High Quality Jobs

The following is a recent commentary by Montana CDC’s Risk Manager, Kaia Peterson

There’s a lot of talk this election year about creating jobs.  In this economy, it’s clearly an important topic – especially to those who are out of work.  But what many candidates aren’t talking about is the quality of jobs that need to be created.

At the Montana Community Development Corporation, there are a few core indicators that we look for in identifying a high quality job.  Number one is, of course, wage level.  Two is job security — are the jobs full-time and permanent?  And number three is employer provided benefits such as employer contributions to health insurance and retirement.  We also look for factors like work schedule flexibility, including sick leave and vacation time, and, finally, opportunities for training and advancement.

So how are jobs measuring up?  Over the past thirty years, the quality of jobs in the US has deteriorated steadily.  Both real wages and employer provided benefits have declined.  We see it with our clients’ businesses every day.  Instead of rising with the cost of living, wages have been stagnant or even lowered.  And employers who previously offered health care to their employees can no longer even afford to cover it for themselves.

When we look at wages what should our benchmark for quality be these days?  According to research from the Center for Economic and Policy Research more than one-fourth of jobs pay less than poverty level-wages – the amount that would allow a full-time year-round worker to lift a family of four out of poverty.  In 2011 poverty-level wages were about $22,000.  But that’s just enough to barely scrape by.

The organization Wider Opportunities for Women recently published their Basic Economic Security Tables or BEST, which factors in essentials like housing, food, transportation, and household items, but also health care, emergency savings, and retirement savings.  They calculated that in order for a family of four with two full time workers to cover these needs, they would need total annual earnings of  $68,000 per year, or $16 per hour per worker.  Even at this level the family would not be earning enough to save for their children’s higher education, or build assets toward home ownership. And, according to BEST, a whopping 45% of U.S. Residents live in households that don’t meet even this basic level of economic security. Do you?

And if you’re an employer, are you able to provide this level of wages to your employees? Statistics say probably not — at least not yet.  But, small businesses are known to be an important source of high quality job creation. They can provide wealth building opportunities for their owners, create more middle-income jobs and offer real opportunities for advancement.  As the businesses grow, their employees are able to grow with them.

Over the past two years, we’ve seen our clients struggle to keep their businesses viable and their employees on the job.  But they’ve done their best for the welfare of their employees.  Some have kept all of their staff but reduced their hours and are slowly building their employees back up to full time as their businesses turn around.  Others have stopped contributing to health insurance, but have maintained a group plan that provides better coverage at a lower cost than their employees would otherwise be able to access.  Some have also allowed for more flexible work schedules to accommodate other employment and family needs.

And these employers are being rewarded for their attention to their employees.  For example, I have a client who worked to keep all of her staff employed even as the business was struggling. When she honestly discussed the businesses’ financials with her employees, they all volunteered to donate the pay they would have received for employee training hours to a fund to save money to purchase new equipment for the business.  This employer and these employees alike are working toward a more stable business with stable, high quality jobs.

As we move deeper into election season and the debates about the economy continue, I hope to hear more frank discussions about the metrics that ensure quality as well as quantity of work.  And I hope that these conversations aren’t limited to the political arena, but are taken up at board meetings, staff meetings, and lunch rooms across Montana.  As our economy changes, we need to keep our eye on what we want out of our working lives, now and in the coming decades.  By all means let’s figure out how to create more jobs, but let’s also remember the ultimate goal — to create better lives.

Don’t Go It Alone

Hi, I’m Amita Greer.  For the last three years, I’ve worked as a business advisor for Montana Community Development Corporation.  We provide free consulting to entrepreneurs throughout Montana.  We work with everyone from startups to established businesses and from tiny one-person companies to more substantial small companies.  But no matter the size or shape of the business, all successful entrepreneurs have one thing in common:  they know when to ask for help.

There is a great myth out there about entrepreneurs.  We think of them as solitary go-getters who can manage operations, do their books, create a vision, uphold a mission, increase sales, make the widgets, manage employees, and market the company all by themselves.  We assume that they are supernatural loners who enjoy working at all hours, creating in their garage, and finding success through sheer determination, steely will, and lots and lots of exhausting work.  While the hard work part is definitely true, the most successful entrepreneurs I know don’t go it alone – at least not completely.

According to a study done by the Kauffman Foundation in 2009 that surveyed 549 small businesses that made it past the startup stage, 73% of the business owners said professional networks were important to the success of their business. I’m not surprised by this statistic.

