I keep wondering what happened to the confident young man who was sampling his product and received rave reviews from the sampling population. Was he afraid of success or did he determine that any additional cash he would have to put in the business wasn’t worth the investment? Or did he realize he didn’t have the time needed to dedicate to the business.

Whatever his reasons, his story is very common. Cash flow can be the demise of any business. Every great idea needs a plan. While a formal and lengthy business plan is optimal, a short one with key information can help a new business plan for success. Before embarking on a business venture it is wise to answer a few key questions. If you are considering starting a business answer the following questions:

1. What steps do I need to take to get my product or service ready for sale?
2. How much of my time will it take to get the product or service ready to sell?
3. What is the selling price for the product or service? How does this compare to the competitor prices?
4. How many units or hours/projects do I expect to sell?
5. Where do I find buyers and how do I attract them to my product or service?
6. Do I need others to help me? How much do I pay them and how often?
7. How much cash am I willing to invest in this business?
8. What is my exit strategy, if any?

A little planning goes a long way. Even if you don’t have time or the desire to write a formal business plan, answering a few questions can give you an idea what you need to commit with regard to time and money. Good luck!

One company recently offered pay raises to their employees because they were experiencing a large turnover. While they may not have been upset, at least financially, to see one or two staff people leave, they became concerned when there was a large number of employees leaving for higher paying positions. To solve the problem they responded with mid-year raises.

Sometimes when you are an employee you have little say in what projects you are given or your schedule. I know a woman who left her job because her employer would not honor a request to change her schedule to make the working hours more “fair” between her and the other people who were in the same position. They were surprised when she gave her 2-week noticed and asked her what they could do to entice her to stay. She informed them she had requested a change to her schedule and because no change was made she found another employer who offered her the schedule she desired. They promised her a better schedule, but it was a little too late as she didn’t trust them to follow through on their promise.

Another person was given a project they were not truly skilled for. There are other people in her company who have more experience and skill in the area. In addition, her to-do list was really long and she had asked work be allocated to other people, when possible. The fact that she was given a project where she is not the expert will require her to work additional hours to complete the job. While she plans on completing the project, she is frustrated.

Small business is the driver of our economy. It is understandable that some companies are having to make due with fewer employees to get the job done. Which means some employees are being given tasks/projects that they are not skilled in or are required to work additional hours. But hopefully many employers recognize the demands they are making of their staff and acknowledge the efforts being made by their employees. A simple “Thank you” or “You are doing a great job!” can go a long way in keeping people satisfied. When the economy improves hopefully your employees do not go looking for a better working environment, as turnover is very costly, even in a good economy.

About six months ago I had a coach who specializes in Feng Shui visit my office. She asked me to write down a few key things that I wanted to get clear about as well as a few goals. One of my goals was to maximize the work day hours doing productive activities so that my family time was maximized in the evenings and weekends. The other goal was to really focus on teaching as my main career and to make my classes fun for the students (which can be challenging when you teach accounting).

She provided me with a few tips about how to organize my office to maximize the ability to realize my goals. And it worked. A few months after rearranging my office I was invited to be an online instructor for undergraduate accounting courses. Recently the university added graduate online courses for me to teach as well. The university where I have been teaching since 2003 offered to convert me from an independent contractor to a part-time employee.

Feng Shui isn’t for everyone. My husband thinks it is silly. It worked for me because I established clear goals and created actions for how I was going to achieve my goals.

A friend of mine didn’t use Feng Shui but he did create a plan of what he would like his business to look like. He has been working on a business plan and is in discussions with an investor. We can make anything happen when we have clarity.

Most of us know that new year resolutions do not always work. We get excited about changing our habits, but we easily fall back into the bad ones. A friend of mine stated that she is not going on a diet, but making a lifestyle change. There is a huge distinction in the words we use. A diet is seen as something negative and temporary, whereas a lifestyle change is more permanent in nature and uses more positive wording.

How can you apply the concept of lifestyle change to your business? What are some goals you have for you business that you have not been able to reach? Is it because you don’t have enough time or because you haven’t had enough cash on hand to make the investment? Whatever the reason, consider what you can do today to make the goal a reality.

Do you want to write a book (or any other type of professional publication)? If so, put a block on time on your calendar to write for 30-60 minutes each day. If you schedule the time you will be more likely to make the time.

Do you need more time to work on your business rather than working in your business? Working on your business means generating revenue whereas working in your business means you are doing the mundane tasks that you truly should outsource. What can you delegate to someone else? Maybe your monthly bookkeeping? Or maybe some marketing? Consider how much your time is worth, then compare that to what you would pay someone else for their expertise. Let’s say your billing rate is $150 per hour and it takes you 2-3 hours to input your daily receipts into Quickbooks (TM) each month. A bookkeeper might only charge you $100 for the same task. By doing the accounting yourself you are actually costing your business $200-350 each month.

Where can you create some efficiencies this year? Make some lifestyle changes to your business in 2011. Happy New Year!

Students who are completing an MBA program often ask me why they need to take accounting courses when it is not their major or concentration. In my response I communicate that one day they will be in a management position and they will need to know how to create a budget or read one, read and analyze their departmental financial results, and make decisions for the company that will impact profitability.

