2009 Year in Review and Looking to 2010

Over this past year, the opportunity to work with startups and midmarket companies has been a delight, challenge and encouragement to the good workings of innovation and capitalism.  During this time, we have again seen state and federal policy affect the opportunities for business to plan, adapt, adopt and overcome the rapid shifts in monetary policy; banking and the government take over of product markets.  In addition to the greater policy issues that we track to know how to better serve our clients, the items closer to home that matter are understanding financial statements, cash flow, innovation, product development, marketing & sales and most importantly is capital availability.

It is significant to the operational health of an organization that the Board and management have an understanding of financial statements and the relationship of cash flow to sustainability.  During the course of this past year it has become painfully clear that knowing what financial statements mean and how to interpret that information for the purposes of risk management and strategic decision making is not a common skill set among those responsible for organizations.  We have seen the results of this lack of understanding in the public organizational arena and the problem is more systemic in the private small and medium business environment.  With the lack of understanding and knowledge comes the unintended or sometimes purposeful negative manipulation of funds and numbers to make things look better then they may be.  Not only that, if the Board and management are not clear on these subjects then when things start to really look gloomy, desperation may lead to inappropriate activities and use of cash that most likely is not available; hence the financial debacle of the last decade.  We have worked with business leaders to understand these fundamentals so that better decisions can be developed and risks can be mitigated.

I have been participating in a number of discussions regarding innovation.  Often this concept is relegated to technology and products, yet I believe that it has a broader scope into the other functional areas of business including the overall business model.  For some forms of businesses this is more difficult to envision due to regulatory requirements and policies that put the models in boxes.  But for the small and medium businesses, this is the time to look at what makes sense in the existing environment and determine if new opportunities can be derived through innovative thinking and approaches to the business.  We believe in critical thinking that includes cross-organizational participation to bring together the strategic plans that come from innovation.

Marketing and Sales is the lifeblood of any company.  The ability to communicate the differentiating value of the products or services in a competitive environment is what marketing is all about.  The difficult aspect of this for the small and medium business is to understand their competitive environment and set a budget that will produce results through increased sales.  It seems that many organizations still do not have clarity regarding the differentiations between marketing, advertising and sales.  This is an area that we have been able to assist companies in gaining insight and therefore increasing existing customer relations and building new channels to new customers.

The really tough spot for organizations over the last couple years has been access to capital and financing.  We have learned even more this year what the capital markets for startups and mid-stage companies is requiring.  The need to have very well researched and developed business plans is more crucial than any recent time in funding new companies.  Of the several key areas that get the most focus, these two are really zeroed in on:  an understanding of the competitive market and distribution channels.  This goes back to what was mentioned in the last paragraph.  Access to capital requires good efforts by the CEO who needs to get out and sell the value points of the     company to the investors.  With that there needs to be a good management team that develops the information that will build out the financial and business models.  These documents will be needed  in order to seek financing as well.  This may be in the form of a revolving line of credit or other facility.  Although the Federal Government touted that financing to small businesses would be available, the interesting aspect of this is that not much became available and the financial system did not make it easy to gain access to these dollars.

The promises of new loan availability to the small and medium business environment never materialized.  We do not expect it to get any better in 2010.  With this, we are looking at the more critical aspects of how to work with companies to really understand cash flow and cash flow management.  Through much research and study, we believe that companies need to aggressively develop a debt free model with a strong cash flow model.  This is counter to what the treasury and banking systems would have business do.  We are working out the operational methodology of this innovative model and intend to work with organizations in 2010 that will strengthen their cash management strategy and facilitate managed growth.

2010 – Looking forward

We intend to continue to communicate practical and informative business management for the blog entries here.  These will transit the various core activities of doing business and technologies that will best enhance opportunities for business management and market development.  We continue to qualify and quantify the business model that strengthens cash flow and growth strategies.  Our CEO, Tom Niewulis, will continue to discuss real life lessons learned in business, which personalizes that which almost every entrepreneur encounters.  His straightforward and humorous approach brings insights that often come across in a purely academic way from others. 

Our ultimate goal for 2010 is to continue to build great relationships with our clients and build new client relationships by bringing insight and resources to efficiently execute their strategy, to assist in the development of new strategies, to facilitate greater understanding of financial and business models and to assess technologies from an their end user perspective.  We look forward to the opportunities for everyone to excel in 2010.

