The Chairman's Blog: Americans Can’t Handle the Truth

The Chairman's Blog: Gallup:

David Stockman’s new book, The Great Deformation: The Corruption of Capitalism in America, is getting a lot of attention these days....

united states currency eye- IMG_7364_web (Photo credit: kevindean)

Stockman, President Ronald Reagan’s first budget director, confronts us head-on with blunt truths we simply can’t handle. He argues that our current economy -- and recent prosperity -- aren’t real. Instead, they’ve been fueled by a series of artificial bubbles created by runaway deficit spending and reckless money-printing at the Federal Reserve. This is all going to lead to an epic crash, Stockman predicts, and next time around, there won’t be any bailouts.

I hate to say it, but most of us would rather the president and our representatives in Congress don’t cause us any pain. ... We elect our officials to create no discomfort for us, and they deliver.

Inspired by Stockman’s blunt assessment, I’d like to focus on three areas where all of us -- the White House, Congress, and citizens, too -- need a heavy dose of truth-telling: the unemployment rate, the unsustainability of healthcare, and the reality of America’s economic growth.

English: United States mean duration of unemployment 1948-2010. Data source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average (Mean) Duration of Unemployment [UEMPMEAN] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed August 14, 2010. (Photo credit: Wikipedia)

The unemployment rate in the U.S. is stagnant at best. Yes, the U.S. Department of Labor says the rate has dropped from 7.8% to 7.6%, but it’s actually frozen when you apply a more accurate measure. In simple terms, the Bureau of Labor Statistics’ survey of 60,000 households per month doesn’t count you as “unemployed” unless you looked for a job in the past four weeks.

I think it’s better to turn the number upside down and ask, “What percentage of the population does have a good job?” According to Gallup’s monthly payroll to population (P2P) survey of 30,000 adults, the employment situation has failed to improve recently and has remained relatively little changed year-over-year. Workers haven’t found the full-time jobs they’ve been seeking, and the labor force and unadjusted unemployment rates are flat.

Healthcare costs are out of control. We must confront this problem now... At $2.5 trillion annually, the U.S. healthcare tab is ... nearly two times the whole Russian economy. It’s also roughly twice the size of the whole Indian economy, and India has a billion-plus population.

The fact is, healthcare is breaking America faster than Social Security and other pension benefits. And healthcare is growing at an average of 6% per year, which means the new costs over the next decade will be a staggering $10 trillion over and above where we currently are.

Components of economic growth (Saari 2006) (Photo credit: Wikipedia)

We need authentic economic growth. While I agree with Stockman that the current booming stock market is an illusion driven by money-printing and deficit spending -- ... many of his solutions are more political in nature: ... I have a more straightforward fix: Restore and encourage the spirit of American free enterprise. ...

Chart of economic growth; from spreadsheet (Photo credit: Wikipedia)

Whatever anyone in the White House or on Wall Street says, don’t forget that our economy is currently growing at a pathetic 1%, where we need a minimum of 2.5% GDP growth just to tread water, in my view. ... I think we need GDP growth of about 4.5% to get the economy humming again. We’re not going to get there with more deficit spending and with the Federal Reserve handing out more free money to investors.

What will get us to authentic economic growth and job creation is for federal, state, and local governments to do everything in their power to help America’s 6 million small businesses succeed. That means restoring their confidence in the future -- 30% of small-business owners are worried they may not be in business in 12 months, according to a Wells Fargo/Gallup Small Business Index survey -- and removing any barriers they may face. What most people probably don’t know is that small businesses -- not large enterprises -- create most of the good jobs in America.

Maybe Stockman’s political reforms are the right way to go, but whatever the case, I think that restoring the spirit of robust, free-market capitalism will cure most of our ills and put the country on a sustainable path for the future.

But first, we need to start telling ourselves the truth about what really drives prosperity and what’s just an illusion. David Stockman has done us all a favor by getting us to confront reality. Of course, I actually do recommend his book.

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Business Valuation: Key Questions to Ask

By some estimates, roughly 80% of a typical small business owner’s net worth is tied up in her company. Yet, according to experts, most entrepreneurs have not taken the time to formally value their companies.

Financial Planning:

BY: ANN MARSH

FINANCIAL PLANNING

THURSDAY, FEBRUARY 21, 2013

“The value is the amount your business would be worth if you were to sell it to a third party,” says Mark Tepper, the president of Strategic Wealth Partners in Seven Hills, Ohio. Tepper, who specializes in working with small business owners, has devised a multi-step process for doing back-of-the-envelope valuations for his clients.“We put the valuations together as part of our wealth management package,” he says.