The accounting data is relevant to business. If an entrepreneur does not have skill in accounting they should outsource the preparation of the profit and loss statement along with the balance sheet. And while cash is king, it is important to understand what is happening in the daily operations to make good cash flow decisions. The profit and loss statement provides a wealth of information.

But it is not just accounting data that is relevant. Marketing efforts play a big role in the success or failure of businesses. Are you analyzing where you spend your advertising dollars? A few years ago I hired an advertising agency to help me with an ad campaign. They did not guarantee results, but they came highly recommended so I moved forward. In hindsight, it was a waste of time and money. I discounted the value of an ad agency that offered a partial refund if the results I wanted were not achieved because they were not highly recommended. Oops. Since I am not a marketing expert I didn’t know the questions to ask or what expectations I should have of the ad agency. I used the referral as a relevant item to my decision rather than the results of the campaign. My mistake and one I will not make again.

All aspects of our business are important and help us make good business decisions. While they are not equally important, they all play a role that determines how successful we will be.

You must apply for the scholarship and the process is fairly easy. You have to determine four questions you want answered regarding marketing as well as write a paragraph as to why you deserve the scholarship. To read more about or apply for the scholarship click Your Market Research Scholarship Program.

If you are selected as a winner for the scholarship Gnosis Arts will also submit a press release on your behalf. If you are looking for a little boost to help your marketing efforts, I recommend you apply. Even if you are not selecte, the effort of creating the four marketing questions you have about your target market will give you greater clarity as to where to focus your time and money.

Good luck!

As we continue with accounting terminology (see Types of Cost Behaviors), a couple of items to consider when making a new purchase are opportunity costs and sunk costs. An opportunity cost is a foregone benefit. For example, do you rent the extra office on your floor to generate some additional revenue or do you use it as a storage room? The “lost” benefit would be the rental income. A sunk cost is a cost that has already been incurred and is irrelevant for the current decision. For example, the original price for a new car 4 years ago is irrelevant to your decision to purchase a new car today.

Why do opportunity and sunk costs matter? Because we need to account for any lost benefit if we choose one option over another. And the sunk costs are often mistaken for relevant costs and can skew a decision. Therefore, it is important to categorize items before you crunch the numbers.

Here is a common example: You want to buy a new truck for your business. The new truck will cost $36,500. The truck you have is 4 years old. You bought it for $32,000 and the outstanding loan value is $13,000. You wish to sell the auto, but the Kelley Blue Book value is only $12,000. The annual depreciation on the new truck is $7,300 per year. Depreciation on the old truck was $6,400.

In this example the relevant costs are the cost of the new truck at $36,500, the market value of the old truck of $12,000 and the $900 difference in depreciation between the old and new truck. The original cost of the old truck is irrelevant because it is a sunk cost as is the outstanding loan amount.

The next time you consider buying a new vehicle or equipment for your business, look at what items are relevant to the decision. You can use similar logic when analyzing if a cost is avoidable or unavoidable.

I am asking these questions because I have seen people change their level of motivation purely by letting them know that I care. Last term, I had a handful of students who were doing the work just enough to get by. This term, I have a couple of some of those same students and I have noticed a change in their behavior. While I think the topic this term is a little easier to understand, I am encouraging them just a little bit more than I did last term to stay engaged. And they are doing just that.

My tactic is to send gentle reminders about items due. In addition, I offer praise when they do the work on time or correctly. Seems simple enough. I’ve come to realize, though, that not all instructors or supervisors do so. In fact, one of my students thanked me for providing detailed feedback in the areas where she didn’t get the problem correct.

The tone and way people communicate are different when you offer praise instead of criticisms. I’ve started to apply my “teaching” concepts at home. Instead of telling my daughters they are smart or they did a good job, I am very specific in what they did correctly or where they can make improvements. In topics that could cause debate, I start by praising my husband or letting him know I am not mad before I tell him my thoughts.

A good manager can help mold a subordinate into an good employee that in turn becomes a good manager. A leader knows how to deliver bad news or criticisms in a way that does not degrade their staff. I think we could all use some positive critique along with some well deserved praise for a job well done. Don’t you?

The week before school started the elementary had a “Meet the Teacher” night. Since this was our first foray into public education we decided it would be a good idea to attend. Our daughter had the opportunity to meet and talk to her new teacher. I informed the teacher that my daughter was excited about learning, but scared about the social aspects of school.

The first day of school I was expecting a meltdown by my child. Instead she willingly took her teacher’s hand as they walked into the building. I couldn’t believe that she handled the transition so well.

Thinking back we did a few things right and some not so right. First, no matter what you tell someone they will develop their own opinions. Second, perceptions are difficult to change – the person often needs to have an experience directly. No matter how many times I told my daughter kindergarten would be different than daycare she did not believe me until she experienced this for herself. Third, preparation helps, but it is not always enough to make a mind shift. Finally, a sample or a preview can help a person understand what they are getting.

