The entrepreneurial spirit is alive and well in Northwest Indiana. Small business incubators dot the region’s landscape – from Valparaiso to Hammond, from Merrillville to South Bend.
As the landscape for small business changes from traditional pursuits in manufacturing to high-tech ventures, new questions arise among entrepreneurs on how to ensure success.
To help answer those questions, Northwest Indiana Business Quarterly has asked experts from around the region and state to address key issues that small business owners must deal with in order to succeed. Their comments are part of this special section.
* Paul Freeman, executive vice president of the Indiana Bankers Association in Indianapolis talks about how to obtain and use capital.
* Karen Imgrund Deak, who has specialized in biotech patents for an international law firm and is now a professor at the University of Notre Dame Law School, talks about protecting intellectual property and concepts.
* Willis H. Glaros, a registered health underwriter and part of Employer Benefit Systems Inc. in Crown Point, explains the importance of providing the best health care coverage and benefits in order to maintain employee satisfaction.
* Theresa Valade, CEO of Success Trek in Valparaiso, explains how small companies can attract and keep quality employees.
* Kathy Sipple, founder and CEO of My Social Media Coach in Valparaiso, discusses the importance of marketing your company through Facebook, Twitter and other social media websites.
–Rick Richards, editor
The Science of People
Engaging employees is the secret to moving forward.
When was the last time you asked your employees, “What are you doing?” Now try and remember the last time you asked your employees, “How are you doing?” In today’s economic climate, changing that first word has the power to change your business.
All businesses have felt the recession’s impact. The U.S. Small Business Administration says small business owners have been hit particularly hard. In 2008, more than half a million closed and more than 40,000 went into bankruptcy. In this culture of survival, businesses often make a critical mistake: They focus so much on cutting back they lose sight of what keeps them moving forward.
And what is that? Engaged employees.
Making sure employees are engaged is one of the most cost-effective ways to improve productivity and profitability. But the numbers on employee engagement are not encouraging. A 2010 Gallup Poll reported that only 33 percent of employees are actively engaged (passionate and connected to the company’s outcomes), 49 percent are not engaged (putting in time but minimal energy) and 18 percent are actively disengaged (acting out to undermine those who are engaged).
What does this mean for small businesses? The bad news is more than 70 percent of your employees may be disengaged. The good news is if you have disengaged employees, you also have the resources you need today to increase your bottom line.
The Power of a Conversation
Unleashing the potential of your workforce doesn’t have to be expensive. It does, however, require an investment. Small businesses have to be willing to invest the time and energy to better understand what drives employees to be invested in the success of the company. This understanding grows out of utilizing soft skills – listening, motivating, communicating and inspiring. Business owners, managers and supervisors have to look beyond measuring what their employees are doing and start paying attention to how their employees are doing, shifting their mindset from being a “boss” to becoming a “leader.”
Leaders have conversations, cultivate relationships based upon trust and work to connect with their employees as individuals.
Employees leave managers, not companies. The most effective managers never try to fix weaknesses; instead they focus on reinforcing and developing strengths and talent.
By doing small things differently – being aware of their disposition, expressing appreciation and recognizing solutions rather than spotlighting problems – leaders can ignite employee enthusiasm.
From Job Descriptions to Strengths-Based Positions
Employee engagement also thrives in response to strength-based management. Most businesses manage their employees based on a 1950s construct: the job description. In the fluid environment of the workplace, however, job descriptions rarely capture the realities of performance. This disconnect between the description and the actual job can cause employees to disengage, creating a “that’s not in my job description” work environment where employees are more committed to their job description than they are to the company.
Company cultures driven by employees’ strengths, however, inspire engagement. The center of this business model is the core belief that everyone has the talent to be exceptional at something. The trick is finding that talent.
Some companies invest in personality assessments. I like the Attribute Index because it provides a full picture of an individual’s soft skills – behaviors, values and attributes. But tapping into people’s strengths can also be as easy as having a conversation. When employees are working within their strength areas, they are engaged in the outcome.
These recommendations may seem theoretical, but consciously creating a relationship-based, strength-driven workplace has real implications for your bottom line. Cathy Greenburg’s study on the Science of Happiness in Business demonstrate that positive manager-employee relationships lead to a 27 percent increase in employee engagement, a 66 percent reduction in the time it takes to get a product or service to market, and a 76 percent gain in productivity. In strength-based working environments, turnover dropped by 14.9 percent.
