Utah Business Blog

By Mark Adams, Fruition Design

I have a wonderful, two year old son, who is going through that “what’s that?” phase. It is so great to explain something to someone, knowing that they have no preconceived notions. I find it quite a joy to explain the most simplistic things to him, in response to the daily barrage of “what’s that?” questions. 

As I am sure everyone would agree (to some extent), pretending that we are two year’s old and taking the most simplistic view, forgetting all of our assumptions, and preconceived notions, can be very beneficial. 

I was recently reminded of this when I picked up a copy of the book The Goal (Goldbratt and Cox). The Goal outlines the trials and tribulations of a failing middle manager, in charge of a run-of-the-mill factory in everyday, middle America. I was supposed to read this book in college, but did not see how this novel (yes, it is a paperback novel) was supposed to teach me about manufacturing efficiencies. In a nutshell, The Goal tells the story of how the myriad of measuring sticks, performance matrices and en vogue business tools can muddy the waters so severely, that we can no longer see the forest for the trees.  

Rather than outlining The Goal’s approach to a simplified analysis of a business and how to measure that business’s performance, I feel that it is much more important to focus on the underlying moral of the story. To figure out why you are spending more than you are making, to figure out why you are shipping less than you are building, to figure out why you are buying more than you are selling, step back and take a simple, fresh look at your business. What do you see? 

• Did you purchase new equipment to eliminate a bottleneck in one area, only to see that bottleneck move to another?
• Did you spend $100K more on advertising last year, only to see an increase in sales of $15K?

To a large degree, me telling you this is a case of the pot calling the kettle black. It is very difficult for one to see the error of one’s own ways. Rather than hiring an overpriced business consultant to spend a week on site, to identify your shortcomings, I would first suggest that you somehow get an outsider’s perspective.

If you are anything like me, and can’t extract yourself enough from the situation, consider finding one or two unbiased individuals who will be frank with you. Networking events, put on by industry groups can provide you with easy access to people like this. To be clear, I am not proposing that open your books to somebody who very well could be a competitor, over lunch. Finding a mentor who you can speak to in generalities will usually get you the answers that you are looking for, without giving away the secret family recipe. 

I find that simply forcing the words to come out of my own mouth, often points me to the answers for all of my problems. I must warn you though, it can be quite sobering to hear responses such as, “so you are telling me that you spent $50K on equipment, in the hopes to get a contract for $40K?” Well….sure….when you put it that way…

The views and opinions of this blog post are those of Mark Adams of Fruition Design and do not necessarily reflect those of Utah Business.

By Mark Adams, Fruition Design

As I begin to expand my business and take on larger jobs from customers, I have found myself laying out more cash than ever before for raw materials. In doing so, I have come to learn that I must have a clear understanding of when the cash spent on those raw materials will be returned to me in the form of sales revenue. The time period from when I am required to pay for my materials and my customers are required to pay me, is known as the cash conversion cycleor simply the cash cycle. 

Here’s a simple example. Let’s assume that you own a business that sells office furniture. Essentially, your business entails purchasing office furniture in high volume and then reselling that furniture to your customers. 

Let’s now assume that your supplier (the manufacturer of the office furniture) requires that you pay your bills within 30 days (“Net 30”). Let’s also assume that you give your customers 30 days from delivery of their purchase to pay their bills. 

At first glance, one might think that there are no issues to be concerned with because you have to pay your suppliers within 30 days, but your customers must also pay you within 30 days. Let’s look closer at the real situation though. 

Let’s say that you buy from the manufacturer in volume, and that it typically takes you 90 days to sell all of the inventory that you buy in a single order. 

You can now see that it takes 90 days to recoup all of the cash that you spent to gain those sales. 

Now imagine that you are a manufacturer of finished goods. Your product is a large hydraulic assembly used by a farm equipment company, located in Australia. To build your products, you must amass an inventory of raw materials. You must then manufacture the finished goods. Lastly, you must ship the finished goods to Australia. Imagine that the contract that you have with your customer states the terms of Net 30, upon receipt of goods. 

This later example should start to give you an understanding of how long and complex the cash cycle can become. 

Regardless of whether you are a manufacturer of finished goods, or simply a reseller, it is important to understand your cash cycle. A quick search of the web will produce a list of tools and reference material to help you better understand your cash cycle.

The views and opinions in this blog reflect solely those of Mark Adams at Fruition Design and not necessarily those of Utah Business.

By Mark Adams, Entrepreneur, Owner of Fruition Design

There’s a saying that goes something to the effect, keep your friends close, and your enemies even closer. In my experience in a highly technical field, I have found that most consider the competition to be their enemies. In hi-tech, much of this discontent is likely due to the value of intellectual property (IP). Technologists are generally afraid of speaking to their competition in fear that they might find out the secret recipe. I get a chuckle every time that I run into a former co-worker at an event, and he/she proceeds to squirm as they try to answer my question, “so, what are you working on these days?”

