown and was the brainchild of New Zealand mates, Edmund George and Daniel Hochberg. The two first met as students at the University of Wellington but went their separate ways and eventually bumped into each other in Sydney.

‘We started with eight grand each and were a couple of marketing guys who knew nothing about retail,’ George recalls. ‘We did a lot wrong but we did one thing right – we picked the market and the location.’

So they saw a gap in the market?
At the time, George said two big firms dominated the bed linen market and protective trade policies had put limitations on what consumers were being offered.
‘I had run a business importing woollen products from New Zealand and knew some of the suppliers in the industry who regularly had difficulty getting rid of ends-of-lines and seconds, so we thought we would give them an outlet,’ George says. ‘Daniel’s wife came up with the name and I suppose it shows the kind of fun attitude we brought to the business.’

Despite some early setbacks, including a fire that gutted its head office a decade ago, Holy Sheet! is now a franchise system with 28 outlets in NSW, Victoria, Queensland, Tasmania,ACT and Western Australia.

‘Within three years, we have hopes to have 40 stores in Australia and also intend to explore opportunities overseas,’ George says.

So you have to know who to target?
Holy Sheet! is a modern business with the marketing push not only targeted at women, who invariably assume the role of interior decorator in most households.

‘The average Holy Sheet! customer is one who enjoys relaxation time, a contemporary lifestyle and a sense of humour,’ Hochberg says. ‘When a customer visits any of our 28 stores, there is that element of surprise about the type and range of products we have and this is what makes our concept so captivating. The urban male of today plays as important a role in our marketing as much as the usual fashionable female does.’

The plan to create a retail chain was not the only part of the picture, as they also wanted to build a brand. Nowadays more than 50 per cent of the products sold are under the Holy Sheet! brand.
‘Our product ranges are regarded by many as the benchmark in fashion and our views are regularly sought by suppliers in their stock selection process,’ Hochberg explains. ‘We work to be three to four steps ahead of the rest.’

On the experience of being a franchisor, George says getting the first few franchisees wasn’t easy, but after six were in place the numbers increased quickly.

‘We actually came at it from a different angle because we had been franchisees ourselves earlier in our history, opening up the first House store in Sydney,’ George says. ‘It gave us a perspective on what franchisees need from their franchisor.’

What gives winners the edge?
The pair say you have to be always open to learn new things to give you an edge.
‘We recently took on a new partner, Nick Hillyard, who has had vast experience in UK retail outlets,’ George says. ‘He has come in and has shown us better ways of doing business and what he knows has been eye opening.’

This is not just a story about someone taking a good business into a franchise system, which is something many small businesses aspire to do, but it’s essentially about how they saw that the domination of the market by two big players created an opportunity for Holy Sheet!

Don’t just think about your business and your competition today, but also think about what you could do to your industry and your competitors tomorrow.

Any tips?
o The big players don’t have to rule.
o Look for gaps in the market and you will find them.
o Brainstorm ideas. You never know what can come out of people’s minds, even over rugby and a beer!
o Copy the best in business. They set great examples.

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Money talks

Being an effective salesperson comes naturally to some people and the experts argue there are several key characteristics of the top sellers.

People in sales are a special breed. Lots of people can do a pitch, which mainly requires an ability to communicate. That’s the easy part. The tough part is closing the deal and getting the sale, and this takes a special personal trait. Some say it’s courage, others say it’s having a thick hide, while others even suggest it takes a ‘win at all costs’ attitude.

Undoubtedly, there’s a little bit of all of these characteristics in a good seller. Good sellers insist there is an exhilarating buzz from closing the sale. Some say it’s addictive.

What’s really interesting are the lessons from some of the internationally renowned sellers – Zig Ziglar, Tom Hopkins and Jay Abraham. All three do the same thing — they sell the secrets of doing business better.

The small business proprietor should be lining up to listen and learn from the top hands of selling. Ziglar is internationally renowned as a guru of sales. It seemed his ideas on selling were as unforgettable as his name, so when I was offered a chance to do a phone interview with Ziglar, I was in and dialling in a flash. Here’s what I learned.