Bottom Up is Smarter

So you think you’re a corporation? The questions are many and I will deal with different segments of this in the next few postings. Here are several of the basic underlying questions for today:
1. Other than filing the paperwork with the respective state and the feds, what defines you as a corporation?
2. Are you going to look for investors?
3. How are going to include friends and family into your investor strategy?
4. The nut of it all is: How have you structured your equity positions?

What really defines you as a corporation? Are you using the entity because some attorney or account told you that there were tax advantages and that your assets would be protected? Those are reasons that are valid for incorporating but what now is your responsibility with that entity? You need to understand that you are not the corporation. As I discuss in my podcast and mini-series, a corporation is its own entity. To many folks think that they are that entity and this causes all sorts of issues as the corporation matures.

It is important that the corporate organizational structure is in place. This does not matter what your size is. The hope and desire is that the company will grow. Also, you should have a Board of Directors that can contribute to the development of the company. To often the BOD of small corporations is made up of persons that cannot help direct the corporate entity in a good business manner. Take the time to evaluate what make that entity, the corporation what it should be.

Are you looking for investors? This may start out as the three-Fs (Friends, Family and fools) but a corporation with great opportunity and leadership will want to grow and increase capitalization. This requires investors. Design the entity from the bottom up so that you will not have to rework everything when you are ready to go out with a PPM (Private Placement Memorandum) or seek Angles and Venture Capital.

The 3-Fs – how they are included in the investor strategy is critical, especially if you are a Subchapter ‘S’ corp. Have you thought all of this through? There are important issues that need to be faced so that these folks understand what will happen to their value as you add round of capital to feed the growth.

Have you structured your equity positions correctly? Usually this is the place many errors are made. How did you file with the state regarding your shares of the corporation? Did you reserve enough for all the present investors? Did you issue everything? Do you know how to structure your equity position and set the value of your Intellectual Property? I have seen many horror stories created by not doing this correct from the start.

I’m asking all these questions to get your thoughts processing. I have recently worked with a couple startup corporations that struggled with most all of these issues. Let me tell you, it isn’t pretty to resolve. But it needs to be. The fact is that most new corporations don’t take the time to structure properly. Doing it is a lot of upfront work but it is worth it in the long run.

Be smart, start bottom up not top down. Set the foundation and all will work much better.

Hey! Where've You Been

Wow! Times seems to move fast especially when wanting to keep up with all the great happenings on the Net and life in general. So what does all that have to do with NCDCS and the seemingly Missing-in-Action for this Blog? The fact is we've been getting our Facts in order and verified. What do I mean by that? Well here's a review of some of the Facts regarding why we are doing what we're doing:

• Small business is the driving force of the economy in the US. The statistics are there and with 26 million small businesses active in the economy and 7% of the adult population attempting to start a small business every year.... Well there is a lot to cover. More on the statistics in the future...

• Most sites on the Net and books written read like text books. So when we talk to folks about the hard knocks and real lessons of life in business from cradle to grave; our perspective and discussion resonates. Heck, we're going to revamp stuff on our site as well to get it to have meaning and interest to small businesses. We've had to many comments that we look like we talk to the large corporate level of folks when our heart and intent is to make sense of business concepts with a "Napkin" approach. KISSIOMD. Oh, the acronym comes from my daughter - Keep It Simple Stupid, OH! I Mean Dad.

• Most of the business journals and local government entities don't really have a clue regarding the needs and functionality of small or even medium size businesses (the SMB environment).

• Most economic development councils are tuned into the 10% of the large businesses and don't know how to stimulate economic growth in the SMB environment.

• There are a lot of misnomers out there regarding the ins & outs of LLCs. Especially when it comes to the realm of funding and financing the entity.

• There is little thought given to the fact that a business has a personality and that the SMB environment misses this perspective altogether. That's what the book that Tom is finishing will really dig into.

So, we've been busy validating what we suspected to be true. We have a lot more that we've learned, validate and are putting into the book by Tom and seminars will really get into the nitty-gritty in a fun common sense way. Dang It - business should be fun!!

Mostly, in all candor, we've been really drinking our own medicine. Thankfully we know who turns the distasteful palatable so that we can excel and succeed.

With that, we won't leave you hanging again for such a long time. We'll be getting more moving.

Thanks for stopping by!!