Money Lessons from a Chinese Entrepreneur Friend

Entrepreneurs should never give up due to failure. Not just entrepreneurs, but people of whatever profession -all of us -should learn from our setbacks. We should never surrender to despair. ~Lucio Tan, a Chinese-Filipino Tycoon and one among Forbes.com List of World Billionaires for 2008

In my first attempt as an entrepreneur, I was a miserable failure. I ended up owing a lot of money from my suppliers and my business credibility was ruined. I never thought that I would be able to get out of that rut. Some of my colleagues said that the business was started on a bad timing (during the Asian economic flu). I belittled their comment because on the first year, I was doubling my net income every other month. It was not the timing nor the economic climate -I failed to manage my business’ finances correctly. In fact, my Chinese entrepreneur friend already forewarned me about this.

Money Lessons in Small Business

Unlike me, my friend was born with a silver spoon in his mouth. He’s a COO. Nah, not the corporate COO (Chief Operating Officer). He was the ‘COO’ (Child Of the Owner ^_^ ) . I used to work for his dad,while he was the EVP (Executive Vice President) then. I left them when I decided to put my own small business. When I told him about my plans, he shared to me the following basic money management principles in entrepreneurship that I should religiously adhere to:

1. Never spend the money that you have not earned (or collected) yet;

2. Never hire people to replace the job you are doing so well unless your business has outgrown you;

3. lastly, pay yourself first.

Business Success and Failure

My business success on the first year was phenomenal. I exceeded my target revenue. But at the same time, I somehow ignored the wisdom of those three money management advices. I started using the money that I have not collected yet, with optimism (actually, more like a 'presumption') that sales turnover will continue to double every other month. I hired people who are not delivering my expectations. They were not doing the jobs I delegated them, especially the sales and marketing. Lastly, I never paid myself. I rolled out all the income I generated and only kept what I really needed. As you can see, those were the perfect ingredients for ‘business failure recipe.’

I learned my lessons the hard (other) way.

What is our take?

When business is failing, or when our finances are drained, we tend to blame everything on the bad economy, without looking inwardly on a personal or corporate level. I believe, and as some economists do, that the collapse of some of the great financial institutions of Wall Street and big U.S. auto manufacturers were not due to the economic downturn but of mismanagement. Similarly, those of us who are greatly affected are partly to be blamed. We enjoyed so much pursuing the American dream during the good times and so were caught unprepared when the economy went sour. Good times never last.

Now, more and more employees (those that are still employed) are seeking their own bailout through loans. I cannot blame them. It is easier, faster, and convenient. By comparison, saving and paying yourself first is painful and takes a lot of discipline. I know that a quick loan is badly needed –these are really crunch times. Nonetheless, whether you are an entrepreneur or an employee, it is always to your advantage if you live within your means, spend less and save more. I know, as history shows, good times will return soon. This economy will bounce back; and those who are resilient today, will enjoy it more .

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About the Author

Nor Franco is the Managing Director and Virtual CEO of nextManager.net. He's a former corporate executive whose passion is bringing out the full potential of HR in Businesses. This time that passion is pursued through Virtual Management. He writes and blogs about his management views and insights here. Follow him on Twitter.

Protect your Investment with Small Business Security Systems

Small Business Defined

Defining what constitutes a small business has always been an issue. In this blog, I have more often referred to small businesses whenever I am addressing a relevant issue to distinguish them from larger corporations.

An organization that employed less than 100, a company that has more than $500k in annual sales revenue, a retail store or pharmacy, managed by the business owner itself, smaller relative to its target market –are but among the many attempted definitions being offered. In fact, even the U.S. SBA (Small Business Administration) has to set variables and other parameters to classify a business ‘small’ in nature.

Why wrestle with the definition anyway? Why now?

Because, it must be settled that there is no single authoritative definition for a small business. Ironic though, at least for now, we settle for an ambiguous definition, that is, a business that is independently owned and managed by its owner/s, with a fewer employees (or sometimes none) and relatively low volume of sales. Let that suffice for now, and at least when I discuss issues here that are relevant to small business.

Protecting your Small Business Investment

Here, let me be clear that I am referring to your factory, office (home or otherwise), warehouse (supply and product inventory, and equipment. These are, basically, the tools of your trade -and where you tied-up more of your money. It is but fitting then to safeguard these investments.

Basic small business management does not only involve managing your operations, people, finances, sales and marketing, but protecting your properties as well. Small business security is essential to your continued viability. More often, we tend to overlook this. Whether you are a retail store owner or a freelancer like me (with one staff employee), regardless of the size and nature of your business, you need to ensure that your offices and other properties are secured from common burglary and fire.

You might want to get an online analysis and recommendation through ADT Security Systems advisor to determine your requirements and the appropriate security system to install. This is one of the investments you must make. Do not put it off. By the way, ADT offers security solutions targeted specifically for small businesses. They can monitor and protect your business 24-7.

Our take on this: While I am aware that these are crunch times for small business owners, however, the cost of installing reliable security and fire alarm systems is too small to make compared to the possible losses you may incurred due burglaries and fire. Besides, as they say, “better safe than sorry!”

WHAT'S NEXT? Get your updates by emailor via RSS.Follow us on Twitteror like us on Facebook. Visit ourFREE Business Resourcespage.

About the Author

Nor Franco is the Managing Director and Virtual CEO of nextManager.net. He's a former corporate executive whose passion is bringing out the full potential of HR in Businesses. This time that passion is pursued through Virtual Management. He writes and blogs about his management views and insights here. Follow him on Twitter.