Re-evaluating doesn’t cost money. Not doing so may. In this economy, businesses have to rethink what it takes to run a successful company – hard skills and rigid job descriptions, or soft skills and strengths-based positions? The most profitable companies realize that employee engagement is not a human resources initiative – it’s strategic for the way they do business.
Theresa Valade lives in Northwest Indiana and is CEO of Success Trek Inc., in Valparaiso. It provides cutting-edge solutions needed to increase performance, create a positive business culture and streamline communications processes.
Employee Benefits & Startups
Decide whether to offer benefits, and who can help.
To be or not to be, that is the question posed in Shakespeare’s “Hamlet.”
‘Tis also not an uncommon question undertaken by owners new to business when pondering “to do or not to do” benefits for their fledgling companies.
Here are three strategies for getting from “do we” to doing it and doing it successfully.
First, decide whether or not you’re going to provide employee benefits to your fledgling group. Second, what is the best way to determine what you need to do once the decision has been made? And third, how do you do it successfully?
Do we or don’t we provide benefits to employees?
This is best answered by doing a self-analysis of your firm’s employee relations and administrative strategy and capabilities. Do we need benefits to attract and retain employees? Is it best to provide those benefits by paying employees more money so they can buy their own, or is it best to allow them to purchase those benefits with the advantages of pre-tax purchase? At our employment size, do we have the manpower to administer benefits? What are the implications for federal, state and local compliance issues? What benefits are necessary as a minimum? How much do we ask employees to pay? Do we offer some benefits on a voluntary basis?
These are just starting points, but should give you an idea as to whether it is worth the effort to take the steps necessary to provide benefits for your employees.
What to Do, How to Do It
In step two, determine the next steps you need to take in order to develop a sound employee benefit strategy, starting with what to do and ending with how to do it.
First and foremost is to find a competent insurance representative to assist you. From this one decision, if it’s a good one, will come the energy and planning to bring your plans to fruition.
So how do we find that special professional and know he or she is the best? The typical method is to provide to three to five insurance agents your company’s demographics, plans desired and cost parameters and ask them to provide proposals.
While this sounds good, your better effort is to actually put the position out to bid first. This way you can determine which candidate has the acumen, knowledge, experience and tools to provide you with not only your startup plan but the longevity to help you meet your strategies in the long run. The best way to get this information is to ask each candidate for the above listed qualities and measure each category for the most competent candidate.
The final piece in the puzzle is to meet personally with each candidate and make sure your personalities match and you can work together.
Once you have made your decision, your work will move away from personalities and cost and focus on the professional’s talent in designing a plan to best suit your company.
Let the professional go to the marketplace and obtain all the competitive proposals, analyze them and present a clear picture of options that meet your goals. This is far easier and a clearer approach than listening to four competing agents confuse your decisions. This is especially true in the small group marketplace where everyone will have the same pricing assuming everyone was provided the same information. Your professional can then work to meet your goals knowing the cost and benefit limitations.
Now that you have selected an agent, developed your plan, priced the options and discussed employee participation, it’s time to implement your plan.
Implement and administer
The final question is how to accomplish implementation and the ongoing administration and management of the plan.
The first step is to communicate your plans to your employees. It’s best to do this with a presentation piece provided at an open employee meeting. Your agent should provide this service and it should include the presentation of the plans selected, the cost to the employees and updates on any required notices provided by law.
This is where you first make your employees aware of your plans and the benefits. It is paramount to inform them of your benefit strategy and the reasons that drove your decisions. This will help in implementing the long-term consistency of your plans. It is also at this time that they can become familiar with your agent and his staff so that much of the day-to-day administration and claims work can be handled by them.
Next is to set up administrative systems to process all the changes that occur between the starting date and the next renewal. In addition, depending upon your size, you may be implementing systems for COBRA, FMLA, Medicare Part D, Section 125 pre-tax and other plans.
The third step is to set up ongoing education for the employees. Key topics are the 10 ways to reduce health care costs, why generic drugs are not bad, and when you should use an emergency room. The bottom line is to educate employees to be better consumers.