If you’ve read my pieces before, you could have noticed I picked up a hefty serving of cynicism over the years, but Ziglar passed the Switzer ‘not another Yank expert’ test. This guy is worth listening to.

Book-wise, he has pumped out eight, but his most well-known is See You At The Top, which focused on personal growth and has had a print run of two million!

I asked Ziglar, ‘What advice would you give someone who reads your books, follows your advice but still winds up with poor progress?’

Like many top motivators, he reeled off one of the profound observations upon life which gives you something to carry along your own road. He pointed out that the psychiatrist, Alfred Adler, once defined the quality of hope as ‘the foundation quality of all change’.

The message is to keep your hopes up, never go negative, and keep working on your game.

My next question was one that has always bugged me: ‘Can everybody be taught to close a sale?’

Ziglar carefully insisted that everybody can substantially improve the closure strike rate by improving the closure procedure.
To sell well, he maintains, you have to do three things:
1. Have an intimate knowledge of your product or service.
2. Have an absolute conviction about the quality of what you’re selling.
3. Back it all up with hard work.

He says the three ‘Ps’ should not be forgotten. Do what you do professionally, politely and pleasantly, as selling is a transference of a feeling.

So is there a standard winning formula which will work for all sale situations? Ziglar thinks not. He believes you have to set your tone to suit your customer. If your customer is a trusting type, it’s easy. But if he or she is an individual who is a prosecuting attorney type, it is entirely different. A ‘solid Sam’ type usually wants minimal dialogue. An impetuous type will say ‘yes’ or ‘no’ at a glance and the high percentage sales pro must learn to adapt.

Ziglar advises that if your customer is a fast talker, speed up, but if they are slow and deliberate, check your speed. This way you create the notion in the mind of the buyer that the salesperson is like themself.

Another guru
Tom Hopkins is often referred to by salespeople in the tones reserved for Don Bradman and Mark Spitz.

Apart from his endless record of speaking and educating across the world, what I like about Hopkins is the clarity with which he communicates his message.

He keeps it simple. He uses teaching tools like The 7 Fundamental Selling Techniques Of A Champion which instantly makes you want to know what they are. He is master of the better business tip and seems to have a bottomless bag where he stores them.

Try this one on for size: ‘Use your energies to out-work, out-think and out-service your competition. Follow up like never before. Write thank-you notes. Return phone calls. Show up on time.’

The key to winning in today’s fast-changing world is to become a reliable, dependable and steady partner to the customer. Hopkins knows small business and has devised the best game plans to help them win. He is a business thinker who is on everybody’s wavelength and does not deserve to be ignored.

On the home front
Closer to home, Jodie White has over 15 years experience in hospitality, retail and training, dealing with Asian clientele. She also spent several years in Japan working with Ricoh, Toshiba and Sanyo.

White says: ‘If you are in the business of selling and your customer base includes Asians, you need to understand their wants and expectations.
‘Clearly, language barriers exist, so if you’re in retail and have a customer base that is Japanese you MUST know that base. The Japanese are such sophisticated shoppers, as are the Chinese, but they are different. While the Chinese pursue discounts with ferocity, discounting too much may lead a Japanese customer to think the product or service is without value.’

The message is clear: to maximise sales, know your customer.
The expectation of service is a major difference between Australians and tourists that come here. ‘In Japan, the customer is a god,’ says White. ‘As soon as you walk into a department store everyone says, ‘Welcome’. White believes we must train and motivate people to sell, because when it comes to selling, ‘We are so lazy!’.

While Americans rate highly as the best sellers (tipping is a powerful motivation), the Japanese are up right up there. Australians can give first-class service, but our friendliness doesn’t make up for our inconsistency and laidback style, which can look unprofessional.

The 5 steps of selling
1. Seek out the ‘suspects’
These are the people who may need your product. You must get out and show it to them. If your product is good, your communications skills reasonable and the demand is there, then what are you waiting for?
2. Locate the prospect
Talk to the person who ultimately makes the decision – otherwise you’re wasting your time and everybody else’s.
3. Present the product or service
Know your product, warts and all.
4. Overcome any objections
Make sure you tell them how your product will suit them. Remember that you have to believe in your product first for others to be convinced.
5. Close the sale
You’ve done the hard work and now you need the signature on the bottom line. For many people this is really the hard part. Try asking for the order with a trial close at any time during the sales process. If you’re finding it difficult, remember, when the going gets tough, the tough get going.