Using Balanced Scorecard in HR Management

Business Reactions from the Recession

Each time I read my morning paper or turn on the evening news, the headlines contain stories on how the economic pandemic has been wreaking financial havoc on the lives of businesses and employees alike. And lately, I often hear my clients talk of cost-cutting measures, retrenchment, downsizing or streamlining, imminent bankruptcy, deferment of suppliers’ payment, and avoid foreclosure. These are but natural reactions. A financial crisis with a magnitude like this, any business owner would worry. When a business is threatened by circumstances beyond its control, the most practical thing to do is preserve its viability or profitability at all costs.

However, if we take these knee-jerk reactions, are we not simply allowing this crisis to hasten the demise of our businesses, and let our employees take the brunt of it all? It is lamentable to think that each time the business suffer losses, employees find themselves jobless. This could be prevented.

Employees' compensation and benefits does not account for the majority of the operational expenses (as most finance managers would present in corporate meetings). Competent and loyal employees are assets that needed to be protected and nurtured because they help the bottom line.

Have you even considered looking at your recession scorecard? There is a better remedy to this crisis without necessarily laying-off employees. Use better and accurate performance management systems that will monitor and manage your business KPIs (Key Performance Indicators) by using Balanced Scorecard or BSC. This way, you can better formulate corporate strategies that will shelter you from the effects of the economic downturn.

Balanced Scorecard: A Performance Management Alternative

The Balanced Scorecard gives CEOs, business owners, and managers an indication of the performance of a business organization based on the degree to which various stakeholder needs are satisfied; it presents the organization from the perspective of internal and external customers, employees, and shareholders.

Robert S. Kaplan and David P. Norton, among the proponents of these strategic concepts, give a better definition:

"Balanced scorecard provides managers with the instrumentation they need to navigate to future competitive success. Today, organizations are competing in complex environments so that an accurate understanding of their goals and the methods for attaining those goals is vital. Balance scorecard translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system. It retains an emphasis on achieving financial objective but also includes the performance drivers of these financial objectives. The scorecard measures organizational performance across four balanced perspectives: financial, customers, internal business processes, and learning and growth. It enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for future growth." (The Balanced Score Card: Translating Strategy into Action, pp. 1-3)

Why is Balanced Scorecard Important for Businesses, especially during a financial crisis?

The Balanced Scorecard is important because it brings together most of the features that a company needs to focus on to be competitive. These include being customer-focused, improving quality, emphasizing teamwork, reducing new product and service development times, and managing for the long term.

The Balanced Scorecard differs from the traditional measures of company performance by emphasizing that the critical indicators chosen are based on the organization's business strategy and competitive demands. Organizations need to customize their balanced scorecards based on different market situations, products, competitive environments, including the current state of the global economy. In this respect, recession KPI should have been formulated and established with the aid of downturn metrics provided by AKS-Labs (Developer of Balanced Scorecard Designer).

Balanced Scorecard is also an excellent crisis management tool for organizations who have EMS (Environmental Management Systems) and OSHAS (Occupational Health and Safety Administration Standards) certifications. BSC is an excellent tool for monitoring and auditing compliance to those standards.

Balanced Scorecard in HR Management

Effective roll out and implementation of Balanced Scorecard can only be made if the organization is able to cascade its mechanics, importance, and objectives to the employees. Therefore, doing, this will give them a concrete framework that helps them see the goals and strategies of the organizations, how these goals and strategies are measured, and how they influenced the critical KPIs. The HRM department should be in the forefront in this respect, and in providing the necessary training or orientation.

Moreover, the Balanced Scorecard should be used to link HRM activities with the organization’s strategy and evaluate the extent to which its functions add value to business strategies and goals. Measure of HRM practices primarily relate to productivity, people, and process. Productivity measures involve determining output per employee (such as revenue per employee). Measuring people includes assessing employees' behavior, attitudes, skills, and/or knowledge. While process measures focus on assessing employees' satisfaction with how the organization compensate, reward, and develop them so that they continue to add value to organizational competitiveness as a whole.

Conclusion: Benefits of Balanced Scorecard in HRM

1. Using BSC or Balanced Scorecard in performance management is actually a holistic approach; because it does not leave any key functional area in the organization unturned. Also, because it focuses on the most essential things needed to produce the maximum results. It actually follows closely the Pareto Principle, where 80% of productive organizational performance comes from focusing on the 20% most important KPIs.
2. BSC links organizational units into a more cohesive entity towards a common goal while they continue to strive to meet their own personal and departmental goals. More so, with BSC, individual performance is tied-up with departmental performance. Each member’s goals and performance is integrated with that of the unit or department. This is where the principle of the sum of the parts is greater than the whole. In short, BSC impels employees to synergize.
3. Lastly, the best part of implementing BSC is you get the results of what you measure; because Balanced Scorecard enables the organization to link its performance measures with its business strategies and goals.

WHAT'S NEXT? Get your updates by emailor via RSS.Follow us on Twitteror like us on Facebook. Visit ourFREE Business Resourcespage.

About the Author

Nor Franco is the Managing Director and Virtual CEO of nextManager.net. He's a former corporate executive whose passion is bringing out the full potential of HR in Businesses. This time that passion is pursued through Virtual Management. He writes and blogs about his management views and insights here. Follow him on Twitter.