I thought I could convince my daughter that school would be fun simply by telling her it would be so. This was a huge mistake. I’ve heard other parents having success with this method, but my daughter needed more. She needed to experience it for herself. Isn’t this true with all of us in both our business and personal lives. Perceptions are difficult to change, not impossible, but difficult.

What perceptions do you have that are hurting your business?

Me: A few months ago you made a decision to increase your prices and ramp up your marketing efforts. You did both of these things in a down economy in hopes of increasing sales and preventing layoffs. Most business can probably understand the logic of increasing marking efforts, but increasing prices, that was a very strategic decision. What steps did you take to implement those changes and how quickly did you see results?

Eric at Gnosis Arts: First we had a meeting with key staff to come up with a new pricing level. (The Business Development Manager, PR Manager, COO, and myself). We listened to each others arguments for or against.

Second, I trusted the judgment of Suzan Pleva, the business development manager. She has a background in sales. It was her idea to raise prices. She comes from a sales background, so her main argument was: “Listen, we have an excellent service, we dominate the market for it (Wikipedia writing services) – we can charge much higher for this and I believe customers will pay it because I believe in the service and I believe that I can convince them to believe in us.” Going through this process, I found that sometimes just doing market research and trying to figure out what the market will bear can leave you shortsighted.

Finally, we did some research and found that top freelance writers, e.g., those that wrote for pubs like the NY Times, etc – were commanding close to $100/hr for their writing services. We were initially charging $36. We felt it we had paid our dues, so to speak, and had delivered an outstanding service to many clients. In addition, we can arguable be considered authorities in the field of technical online writing – so we raised rates to $70/hr and we felt this was fair pricing for our customers.

Me: In the NYtimes.com video you mentioned that sometimes you have to take risks in order to find the reward. Other than your recent business decision to increase prices and marketing efforts, what risks have you taken in your business?

Eric at Gnosis Arts: Well, it was a risk to keep our two main staff – Suzan Pleva and Susan Marie Kovalinsky, even though we didn’t fully see how we were going to justify their wages. And I think anytime you hire someone, you take a bit of a risk. I’ve hired several people who turned out to cost the firm money in the end, and so I had to let them go. I think the key for an entrepreneur is not to take no risks at all, but to take calculated risks.

Me: Do you use your financial data to make decisions? If so, what data do you use? How does it help you make decisions in your business?

Eric at Gnosis Arts: I mainly use the P & L statement to make decisions. It tells me where we might be spending too much on certain services. It also shows me precisely how much we’re spending on staff wages – typically this will be your largest expense. Knowing that helps me with sales forecasting.

I am also a big proponent of using CPA (Cost Per Acquisition). We track our advertising spend and compare it with sales generated to determine the CPA ratio. For example, if I know that it costs $37 in ad spend to generate 1 Wikipedia customer, I can use this data to try to come up with creative ways to reduce that dollar amount. This type of information determines where we will advertise, which ad services we will use, and how much we will spend on advertising in a given month.

Me: What is one mistake business owners make when consider an online marketing strategy?

Eric at Gnosis Arts: One of the biggest mistakes is not getting your tracking right from the beginning. You need to be able to evaluate the effectiveness of a particular online marketing channel in terms of generating leads and sales. Without proper tracking mechanism, detailed web analytics, it is difficult to measure this.

Another mistake I see a lot is focusing too much on only one or two online channels. For example, some people only do social media. Others only do organic SEO. But to be really effective, an online marketing strategy should utilize several online channels, and try to create a synergy among them: email, PPC, online PR, mobile, social media, B2B/B2C freelance sites (e.g., craigslist, elance), etc.

A third common mistake is mistaking correlational data for causal data. For example, we consulted with a novelist who swore up and down that she generates tons of book sales from using Twitter alone. After drilling down into it a little deeper, however, the truth was only that people were purchasing her books elsewhere, and then later found her on twitter and commented that they liked this or that book. She was mistaking this for “Twitter generating the sales.” Though this is a simple example, there are many variations on this theme.

Me: What prompted you to start Gnosis Arts?

Originally, I had no intention of starting a business. I was just following after the things I was passionate about and enjoyed: Internet marketing, writing, music, multimedia. After it became apparent that I offered services that people really wanted and needed, I began seriously thinking about making Gnosis Arts a legitimate, profitable business in 2007. I suppose I wanted to do it, mainly just to see if I could. I didn’t even really think much about profit or prices. When I first began, we used to sell some services for $5! It gave me such a thrill, conceiving a service, doing market research, SEO-ing my website, negotiating a deal – that I decided to make it a business.

Me: Describe the services offered by Gnosis Arts.

Eric at Gnosis Arts:
Writing & Communications
• Wikipedia Writing
• Article Marketing
• News & Press Releases
• Writing Research Tools

Multimedia Web Promotion
• Audio/Video Web Applications
• Upload Photos/Videos
• Mobile Website Conversion
• Mobile Applications
• Chat Box Deployment

Internet Marketing
• Search Engine Optimization
• Submit A Free Press Release
• Get Our Latest Social Media Marketing eBook
• NEW! Twtsynd: Twitter Syndication Network

To learn more about Gnosis Arts visit their website. Follow Eric on Twitter at: @slashcareer.
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