The most successful entrepreneurs I’ve seen through Montana CDC are the ones constantly asking questions about their markets, industry, and how they can improve their business.  They know their own weaknesses and try to mange for it. If they don’t know how to read their financials or understand social media networking, they go out and ask for help. They may eventually outsource some parts of their business because they know they can’t do everything. These successful entrepreneurs ask for help because they know they can’t do it all and that they are not the best at everything.

Still, many entrepreneurs do have a hard time admitting they need help. Asking for assistance is difficult for many of us. We pride ourselves on our individuality and some view asking for help as a weakness. For many people, it never occurs to them to even reach out and ask questions.  

I’ve worked with entrepreneurs who were embarrassed to submit their business plan for review because they were asking for feedback. I’ve had small business owners on the verge of closing their doors because they came in too late to make any significant changes – all because they did not want to ask for help. 

I’ve heard lots of reasons:

“I’m a private person and don’t feel comfortable having someone else looking at my business.”

“I have a great business idea and I don’t want anyone to steal it.”

“It will cost too much to hire someone to help me.”

Or the two most dangerous ones:

“Nobody can help me.  Only I understand what needs to be done.”

And

“I’m just too busy to even talk to anyone.”

But, if an entrepreneur is truly going to grow a business, he or she must learn that they can’t go it alone. Many successful entrepreneurs have mentors, coaches, or an advisory council that can provide valuable feedback. The hardest and probably most rewarding thing is to be open, honest and willing to receive criticism.

So, who do you ask for help?

Advisors can come in many forms. Attend networking groups. Contact other business owners in the area or in your industry. Attend a business training or conference and talk to other owners and professionals. Go online to find business contacts and call them. Seek out those smarter than you and make the ask.

It’s also important to know when to ask for help.

Ask for help when you see a negative trend in your business. Bring in someone to help provide a different perspective and strategize on solutions. One of the biggest mistakes a business owner makes is waiting too long before seeking to make a change.

Ask for help when you need an expert. Perhaps you need to do a website or learn a software program. Maybe you want to learn how to increase sales through social media but don’t know how. You will save time and money in the long run if you work with an expert rather than trying to figure it out yourself.

Finally, ask for help when you need new ideas. Things constantly change in the business world. Having contacts in different industries can provide you with new insights that you may never have seen by yourself.

None of us have answers all the time. As entrepreneurs, it’s important to remember that going out on your own does not literally mean always working alone. Be open to advice, ideas, and new ways of doing things. Hire people that can do things better than you can.  Find others who you can talk to, share experiences with, and just plain commiserate with. 

Being an entrepreneur is tough. 

Don’t go it alone.

For more Business Resources from Montana CDC, review our business tools here.

Business Success Kit

Resolutions: Healthy Finances for 2012

The following is a presentation that Montana CDC’s Business Services Advisor, Patty Cox, provided to the Missoula Women’s Business Network on January 11, 2012.  This information is meant to provide helpful tips and insight on getting your business financials in order for the New Year.  In addition to serving Montana CDC’s clients, Patty runs a small catering company called Patty’s Pantry.

Patty enjoying putting an order together for Patty's Pantry

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Thinking about fiscal responsibility in January is a good strategy for personal and business financial health.  Experience has shown me that careful planning in January and regular monitoring throughout the year is the best way to keep your business and personal finances in the pink.

Here are few helpful tips.

• Set your projections/plan your budget
• Take a look at your historical financials and project income and expenses for the next year.  Putting together a budget for your business or personal finances may seem like a painful process, but in the end you will be more confident on where you can go with your business and how to manage your finances, rather than letting your finances manage you.
• Make sure when you set your budgets that you include line items for the fun or worthwhile stuff–such as donating back to your community or for staff recognitions.   These line items need to match the profitability of your company, but know that they can go a long way to increase your outreach and customer base.   One thing I do is donate gift certificates for my services to a variety of auctions.   Through these donations, I have increased awareness of my personal chef services and gained new customers.   By setting budgets for the fun stuff you know how much you can give—so your bottom line doesn’t suffer if you have a big heart.
• My next tip is to understand your cost of sales.  For businesses, it is important to budget your expenses, but also to understand sales goals and cost of goods sold.    Cost of goods sold or COGS refers to the inventory costs of those goods a business has sold during a particular period.  Cost of goods made by the business includes material, labor, and allocated overhead. For example, if I make pot pies, I have to understand the cost of my labor, the cost of the ingredients, and some overhead costs related to the product.   Looking back over my historical financials and understanding COGS gives me an idea of how much to charge for my products to meet my sales and profit goals.
• Price it right.   Don’t under price your product or service.  Remember to consider the COGs when setting the pricing.   This is not just the cost of inventory but also can include labor costs, and overhead.    There are many pricing strategies for businesses, but one component for pricing is to understand your margin.   Calculate your profit margin, or revenues divided by expenses, and use it as an indicator of your pricing strategies as the profit margin should remain consistent among your products or services.
• Be curious–Review your financials monthly.  Most importantly, review your financials monthly to see how your actual financials track with your projections. If sales or profitability are coming in off your projections, make adjustments as needed.   Keeping track of your profit margin will help you measure how well your company controls its costs.  If your margins are low or if you find yourself consistently losing money on a certain product line or service, take it out of the mix, or investigate why this is not working for you.   In my business, my biggest seller was turkey pot pie, but I never found I made enough profit on this item.  When I checked into my numbers, I realized that this product required more labor and had higher priced ingredients.    I switched from turkey to chicken (which has a lower price point) and the margin for my pot pies improved.