Setting sales goals
o Set specific targets based on figures that are achievable. Don’t merely pluck a figure out of the air. Take into consideration what’s happening in the economy and other external factors that may affect your target
o Increase your sales budget each year based on what was achieved last year – and again what can be expected to happen in the economy
o Train your sales staff (even yourself) so they have a chance to achieve or even exceed these budgets. You must arm your salespeople with the knowledge and resources for them to succeed
o Keep in mind that selling is hard work and reward your sales team when they succeed.

*Sales tip *
Learn how to sell. Some sales people just have the knack, but for most people there are things to be learned about selling. These include:
o Develop a love for your work and pride in the product or service you are selling
o Believe in your product – you won’t be an effective salesperson if you don’t
o Be positive and create a positive attitude from the beginning
o Establish what the prospect really wants
o Always dress appropriately when dealing with prospects or clients
o Set aside time to meet to regularly meet with clients or prospects
o Prepare professional-looking proposals and presentations
o Test how committed a prospect is to your proposal
o Be confident and ask for the sale.

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Effective Communication

The legendary American screen actor Rod Steiger once said something to Paul Newman in the movie In The Heat of the Night that all business owners should remember if they want to build a great business brand. It was simple but it said it all: “What we’ve got here is a failure to communicate. Some men, you just can’t reach.”

The great business builders are champions at communicating and reaching their audience. And just about all of them used that Communications 101 technique of public relations to get the business noticed and growing.

My experience is that few businesses have made their mark through advertising first. If they did they would have had a brilliant product and a brilliant ad campaign.

About five years ago I interviewed arguably the world’s greatest self-generators of free publicity — Richard Branson. This guy is the master of public stunts to get noticed and he admits that in the early days his lack of money made it compulsory. However, he says as the brand grew, it had to be reinforced in the mind of the public by having an advertising spend.

History of the great business communicators says you have to have a strategy or a plan. You have to anticipate the needs of your market or potential customers and you then have a find a way to their eyes and ears.

Lateral thinking is at the core of finding a cheap way to get to your market.

Think outside the square
When John McGrath kicked off his real estate empire he used a PR person, who became a permanent fixture in his business, to get his story to the media. There were stories that helped journalists fill holes in their newspapers and their bellies at lunches with influential people.

Margaret Butler of homewares business Anasazi Trading cleverly linked up with celebrity chef Nigella Lawson and her new kitchenware range. The very utterance of the name Nigella Lawson is bound to launch a thousand journo’s keyboards.

The use of the celebrity can be a way to generate promotion for your business but it can backfire. Sportsman with a penchant for racy women and mind-altering substances can be challenging when trying to build a brand.
Tim Pethick, when he kicked off Nudie would have a team turn up to events and give away free samples, which can be the best way of marketing a business. However, he also used a clever piece of communication.

In giving away the juice he also gave the samplers a flyer, which said something like: ‘If you like this juice, and you would like your local store to stock Nudie, then give them this flyer and we will see that it happens.’

The action made the customer an advocate for Nudie and it was a cheap way of getting word-of-mouth advertising, which is the best kind of promotion.

The lesson is lateral thinking is at the heart of smart
business communication but this does not come naturally to everybody. To some yes but others no and so a vital question is relevant.

To take some inspiration from Clint Eastwood’s Dirty Harry character: ‘You’ve got to ask yourself one question: do I feel lucky?’

You could be playing with your business’s future if you test your luck and draw on your own communications strategy, especially if you have no form on the board in this area.
Sure if you read examples of others who have got it right and copy them, you could come up trumps.

However, if you suspect that the communications business is not your long suit, it might be smarter to throw your hand in with a professional mob who could draw up a winning plan.

Remember, most small businesses don’t plan to fail, they fail to plan. I hope I have effectively communicated my message.

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