English: Figure 13: Break even of costs and revenues; new investment. Belongs to The Organic Business Guide. (Photo credit: Wikipedia)

Given that certified valuations cost between $5,000 and $20,000, Tepper says, many of his clients prefer to use his process at first before making the larger investment. Although he warns that his line of questioning offers only a rough number, he says it can still give clients a preliminary way of thinking about their assets' value. “These are not certified valuations,” he cautions. “You can’t take these to IRS court and challenge a gift tax or estate tax ruling. But we can turn [them ]into a certified valuation in roughly a week’s time” if necessary, he adds.

As part of the process, he says, he asks his clients the following eight questions:

1. Can the company stand on its own two feet and operate independently of the owner?

“A good litmus test is if you don’t have the ability to take a month-long vacation from the business, and shut down email and phone communication for that month, then the business is not independent of you,” according to Tepper. “No acquiring buyer is interested in buying a job. They want to buy an investment.”

2. Does the company have a stable and motivated management team?

“Those are really the biggest assets in an acquisition,” Tepper says. “We want to make sure [the management team] will stick around post sale." To ensure this happens, he says, owners should have some sort of non-qualified deferred compensation in place: Valuable team members "should want to continue working so that their account will vest every single year,” he explains.

3. Are there operating systems in place that can improve the sustainability of cash flows?

To make sure a company is a well-oiled machine, Tepper says, there should be a how-to manual -- so that when somebody acquires the venture, they don’t have to learn everything from scratch. “This also helps to protect you when employees leave,” he says, “even if it’s just a receptionist.”

4. Is there a diversified customer base?

“You don’t want to generate 70% of your revenues from one big company,” he says, “because if they leave, you are out of business.”

5. Are there recurring revenues?

“The greater percentage of your revenues that are recurring, the greater the multiple that you will attract” when selling the firm, Tepper says. Firms are typically sold as a multiple of revenues, such as 10 times earnings or total revenues. “This would be something like a cell phone contract,” he says, “not like buying toothpaste. You want sales on a subscription or contractual basis. The acquiring owner would expect those revenues to continue.”

6. Are the financial statements easy to understand?

Buyers want to make sure your client is not running a lot of lifestyle expenses  -- such as cars, vacations or country club memberships -- through the company. Those would make the company’s tax profile look better than it is in reality, Tepper says.

7. Is the appearance of the facility consistent with the asking price?

There can’t be broken windows or unkempt grounds at  $10 million asking price, Tepper says.

8. Is the cash flow not only good, but improving?

A buyer wants to know he is getting an asset that promises to increase in value, he adds.

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• Making Your Business Saleable

Health care reform: What do business owners need to know?

Greensboro - The Business Journal

by Catherine Carlock

Special Reports/Publications Writer

Date: Friday, August 10, 2012, 2:55pm EDT - Last Modified: Friday, August 10, 2012, 3:05pm EDT

Katie Arcieri/The Business Journal

The panelists who spoke at The Business Journal's health care reform discussion, from left to right: Allyson Labban, an attorney with Smith Moore Leatherwood’s health care practice group; Dr. Grace Terrell, president and CEO of Cornerstone Health Care; and Todd Yates, managing partner of employee benefits services firm Hill, Chesson & Woody.

The Supreme Court’s decision to uphold the Affordable Care Act has left many employers with a lot of questions about health care reform.

Maximum Out-of-Pocket Premium Payments Under PPACA (Photo credit: Wikipedia)

The legislation itself provides a framework but gives little guidance as to the implementation of its requirements.

So just what do employers need to know? The Business Journal brought together experts to help answer that question Friday morning at the Airport Marriott in Greensboro.

The panelists were Allyson Labban, an attorney with Smith Moore Leatherwood’s health care practice group; Dr. Grace Terrell, president and CEO of Cornerstone Health Care; and Todd Yates, managing partner of employee benefits services firm Hill, Chesson & Woody. …

… Here’s some of what was discussed:

• What’s the date I need to know? 2014. That's when both the employer and individual mandate will take effect.

Health care systems and universal health care (Photo credit: Wikipedia)

• What’s the threshold? Employers with 50 or more employees will be required to provide health insurance to their workers or pay a penalty. Firms with fewer than 50 employees are not required to provide coverage, but could elect to do so through state or federal exchanges being established. However, all individuals will be required to have some form of health insurance.