Now that you are ready to tackle your finances in 2012, be sure to mark your calendars, so that next year you can start your planning in November or December to get a jump start on 2013!

Keep your Holiday Cash in your Community

From “Occupy Wallstreet to “Liberate Mainstreet” people are talking about the importance of supporting America’s small businesses.

Occupy Wallstreet is a protest against the inequality of wealth in the country where activists attribute the stagnation of the average person’s wealth to the concentration of profits in large corporations and wealthy individuals. The 99% makes reference to discrepancies in income, wealth or political powers between the elite, and the remaining 1% of America.

“Occupy Mainstreet” or “liberate mainstreet”, claims small business owners should be liberated from unnecessary regulation from government. While some characterize these two movements as being on opposite ends of the spectrum, they really share many of the same goals.

What Occupy Mainstreet and Occupy Wallstreet have in common is a desire to help the little guy – the average Joe – the mom-and-pop store. People in both camps value the unique contributions that small business owners bring to their community, not just in terms of jobs, but in terms of culture and character. Nowhere is this more true than in small communities across Montana.

One group of Mainstreet supporters have started a movement this holiday season, called “Shift your Shopping.” The “Shift “ campaign which represents more than 38,000 locally owned and independent businesses across the U.S. and Canada is designed to boost the economy and preserve and create jobs in local communities.

The idea is simple – shift your shopping – at least some – to local independent businesses rather than feeding holiday dollars to national chains and corporations. Since Americans do a large portion of their annual retail shopping between Thanksgiving and Christmas – about $700 – per shopper – this is a time of year that your dollars can really do your talking.

Studies show that dollars spent at locally owned businesses generate far more economic benefits for local communities than money spent at national chain stores with corporate headquarters outside the community. The numbers differ from study to study but in general, dollars spent at local shops generate about 20% more revenue for the local economy than the same dollars spent at a chain store.

Local storefronts in Downtown Missoula, Montana

Here’s why: Independent local businesses use a wide array of local supporting services. They hire local architects, engineers, and contractors for construction. They use local accountants, insurance brokers, consultants, and attorneys. They buy products from local office supply stores, grocery stores and other retailers. Local businesses also tend to build strong neighborhoods by sustaining communities, linking neighborhoods and supporting local events. Look at Missoula’s Higgins Ave hip strip as a great example as they host an annual block party and support local events through sponsorship dollars.

There’s a place in our communities for both small and big business. Both serve their functions. But in a tight economy it’s easy to be swayed by the lowest priced goods or the glossy advertising. But the true price of using the lowest priced seller for all of our purchases should not be overlooked.

If we forgo buying from local retailers, they cannot survive. If we lose our local retailers, we lose our unique downtowns, the economic ripple effect that local businesses have on the overall economic health of our communities, we lose choice and diversity as shoppers. Our loss is big businesses gain. And it’s this disparity between corporate wealth and mainstreet health that has so many people concerned.

So if you consider yourself in the 99%, but you are not quite ready to pitch your tent on the courthouse lawn, or if liberating mainstreet is more your cause, you can make a difference this holiday season by shopping at local retailers.

Julie Ehlers, Marketing Manager with Montana CDC

Show Me the Money: How to Choose an Electronic Payment Provider

One of the many things new businesses need to think about is how they will accept payment for their goods and services.  Cash is good, right?  But you will need to go further.  Making your customer transactions quick and convenient is key to gaining and retaining customers.

We asked one of our Small Business Development Center (SBDC) sponsors,Big Sky Commerce, to talk about when a business should start thinking about purchasing a point of sale or credit card system and the basics of installing one. Big Sky Commerce has consulted with small and large businesses across the country regarding their merchant accounts since 2003.

Here’s what they had to say:

A critical component for every business is the ability to accept payments.  After all, a business cannot sustain itself without revenue.  By accepting electronic payments, in addition to traditional cash and checks, your business can actually increase revenue due to the added convenience and efficiencies.  So how do you best begin the process of accepting electronic payments for your business?

