Many are looking for the “business in a box” where all the issues of creating a business are already answered – say a franchise or a licensed business model.  What they are failing to understand in these instances are that they still have to run the business – hire/fire employees, deal with advertising/promotions, provide customer service, and invest in the business upfront and overtime.  They will be building their client base from scratch no matter which business they buy and they will be competing for customers.

Those who opt to start from scratch are challenged with doing it all.  Setting up, structuring (legal and accounting) and providing the product.  Often starting from scratch seems the ”lower cost” option.  The catch is they often wonder around to find an identity, a message, and the customers. 

Starting a new business may be inexpensive when it comes to set up costs. As the business runs and the revenues are not rolling in to cover salaries and expenses it quickly becomes clear that “low cost of entry”  does not mean there will not be a cost.  The cost comes in investment and a dependency on personal cash reserves to keep the business going.

The questions people should ask before they become business owners include:

• How much money do I have to live on while I start this business (keeping in mind that once you start the business you can’t draw unemployment)?
• How long can I go without taking a salary from the business?
• How much time and effort am I willing and able to commit to the business?
• Am I looking for a lifestyle company that I run and pay the bills? If so, is it just until a job comes along or do I want to be in business long term?
• What do I know about running a business – accounting, marketing, taxes, legal…?
• What do I want from the business?
• Do I want to sell a product, a service, a technology or a combination of things?
• What will the impact be on my family and other commitments?

Many people jump into owning a business as a temporary measure or as a life and career change. Others will choose to take a job loss opportunity to pursue a dream of independence through owning a business. If wise choices aren’t made when starting and growing a business, small businesses will be failing and taking with them the resources of their founders.

Before you jump into the waters of owning a business, be sure of the depth.  Understand that you may have to tread water and use personal resources to keep yourself afloat until the economy and your business take off.

As I sat watching his process, I would see him remove some increment of time from each product on this tremendous spreadsheet.   I would see him add the time for manufacturing the new products.  What I didn’t see was a real reduction of costs for the plant or the company.  To be honest I thought I was missing something.  So I went over the fine details of what he did every night, trying to find the “cost savings” that were being generated…because in addition to this mega spreadsheet, he had another that it fed into that showed how close he was getting to the 5% cost reduction in labor. I watched as the labor reduction target was slowly and steadily being reached with each change he made in the manufacturing times.

But it still didn’t make sense.  He reached the target.  Handed me the details and said “all done” until next year.  I looked at the papers and I looked at him and said “Where are the savings?” He smiled and said the details are all there.  His smile got larger as I looked at him and said “Those are savings on paper where are the real dollars attached to them.  You didn’t eliminate a single operation or job.  There were no salary reductions only increases and you added more time for new products than you took away from old processes.” His response was “Yes that’s right, but I hit the cost reduction target.” 

I was quite amazed that he was pleased with the work product and the result.  My amazement showed on my face.  He laughed and laughed.  Then finally said I was the first person in almost the decade he had been doing things this way to actually challenge the result.  Why?  Because when it came down to it, everyone wasn’t looking at the details and the actual result they generated, but looking to see if the “papers” showed what they were suppose to.  The budget process was a shell game of moving money around to keep the plant budget going up even as they could show “costs” going down.  Every year new products came in to “pick up” the costs allegedly taken out of existing products through process improvement and “changes” in design.

The truth of the budget process wasn’t about real dollars.  It was about the appearance of real dollars.  Why is this relevant today?  Because our national “budget” and expenditures are being handled much the same way.  With the real dollar cuts coming when the reality catches up to the paper myths and those cuts go to programs and people (senior citizens) that can not afford to have the cuts made to their programs.

The “rob Peter to pay Paul” mentality eventually comes to a stop. And when it stops millions of people get hurt financially and personally.  We “survived” the banking and investment fund fiascos (and they are ramping up again with more mergers and such), the fall of home prices, the loss of jobs, and the continuing onslaught of attacks against our economy and competitive futures.

For now, we survive.  How does an organization (or a country) turn from “paper” savings to real dollars? It takes a reality check by leaders and those who won’t play the game any longer.  Companies fail (or use to) when reality caught up with the “paper” fiction.  It’s time to catch up with reality before it sets fire to the fictious savings and paper dreams.  It’s time for action, not “change”.

These aren’t organizations without products, ideas, innovation, or qualified, experienced management teams.  These are businesses that have potential to provide innovative products in medical, bio-tech, green, software, and other growth industries, as well as the established companies with proven track records of profitability for years, even decades.

Why are they questioning the need to exist at this particular time? In part it is that they feel inundated with government – regulations, taxes, reports, and even more important competing with the government for funding.  They also express concern that the government is more and more “in their business”.  The issues of compensation, use of funds, corporate oversight, and “backseat driving” of companies and industries disturbs them at a fundamental level.  Where government was once the source of regulation to ensure fair and open competition, now it seems to BE the competition – taking over companies, providing stimulus funds to “projects” and “industries” and leading attacks on established companies and industries that are playing by the rules.  The old rules that is.

With no idea where the impact will stop with regulations, taxes, and “reform”, businesses of all sizes debate not just the next step, but their very existence and the uncertainty they face.  Where competition interference from other countries and governments was expected, if not accepted, the U.S. government now becomes one of the uncertainties of being able to compete locally and globally. Job creation and economic recovery will be slow as businesses learn to navigate the uncertainty of change and ask “where is the hope?”

In the “capitalist” and “free market” methods of “competing”, it is often regulatory and other government or policy mandates they halt true competition.  Then the “for-profit” demons are targeted for not being able to achieve economies of scale and cost reductions.  When for-profits have to compete against “not-for-profits” and the government, for-profits are under intense pressure and an unfair load that the other entities do not have.