I have recently taken a more “big picture” view of who my enemies really are. For the most part, my enemies are not my competitors. As an example, I ran into somebody this weekend who owns a company very similar to mine, but on the east coast. We both provide machining services to the medical device industry. If asked, this person would probably list me as a competitor. Some of my customers are in his backyard. I provide some of the same services as his company and so on.

Taking the big picture view, though, I realize that the majority of my revenue comes from performing services that his business does not, product design. Therefore, I consider him an ally. I openly share with him the details of my business and our customers. I know that this is more likely to benefit me than it is to hurt me. I know that he has customers that are looking for good product designers. I also know that he would pick up more machining business from these customers, if he could offer a more complete package (i.e., design services).

Therefore, I encourage the big picture approach. Before assuming that another company is your competitor, look closer. Perhaps they could be an ally. Better yet, they may even be a potential customer.

The views and opinions expressed in this blog post are solely that of Mark Adams and do not necessarily reflect the views and/or opinions of Utah Business.

Despite what you may think, starting your own business in a recession offers opportunities

By Joseph R. Cardamone, President, United States Federation of Small Businesses (USFSB)

Often times, the monotony of punching the clock as someone else’s employee leads to day dreams of starting a business and being your own boss. In rough economic times, those day dreams may never pass beyond imagination. “Times are tough, how could I start my own small business now?” one thinks. That’s rational thinking, but, counterintuiviely, a down economy can actually create great opportunity for budding entrepreneurs.

There are a variety of benefits to starting a small business during poor economic conditions. For starters, office rents could be lower and suppliers may cut better deals. Downturns are a great time to sign new accounts. Customers are examining every expense for ways to save, including asking eager entrepreneurs for price bids in order to replace current and expensive vendors.

An unfortunate reality of hard times is increased unemployment. But, for small business owners, this means more experienced talent is available in the marketplace, with more affordable salary requirements.

However, as you can imagine, the grass isn’t all green for entrepreneurs making a start in a down economy.  It’s tough, very tough.  A down economy means tighter lending standards, higher prices on energy and food and weak consumer spending. Like those millions of entrepreneurs who started a business during the recession of the early 1990s, today’s dreamers need to ask themselves if they have the appetite for risk and fire in the belly to succeed as a small business owner. For those inspired to give entrepreneurship a go, here are some quick tips for starting a small business in poor economic conditions:

• Avoid the middle market products and services – Even in a down economy, consumers and businesses need necessity-based products and services – office supplies, tech services, food, medical assistance, waste management, etc. Conversely, an innovative luxury item can also be successful. Avoid the middle ground; if customers can delay purchase while times are hard or choose a less expensive alternative, that’s not the industry to be in.
• Don’t fret the big bucks – If start-up capital is an issue, consider starting a part-time business. Keeping a day job for a while can help maintain a steady income while waiting for sales from the new business venture to kick in. It’s also a smart way to work out kinks, gain industry knowledge and build a solid customer base without superfluous financial stress and pressure.
• Make equipment multitask – Technology products are getting smarter and helping people streamline. Many printers can also scan and fax. Another printer, the DYMO LabelWriter printer, both prints a variety of labels, and enables users to purchase postage online through DYMO Stamps. This enables professional looking mailings, without the commitment or expense of leasing a postage meter, all while saving trips to the post office.
• Strategize staff selection - Minimize full-time staff. Hire part-time employees. Contact the local college or university to see if they offer a formal internship program. In some states, interns can work for free or class credit only. Outsource or hire freelancers who can take overflow work or specialty jobs. Don’t invest precious resources employing people who may be underutilized. As business grows, you can consider adding more full-time employees.
• Embrace the guerrilla – Don’t spend a fortune on advertising. Use guerrilla marketing techniques to get the word out. There are hundreds of free or inexpensive ways to do business promotion: Distribute free product to attract people and secure repeat customers. Write a column for the local newspaper. Get involved with your local chamber of commerce. Network with other area business professionals. Display the company logo on a vehicle.
• Buy the business – Many businesses for sale are completely viable; the current owner has simply run out of time, energy or entrepreneurial passion. Although it may cost more up front, the purchase of a business can provide an existing foundation and income stream - ready to be nurtured and advanced to a higher business level.

Anytime can be the right time to launch a venture if the opportunity is right. During periods of a challenging market, big companies suddenly don’t take any risks; they retrench and bunker down. In contrast, entrepreneurial start-ups, small and agile, are out reinventing models. Great ideas, some savvy business sense and a passion for self-employment can overcome any type of economy. Good luck!

Joseph R. Cardamone is president of the United States Federation of Small Businesses (USFSB). Founded in 1983 by small business owners, USFSB advocates for the rights and interests of small businesses and the self-employed. Their mission is to help their members grow and prosper by joining together and effectively promote small business interests before local, state and federal lawmakers.