Ray Silverstein, The Best Secrets of Great Small Businesses.
Dollar Days Blog is pleased to present the business expertise of Ray Silverstein, author of The Best Secrets of Great Small Businesses. Silverstein has also written a new book called The Small Business Survival Guide: How to Survive (and Thrive) During Tough Times.
Silverstein also founded PRO: President’s Resource Organization, a network of peer advisory boards for entrepreneurs. As the founder of PRO, Silverstein has facilitated more than 1,200 “board meetings” over the last 16 years.
Dollar Days Blog (DDB) – Please provide a short bio and description of PRO.
Ray Silverstein – I created PRO in 1993 based on my success participating in peer advisory boards for larger companies. I wanted to help companies in the critical transition stage of doing to managing.
PRO provides the venue for small business executives to obtain the experience, insight, imagination and critique of experienced small business leaders. A monthly meeting with an experienced business facilitator and business leaders concentrates on issues of concern to the attendees in running a business on a daily basis. Emphasis is placed on working on the business and not only in the business. The discussion is candid and a camaraderie is created between the participants to help each other. Survival and success are critical items of interest to peer advisory board members.
DDB – What are some of the key messages in your new book “The Small Business Survival Guide?”
Silverstein - Cash is King. If a company is in a survival mode the outlook is very short term. No survival, no long term. Survival requires the business owner to take action they ordinarily do not want to take, but must if they want to stay in business. This may mean cut back of personnel, and only the best should be kept.
Management should have a complete understanding of break-even and the expenses that are necessary at break-even. This means an understanding of the different type of expenses involved in operating the business.
Remember that tough economic times are also opportunities. If a company is not in a survival mode this is a great time to improve personnel, market position and take advantage of situations.
DDB – How can profit and loss statements mislead you about the financial health of your organization and how can you protect yourself by projecting cash flow needs?
Silverstein – Again, the important point to remember is that cash is king. A company can make a profit and have cash go south due to increases in inventory, fixed assets, and accounts receivable. Not being able to pay vendors, financial institutions, or employees due to lack of money will put you out of business.
Financial institutions like positive cash flow and collateral. If you are in a service business, there is usually a lack of salable fixed assets. Therefore, no collateral to support loans. Therefore, only the cash flow of the business will support its ongoing activity.
DDB – You’ve suggested companies can write a ‘love poem’ to their customers to get to the front of the receivables line on collections. Are you being serious?
Silverstein – The goal is to create a relationship and differentiate yourself from others, with the accounts payable people. Everyone gets tired of being badgered for payment and may look with favor to someone who takes a different tack. This method has worked and was suggested by a PRO member. But of course a company can always take the “hard” line.
DDB – What is the best way to tell your banker if your business is in trouble – while still preserving a good business relationship?
Silverstein – A banking relationship is built on trust. You are better off being upfront and preserving the relationship. Bankers are more apt to work with those they trust.
But just saying you are having trouble is not enough. You must also propose an action plan that will resolve the situation. The plan must not be vague, but as objective objective and quantitative as possible. You should also try to have measurable goals you will achieve, even if it is still a loss. The bank will want to know when you expect to have positive cash flow.
DDB – What are some of the most exciting opportunities that the recession and general economic turmoil offers for small business owners?
Silverstein – The biggest asset a business has are its people. There are a lot of great people who are looking for work. Now is a time to upgrade your people. Companies that have the cash and fortitude are in a great position to enhance market share. In tough times, most companies cut back on marketing, but studies show that the companies that market now will grow faster after the economy turns around.
Times like these make businesses examine what they are doing and eliminate bad habits. This is a great opportunity to look at what your business is and more importantly, what your business should be. Then create the strategies to get where you need to be.
Does any of Silverstein’s advice ring true based on your own business experiences? Share your thoughts and contribute to the discussion in the Comments section below!