Further, the government sets the rules.  How would a small business or any business go against the government for unfair trade practices or other issues?

Locally and nationally small businesses are competing more and more with “government” agencies and their funded groups.  Small businesses who provide training and eductation programs go head to head with community colleges and other NFPs that receive government grants to provide “free” programs.  The programs are free to attendees but costly to the economy in the long run, because the tax dollars are coming out of the pockets of small business to fund the “competition”.

So then we have healthcare and the government option…Not something that is being kept “simple” and certainly not something that will preserve real competitive forces.  Healthcare and a government option will inevitably be an example of where costs will rise or services will decline as the market loses competitors and government and all its efficiency and managerial capability will be left to provide the sole options.  We have only to look to medicare, social security and other programs to see that the programs are not guaranteed and that every year they are victim to the intersts of U.S. Congress.

What is needed for healthcare reform?

- Remove regulatory barriers on competition – open up cmpetition across state lines

- Allow the full cost of premiums to be taken as a deduction on taxes (to a reasonable level say 10% of annual income not to exceed $10K per individual and have a formula of $X for each child)

- Provide options for major medical coverage rather than “comprehensive”

- Legislatively eliminate the pre-existing conditions exclusion and the ability to drop “costly” subscribers

- Allow for more comprehensive diagnostic testing upfront rather than the “we have to do this first, before we can do the actual test we want to run because the more exact test isn’t covered otherwise”.

It seems that the movie quote that applies to what is happening in government today is “stupid is as stupid does” and if Forrest Gump can get it, why can’t our elected representatives?

The money is awarded, then what. Everyone starts spending…on what? Everyone who receives the funds will by no means be aware of the rules and requirements imposed for accounting, internal controls, and management oversight.  Procurement practices, subcontracting, and a host of other operational procedures will also likely be deficient in many of the organizations.

As a consultant that spends a significant amount of time working with organizations receiving government funds, experience tells me that many organizations are not ready for the accounting and management control system changes that need to happen to provide proper oversight of funds.  For small businesses, not-for-profits, and even the larger entities like universities, colleges, and hospitals, the fact is that the accounting and financial controls are all too often not in place or are deficient in structure and implementation.  It seems almost inevitable that future headlines will be about how stimulus and grant funds have been “misspent” or are “unaccounted for”.

More and more businesses in the United States are fighting to compete.  And they are faced with more and more competition killers:

•  regulations,
• tax structures,
• tax increases,
• intellectual property issues like “obviousness” tests for patents, and
• hurdles imposed by government agencies that aren’t in the laws and regulations.

 Are we competing with the world or competing with our government for resources? Are we going to be on a level playing field with the world or are we going to be tied up in regulations, taxes and tariff retaliation unable to compete ?Are we going to be in a pitched battle against our own legislative, judicial and executive branches (federal, state, and local) to get them to understand that we can have incentives to action rather than punitive taxation that will drive more businesses offshore or out of business?

There are things we need to do and things we want to do. There are things that we have the responsibility to show leadership in and there are things we can provide incentives to achieve. However, when government steps in to run businesses, creates taxes and tariffs on businesses that are punitive (and let’s get real that is what many of the new taxes are), and creating regulations on top of regulations where current regulations exist that could do the job IF enforced, government becomes an obstacle to competitiveness, free markets, and the economy.

Government needs to step back and govern, not be “in business”. The U.S. use to have a sign that said “Open for Business”…now the sign says “Caution Enter At Your Own Risk – Success Requires Redistribution”.

Success goes ultimately in business to those willing to work at the process, to learn, to refine, to plan and to do. It isn’t enough to show up and say “Ta da I’m here! You lucky people!” You have to show up and bring something with you.

Business success requires:
- a good idea, not a great one, but a good one
- a willingness to work hard on the idea
- an ability to keep going when things aren’t working, persistence
- sacrifice, choosing to work on the business instead of doing oh, just about anything else
- investment: time, money, blood, sweat, and tears
- willingness to fail and an ability to succeed

There is no magic bullet to building a successful business or I suspect a well-read blog. It takes time, effort, and a willingness to work at it. Finding a voice uniquely yours that people want to listen to, argue with, and reach out to is the “good idea” for positioning your business and your blog.

While individual businesses will have to make decisions on how to address the costs imposed by regulations and taxes, as a nation the rising costs of regulation and taxes on business become an issue of competitiveness, global competitiveness. Can U.S. businesses compete with increasing costs and restrictions imposed on them while companies in other countries do not have the same costs and requirements? Will increasing regulations and taxes drive more companies to go off shore with their operations and outsource even more jobs overseas?

A level playing field is a key component of competition.  While the world will never be a fully free market system, businesses should not have to contend with their own government creating barriers to competition with regulations and taxes that place them at a competitive disadvantage in the world market place.  Increasingly it seems that government leaders are less concerned about the impact of legislation on the economy and jobs, than on special interests and self-interest. 

As business owners and managers, it is time to form contingency plans for our organizations to address the impact of rising costs, slowing sales, and increasing regulations.  Budgets, “what-if” analysis, strategic planning, and market research are just some tools to ready your business to respond to the economic and regulatory challenges.  Now is the time for all good businesses to adapt to the rising costs of doing business.

Businesses have to get lean and focus on identifying the most profitable aspects of their business.  An organization has to be equipped with the key knowledge of where they make money and where they lose it.  Knowledge is power and the numbers, the activities, and the ability to understand where costs can be cut without cutting competitiveness is a first step in surviving challenging times like these.  Businesses start and grow in the toughest economic times, but only if they are good at what they do – how they do business and with the products, services, and technology they deliver.