• Do companies with more than 50 employees have a choice to pay or play? Yes. Businesses with more than 50 employees need to decide if it makes financial sense for their company to pay the penalty and let employees purchase their own insurance. On the flip side, many studies show that offering benefits is a good way to attract and retain talented workers. “We’re encouraging folks to crunch those numbers now and think ahead,” Yates said.

•
  What’s the penalty per employee? Terrell said for larger employers that choose not to provide insurance, the average fine per employee would be about $2,300. Part-time and seasonal employees are exempt, Yates said. For more specific information regarding employer penalties per employee, Labban suggested reading the “Summary of Potential Employer Penalties Under the Patient Protection and Affordable Care Act,” a report from the Congressional Research Service.

• Who’s levying the penalty? Just like any other tax penalty, the Internal Revenue Service will be the enforcing body behind the penalty. …

• Is the penalty tax-deductible? No.

• Can my existing health care benefits plan be grandfathered in? Yes, as long as it meets certain requirements.

• What about the exchanges? It’s not clear yet whether North Carolina will accept federal funding to organize its own electronic insurance exchange, or if the federal government will step up to the plate. …

• What if individual companies, each with fewer than 50 employees, have the same owner? That owner will be responsible for providing benefits. If there are multiple companies under the same control group, they’ll be considered one, Yates said.

Catherine Carlock reports and writes for special reports and special publications. Contact her at (336) 370-2918

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Managing Conflict in a Family-Owned Business (Part 2 of 2)

CEG Worldwide, LLC

By Tom Hubler (Part 2 of 2)

The structure of the matter (second in a series)

Key Takeaways

• The B.O.S.S. concept formalizes how we generate what’s right for the Business, for Others, for our Self and for Stakeholders.
• The approach helps develop collaboration, team skills and common success.
• Regular family meetings keep issues from growing into problems.
• A family code of conduct helps prepare and formalize key ground rules to keep everyone on track as individuals, as a family and as a business.

Part 1 of Managing Conflict in a Family-Owned Business discusses how important it is to raise issues, prepare succession plans and create a common family vision. This form and structure help unite family members in a superordinate goal.

Here I introduce other specific methods to bring structure to family-business issues and to prevent conflict.

Who’s the B.O.S.S.?
The B.O.S.S. concept is a way to remember what the family wants to generate for the...
Business
Others (and what they want)
Self (what you want for yourself)
Stakeholder (including others who share in the business)

…To manage issues and prevent problems, the family carefully considers what must be done to take care of the “B” (Business). Most family businesses recognize this intuitively. It’s just common sense.

What may be less intuitive is recognizing that in order to prevent issues from becoming problems, you must identify what the “O” (Others) wants. … Every family member must understand that they have a commitment to each other’s success. … In this way, kything prayers and the “O” in B.O.S.S. mean the same thing.




Cover via Amazon

Being aware of others unleashes energy because there is psychological engagement within the family. It is strikingly portrayed by author Mihaly Csikszentmihalyi. I summarized his concept with a few quotes taken from his book Finding Flow:

• “An optimal family system is complex in that it encourages the unique individual development of its members while uniting them in a web of effective ties.”
• “A group of people is kept together by two kinds of energy—material energy provided by food, warmth, physical care and money, and the psychic energy of people investing attention in each other’s goals.”
• “When people pay attention to each other or to the same activity together, the chances of finding flow, binding the family, increase.”
• “Only when there is harmony between the goals of the participants, when everyone is investing psychic energy into a joint goal, does being together become enjoyable.”



The Good Work Team: William Damon, Mihaly Csikszentmihalyi and Howard Gardner (Photo credit: Wikipedia)

Csikszentmihalyi emphasizes the importance of putting psychic energy into families. …The point is that good things happen when people are committed to each other’s success.

The first “S” (Self) in B.O.S.S. represents what you want for yourself. With the family as a team, individuals think about what they want for themselves in concert with what others want for themselves and aligned with what they all want for each other. This puts power into the common family vision because family members reinforce the common good. Each trusts that by contributing during their turn, they are appreciated and the trust is returned when others respond as their turns come.

The second “S” stands for the stakeholders. These stakeholders may be nonfamily employees, other family members not engaged in the business, vendors, suppliers and customers. B.O.S.S. thinking helps create win-win rather than win-lose decisions. It helps promote the common good to help the family and their business become vision driven rather than problem focused.