Finally, discuss, plan and implement a health prevention and education program. This entails a combined effort of doing onsite blood screenings coupled with health risk appraisals. The information provided makes employees aware of their risks and has the added impact of early intervention vs. care later at higher costs.
Better consumers mixed with awareness of risks helps manage costs by the employees as well as the employer.
The point is to use an effective strategy to determine if you should provide benefits, how to best identify and implement your plans and how to make it successful for the long term.
Willis H. Glaros, a Registered Health Underwriter, has more than 25 years of experience in managing and creating employee benefit plans for Northwest Indiana employers. Glaros has managed cases that range in size from two to 4,000 employees.
Access to Credit
Business plan and adequate funding are keys to success.
Many entrepreneurs fund new business ventures through personal sources – savings accounts, retirement accounts, home equity lines of credit, credit cards and the goodwill of friends and family. Some businesses succeed, some fail. However, a failed business might have succeeded if the owner had secured additional funding.
For small business owners, access to capital starts with a solid business plan. What is the realistic potential for success? What are the target markets, and how can the company compete? What distinguishes the company from its competition?
A forward-thinking business owner analyzes the factors that can lead to each scenario and has appropriate action plans in place.
With a business plan established, the next order of business is to calculate the company’s financial needs. Scrutiny of inventory, overhead, supplies, professional fees, human resources, research and development indicates how much funding is needed to be viable, and how much more will be needed to achieve growth.
Debt vs. Equity
There are two main sources of business financing: debt (bank loans) and equity (private capital from investors). Debt is the most easily understood. Banks and other financial institutions are the primary sources of debt. Banks lend capital to a borrower, who repays it with interest. Funds are secured by collateral, which could be all or some of the company’s assets, often backed by a personal guarantee from the owner.
Usually small business loans from banks are short-term, with full repayment collected within one year. As a rule, banks are less likely to make longer-term loans to small businesses, but many financial institutions coordinate with guaranteed-lending programs offered through the Small Business Administration (SBA) to make long-term loans.
There are several advantages to debt: Loan repayment builds creditworthiness for the borrower, interest paid on a loan is tax-deductible, and the lender does not control how the company is run.
Some small business owners use private capital – known as equity or “venture” capital – as a better fit. Obtaining equity capital means selling a portion of ownership in the company to investors.
These investors can be passive or active. Passive investors lend capital, but don’t give input regarding how to run the company; active investors are involved to varying degrees in the company’s operation.
The debt-to-equity ratio can help determine whether to utilize debt vs. equity. This ratio measures funds borrowed against funds invested. Businesses with a high ratio of equity to debt often seek debt financing. Companies with high debt-to-equity ratios may benefit from equity and the resulting increase in ownership capital.
For either type, a business plan assessment helps clarify some of the following:
* Level of comfort with the industry. If the bank is overexposed in a certain industry, it may need to limit additional credit exposure.
* Character of the borrower. A bank needs assurance the loan will be repaid should the borrower experience difficulties.
* Use of the loan. Banks have policy restrictions on the types of loans they make; the restrictions may change in response to economic conditions.
* Why there is a need for a loan. A loan requested to support sales growth will be viewed more favorably than a loan to support operations that are unprofitable.
* Amount of loan. Not only is the amount of the loan important, but the likelihood of additional loans is a consideration.
* Repayment plan. The nature of the loan will determine the repayment structure.
* Risks to repayment. The bank will examine financial and nonfinancial risks, such as vulnerability to changes in technology.
* Mitigating repayment risk. In the event the loan cannot be repaid the bank will need a secondary source of repayment, such as collateral or a guarantee by the firm’s owners.
How Much to Borrow?
As with most business arrangements, there is a balance between overcapitalization and undercapitalization. The latter is the more likely, resulting in insufficient funds to maintain operations. Ideally a business owner secures additional capital before reaching a critical state.
Overcapitalization is rarely a problem. When it occurs, it tends to result from having so many investors tied to a company that a reasonable return on investment is not possible.
Advice is readily available from attorneys, certified public accountants, the local SBA office or a local banker. Whatever the source, access to capital and a well-thought-out business plan can help keep small businesses in operation.