It’s easy to find a myriad of Merchant Service Providers eager to activate a merchant account for your business.  Be prudent when selecting your provider, and make sure you’ve done your research.  Ask three of your business neighbors if they can refer a provider, and read some online reviews (perhaps BBB or Merchant Maverick) prior to signing a contract.  Will your provider be available to explain fees as they appear on your monthly processing statements, rather than just relying on the fee structure (which can and often does change) as disclosed on your original merchant agreement?  Is the provider able to consult with you regarding important industry trends, i.e. the 2011 Durbin Act, PCI Compliance, new IRS regulations, that impact your business directly? In a nut shell, ask good questions and read the fine print to ensure you’re choosing the right Merchant Service Provider.  This single choice may have a significant impact on your bottom line, and your peace of mind.

The team at Big Sky Commerce in Missoula

Entrepreneurs: “Don’t Fear Failure So Much That You Refuse to Try New Things”

If you listen to the experts, starting a small business is up there with base jumping and shark diving in terms of risky activities best avoided. Mention entrepreneurship to an MBA student and you will likely be reminded that 80% of small businesses fail within the first five years. While the exact failure rate is hotly contested, most experts do agree that of all small businesses started, a mere 1/3 make a profit.

Dwayne and Darryl Heap figured out how to work together as entrepreneurs and brothers, and now run the successful cheese manufacturing company in Bozeman: Vintage Cheese Montana.

As the business advisor for the Park and Gallatin County Small Business Development Center, I have worked with many of these fortunate 1/3.  I have also worked with the other 2/3 of entrepreneurs who have yet to make a dollar. My experience with the latter and having been raised in a family of avid entrepreneurs in South Dakota have given me a special appreciation and even admiration for entrepreneurs. It’s motivating and energizing to work with individuals who are so utterly committed to seeing their business succeed that they are willing to make great personal and financial sacrifices in the short term because they are confident that the ends will justify the means. It’s for this reason that I disagree with those who smother the entrepreneurial spirit when they maintain that it’s just not worth the risk. Given the impact of small businesses on our economy, this is too costly of a position to maintain. After all, the latest figures show that small businesses create 75% of all new jobs in our economy.

Now don’t get me wrong, determining whether or not to open a business should not be a laissez faire decision. Small business owners must wear many different hats every day just to keep their doors open. They must be an expert in all areas of the business including but not limited to sales, marketing, and advertising executive; accountant; lawyer; business planner; bill collector; market researcher; and technology expert. Furthermore, starting out on your own exposes oneself to considerable financial risk.

Despite the looming threat of the ominous double dip and as consumer confidence continues to fall, now is a great time to start a business. Here is why:

• Suppliers and manufacturers are hurting in tough times like these, and businesses that would have previously ignored the “small guys” are welcoming every order they can get
• The competition is cutting back: large companies are slashing their marketing especially to “smaller” customers who might just be great customers for you
• When the economy improves, you will have your systems in place and business built up, so you can capitalize on new opportunities

So if you’ve been kicking around the idea of starting your own small business I say take the next step. Seek free guidance by contacting your local Small Business Development Center or find a mentor in the business community. Work with him or her to see if there is an opportunity in the marketplace for your idea. After all, the rewards for small business owners are vast and transcend personal financial gain. The ability to create jobs and to make a difference to another person’s life is the ability to make an immediate and profound impact in a community. So yeah, go for it, because as the elegant business author Louis Boone once famously said, “Don’t fear failure so much that you refuse to try new things. For the saddest summary of a life is contained in three descriptions: could have, might have, and should have.”

Ryan Hansen, SBDC Business Advisor for the Montana Community Development Corporation in Bozeman.

Gratification Achieved: The Pleasures of Running a Small Business

MCDC President Dave Glaser

It isn’t easy running a small business.  In fact, next to parenting (twins!), it is the toughest job I have ever had.  I have now had the pleasure of running two small businesses (MCDC included) and working in a whole lot more.  The roller coaster of joy and frustration on a day-to-day basis is exactly what keeps me coming back.  The ability, everyday, to make a difference for your customers and your company is just the kind of instant gratification that I need to keep me happy at work.

I have worked for large corporations and it doesn’t even compare to the day to day fun of being “in it” when working in small business.  This is why I LOVE what I do – everyday I get the pleasure of doing nothing but helping businesses across the state of Montana get it done.  Montanans are unique, they are the most resilient and “can do” people I have ever met – and I have lived all over the world and the American West.

It is a privilege to spend my days serving the entrepreneurs of this state.

Thanks for that opportunity.

Dave Glaser, MCDC President