Develop collaborative team skills
An excellent way to prevent conflict is to strengthen family communications using Collaborative Team Skills. This highly successful program created by Sherod Miller helps families successfully manage their differences.
The program helps people learn how to express feelings and wants. When these deep needs go unexpressed, communication breaks down…. I consider listening skills to be the most important way to promote understanding within the family.

Proper listening requires knowing how to respond to different communication styles, map an issue and actively problem solve. Conflict often arises because people don’t listen carefully, or they respond poorly. ...

Hold regular family meetings
In his book Family Business (3rd Edition), Ernesto Poza promotes family meetings. He states that when family businesses have regular family meetings, they become more successful. …

Successful family-owned businesses typically hold three types of meetings:

1. Shareholder and owner meetings that include only those members
2. Meetings designed for employees and family-member stakeholders
3. Family-only meetings that bring together the entire family, including spouses and those not active in the business

Each type of meeting has its own dynamic, purpose and value. Family meetings, in particular, help manage the boundary between family and business. This is where so many potential conflicts can be discussed and resolved. Family meetings build the emotional equity of the family (the psychic energy of Finding Flow) while simultaneously building the equity of the business.

Here are a few of the many ways to build emotional equity in the family:

• Establish and celebrate family rituals and traditions
• Regularly spend informal time with each other outside of the business
• Involve adult children and grandchildren in family-oriented services and philanthropic projects

Prepare a family code of conduct



Code of Conduct (Photo credit: jronaldlee)

Issues raised and resolved in family meetings can be restated as part of a family participation plan or code of conduct. …

Too many family-owned businesses regularly play the game of business without having or regularly reviewing their own sets of ground rules. Or they assume the rules are unchanged and fail to keep them current.

I use this outline with my clients to guide them to their own family participation plans or codes of conduct:

• Eligibility
• Entry
• Summer employment
• Intern programs
• Nonfamily executives
• Full-time employees
• Career planning
• Application process
• Coaching
• Poor performance and termination
• Conduct and protocol
• Compensation

Discomfort around touchy issues is natural in every family and family business. Holding regular family meetings and producing a family participation plan or code of conduct can prevent many of these issues from becoming problems. My mantra for clients is: “It’s always easier to prevent a problem than to try to fix one.” Conflicts become painful only if ignored.

About the Author
Tom Hubler (tomh@thehublergroup.com) is president of Hubler for Business Families (hublerfamilybusiness.com) and an adjunct professor at the University of St. Thomas.

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Managing Conflict in a Family-Owned Business (Part 1 of 2) - CEG Worldwide, LLC

CEG Worldwide, LLC

By Tom Hubler (Part 1 of 2)

What advisors frequently overlook can land their clients—and themselves—in hot water (first in a series)

Key Takeaways

• Most families avoid talking about death and money, yet that's exactly what is needed for good business succession and personal estate planning.
• Families avoid discussions because they fear it will create family disharmony, when just the opposite is true.
• Families should develop together a common vision and prayers for each other that reinforce the needs of individual members reflecting their common good.
• Optimize your global tax portfolio/position by understanding where the income gets taxed, and then analyze the after-tax income.

Death, money and sex. In our culture these are the three most difficult things for families to talk about. … Virtually everyone avoids talking about death, money and sex in their families. Do you?



nothıng takes placε but thε placε . . (Photo credit: jef safi)

Unfortunately, when a family-owned business is having a conflict, it is likely that two of these topics must be talked about—death and money. That's because conflict in a successful family business commonly occurs when it's time for succession planning—when the family must decide who will continue the business and how. Many families make the mistake of just assuming who it is that will take over the company and that succession will happen when the time is right. That's where the problems begin.

Estate planners tell us succession is a highly unpleasant subject for families. It requires them to think about death in the family, life without a loved one, taking or transferring assets, and changing responsibilities. For a family business, the discussion seems especially filled with potential landmines.

Family businesses avoid succession planning
Succession planning is not only an issue for the owner-entrepreneur, it's also an issue for the entire family. Many families unconsciously conspire to avoid talking about ownership and management-succession planning. …




Pugh's Garden Centre A family-owned business at Morganstown, near Radyr. The wooded edge of Garth Hill can be seen beyond. (Photo credit: Wikipedia)

My clients will say, “It's too early; we have years to think about this.” Or “I don't have time right now.” Or my favorite, “We don't need all that structure and formality because we love each other.”

Actually, it is because you love each other that you need all that structure and formality. It helps you avoid the emotional tripwires and makes the rational path more visible. However, that path must include more than just plans for ownership and the estate.