Paul W. Freeman is executive vice president-member services of the Indiana Bankers Association. He is past chairman of the Indiana Council for Economic Education and past president of the Indiana Society of Association Executives. He was employed for four years with Robert Morris Associates (now the Risk Management Association) in Philadelphia, and had nine years of banking experience with Bank One, Indiana.
An Intellectual Property Primer
Protect your IP and be sure you’re respecting the IP of others.
With more small business startups being built around development of unique software or proprietary processes, ownership of intellectual property–IP is the legal term for the product of invention or creativity–has become a central focus of small business.
IP law establishes ownership of, and grants certain exclusive rights to owners of, intangible items including: print, musical, literary and artistic works (usually protected by copyright); inventions, discoveries, new plant varieties and improvements to existing products (usually patents or trade secrets); and specific uses of words, phrases or symbols and designs (usually trademark, service mark or trade dress).
As a small business owner, you must be aware of IP that is owned by other people, so as not to infringe upon another’s IP rights. You also must understand the best way to protect your own IP from unauthorized use by others.
Watch your back: protecting your IP
Copyright protects your company’s print materials. Copyright law provides you with a right to use the copyrighted work and to license others to do so. It also provides the right to prevent others from using your copyrighted materials without your consent.
Copyright is secured automatically when a literary work is created for the first time. Copyrights can, but are not required to be, registered with the U.S. Copyright Office. A copyright is in effect for the life of the creator plus 70 years, or if the work was done for hire, for the shorter of 120 years after creation or 95 years after publication.
Marks are the distinctive signs or indicators associated with your business that are used to identify your product or service, and are intended to prevent consumer confusion regarding the source of goods or services. An example is the McDonald’s logo. “Trademark” and “service mark” are often used interchangeably; legally, however, a trademark refers to the product and a service mark refers to the source of a service.
Marks can be owned and sold or licensed. You can, but are not required to, register your trademark or service mark with the U.S. Patent and Trademark Office. You can use the “TM” or “SM” designation with any mark you claim the right to use, even if it is not registered. You are only allowed to use the (R) (registered mark) designation if your mark has been fully registered. A federally registered mark can be in force as long as the mark is in use, theoretically forever.
Trade dress is the distinctive look or packaging of your product. It could be the distinctive color, shape and position of the label on a bottle of perfume, or the distinctive appearance and decor of a chain of restaurants. Trade dress is protected under the same legal statutes as trademark, and can also be registered.
Trade secrets are exactly that – secrets. The most recognizable example of a trade secret is the recipe for Coca-Cola. Supposedly, only a few people in the company know the recipe. Trade secrets are a viable option for protecting IP that is not public-by-definition, and can encompass industrial or manufacturing know-how, or even client lists.
Finally, patents protect inventions. A patent grants the owner the right to exclude others from making, using, selling or importing the invention. There are three types of patents: utility patents (most patents are utility patents) encompass new processes, machines, articles of manufacture, compositions of matter or improvements thereof; design patents cover new, original and ornamental design for an article of manufacture; and plant patents are for new, asexually propagated plant varieties. A utility patent has a legally defined term of 20 years from the filing date. After the patent’s term expires, the invention enters the public domain.
Watch your step: infringing others’ rights
Small businesses must be careful not to make, use or sell IP they do not own. How do you find out if you are infringing on someone else’s IP? Your best recourse is to consult an expert in your IP field, which, in most cases, is an attorney who specializes in the IP protection you are using or seeking. Initial consultation fees are usually modest, and can save big headaches down the road.
Karen Imgrund Deak has a Ph.D. in genetics from the University of Chicago, has passed the Patent Bar, and has spent several years in the intellectual property group at a top 25 multinational law firm, where she specialized in biotech patents. She now lives in South Bend, where she works for the University of Notre Dame.
Social Media for Business
It’s no longer a question of “why,” but “how.”
Social media? For business? You bet! When I began teaching social media marketing for business, I got a lot of skepticism. Many businesses had trouble understanding why they should participate on sites like Facebook, Twitter and LinkedIn.
A lot has changed in the past few years.
Currently, Facebook ranks second in popularity among all visited websites (No. 1 is Google) and boasts more than 500 million active users, 50 percent of whom log on to Facebook in any given day.
Its engaging, intuitive interface translates to increased time spent on the site; the average user spends 15 hours and 33 minutes there per month, according to Facebook statistics.
Twitter turned 5 years old in March. It took more than three years for users to send 1 billion Twitter messages or “tweets,” now users send that many tweets every week. It continues to be an important method for real-time news sourcing, especially important to the ever-growing body of mobile users.
LinkedIn now boasts more than 90 million users globally. Light on “clutter” and heavy on business referral activity, it has arguably won a place as a top site for professional networking.
What does this mean for businesses? I think businesses understand now that social networking sites are not a trend that will go away any time soon. Questions have shifted away from “Why?” and more toward “How?” The rules of engagement in each of these spaces are changing as each site evolves, but there are a few ground rules that apply more or less across all platforms.
Tips for Business Social Networking Success
Facebook, Twitter and LinkedIn are three of the most popular social networking sites. There is strength in numbers; sharing your message where the majority of people are already gathered makes sense. At the same time, there may be niche- or geographic-specific sites that make sense for your particular business or industry.
Whatever path you take, make sure to be relevant. It is easy to create a profile on any given social networking site, but make sure to create a profile that is relevant and easily indexed by search engines for key words or phrases important to your business.
Developing fresh, meaningful, engaging content is another challenge. Your LinkedIn status updates and tweets must create value for your network to be considered relevant. The most successful online companies don’t use these sites as broadcasting mechanisms, but rather tools for engagement; they find out what their clients want and need and provide it.
Be consistent in your efforts. Planning your work and working your plan is critical. Don’t create a profile and then abandon it or update it too infrequently or you will lose your followers’ interest.
Be consistent in your branding. Your profiles should have a consistent look and feel across all social networking sites. Use the same logo/photo/color schemes to maintain your company identity.
Let your website visitors know how to find your video content on YouTube or how they can follow you on Twitter. Use a custom landing page on a business Facebook fan page to allow visitors to sign up for your newsletter. Cross-connect for visitors who may find you on one platform, but prefer to interact with you on another. Make it easy for customers and prospects to consume your message in the manner they prefer; they will often reward you by sharing content with their own network.
Ask questions rather than just making announcements. Allow fan comments on your Facebook wall. If less than positive comments surface, resist the urge to delete them; doing so usually makes things worse. Instead, invite further discussion, preferably offline. Find out what the underlying issues are and work to resolve them. “Like” or thank visitors for positive comments as a way to let them know they’ve been heard.
All text posts can get boring, so add some variety by using visuals. Most sites allow URL links to be attached to posts or updates. Rather than just telling your fans about what’s going on with new products or services, why not include a video or a photo? Most cell phones have built-in cameras that make it easy for this type of material to be immediately uploaded.
Most social networking sites do not charge a fee for businesses to participate. Your time, however, or that of the employee or outside agency you employ to help you with your social networking, is not. Big results can happen in less than 20 minutes a day of time invested in the right sites, doing high-value activities. Learning to apply effort appropriately helps, so invest in proper training to do it yourself or hire a seasoned professional with proven results if you decide to outsource.
Kathy Sipple, founder and CEO of My Social Media Coach in Valparaiso, offers social media marketing training and strategic consulting services for businesses. She is also an independent consultant with St. John-based Forward Progress. Together, with the staff of Forward Progress, they have trained more than 25,000 people on six continents.
FREE Preview Webinar:
LinkedIn Top 5 Business Development Tips
Live: Tuesday, May 24, 2011, at 11 a.m. Central Time
Recorded: Available on demand after May 25, 2011
4-Week Intensive Workshop:
Increase Your Sales with LinkedIn
Begins: Tuesday, June 7, 2011, at 2 p.m. Central Time
Ends: Tuesday, June 28, 2011, at 3 p.m. Central Time
Ready to learn how to develop new business in less than 20 minutes a day with LinkedIn? This in-depth workshop provides step-by-step instructions for creating an effective profile, building your network and closing more business. All sessions are recorded; video provided to attendees for convenience. Northwest Indiana Business Quarterly friends and subscribers are invited to attend this online group training at a special discounted rate.
Regular price of $285, offered for just $149! Reserve your space early; space is limited.
Register online at http://nwibq4sales.eventbrite.com/.