As I stated in a previous article, it is futile to produce a succession plan by focusing on just the ownership (and estate) plan. A smart succession plan must also consider the owner-entrepreneur's overall intention. It must reflect a core purpose that includes legacy and family intentions as well as the business purpose.

Legacy is more than an entrepreneur's wish for “how I want to be remembered.” A sense of legacy drives the entrepreneur to develop a succession plan. Concern for a legacy creates the motivation.

Start by discussing legacy



Motorhomes lined up for sale This family owned business developed from a haulage firm. They now sell new and used motorhomes. (Photo credit: Wikipedia)

… There are two aspects to legacy: your gift to the future and how you want to be remembered. The first aspect, discussed by Laura Nash in the Harvard Business Review article “Just Enough,” defines “your gift to the future” as a means by which “you help others find future success.”

The second aspect—how you want to be remembered—is my definition. It focuses more personally on how an individual wants to be remembered and is highly emotional because virtually everyone in their 60s and 70s wonders at some point whether their lives have meant something. …

A technical planner can ask:

• “How do you want to be remembered?”
• “What is your gift to the future?”
• “How can I help you achieve those goals?”

Ask legacy questions like these so that owner-entrepreneurs will engage in succession planning. This helps avoid a lot of unnecessary conflict that could surface later.

Conflict accumulates when differences are not discussed

Conflict in family-owned businesses can also increase because family members simply try to avoid it. When I taught the Family Business Management class at the University of St. Thomas, I regularly brought up the famous Hubler Speck of Dust Theory to explain what I often saw happening in family-owned businesses.

 

Nursery Center has been a family owned and operated business since 1990. Website: nursery-center.com (Photo credit: Wikipedia)

In my Speck of Dust Theory, an issue or irritation triggers differences in the family-owned business. Family members say to themselves, “If I bring that issue up, it will upset the entire family and ruin our 4th of July picnic at the lake.” That speck of dust—that issue—is not discussed.

Sometime later, another issue surfaces. The conflict isn't mentioned because it could spoil Thanksgiving or Christmas, or an upcoming wedding, birthday or graduation. Irritation accumulates into ever-greater annoyance because no one is willing to bring up an issue. The family creates the very disharmony they are trying to avoid by failing to talk about their differences.

Speck-of-dust issues can grow into a ton of discord. Yet these issues are normal and should be aired. (See my partial list of potential issues.) Every family and family-owned business has issues. They become problems only when they are avoided and not discussed.

How to prevent and manage problems in family-owned businesses

The best way to avoid conflict is to keep issues from becoming problems in the first place. To do this the family should create a common vision that unites everyone at a superordinate level. …

Typically, one would urge compromise … Yet when individuals are asked to compromise, they generally feel like they are conceding or giving in. Instead, the family should be encouraged to understand that this is a negotiation that involves cooperation. Everyone is working together for the common good of the family and the business…



individual -v- group (Photo credit: Sean MacEntee)

Individuals recognize that it is unrealistic for each person to get 100 percent of what he or she wants. Instead, each family member is contributing to reflect what's best for the family vision. … Each understands that “just as I contribute, other members of the family will do the same when their turn comes.” And the others' turns always come.

Develop a family vision
To begin, the family creates a list of values that everyone can embrace. These high-level principles are discussed and developed into a brief paragraph that truly reflects what the family believes about themselves and their values. …

I also encourage families to adopt or develop their own family prayers. Here is a typical example:

Family prayer for loving kindness
May our family be filled with loving kindness.
May we be well.
May our family be peaceful and at ease.
May our family be happy.




NEOSHO, MO- JUNE 17: A Twister Safe sign for a small family business that specializes in constructing safe rooms stands June 17, 2011 in Neosho, Missouri. A surge of interest in safe rooms has been seen since an F5 tornado tore through Joplin, Missouri in May. (Image credit: Getty Images via @daylife)

As family members cooperate to develop their family vision statements and prayers, I encourage individuals to prepare their own personal value statements. …

The prayer and vision statements should be clear and brief enough to be recited daily. Because they are developed through family cooperation, these statements resonate across the family and truly reflect the interests of everyone.

Finally, I encourage family members to think about each other daily through brief kything prayers. Kythes are the vision statements of family members. They are put in the third person and reflect what that person wants, needs or values….

Conclusion
By encouraging your family business clients to talk openly and strategically about death and succession, you can help them preserve substantial wealth and family harmony—and solidify your role as a trusted advisor and confidant.

About the Author
Tom Hubler (tomh@thehublergroup.com) is president of Hubler for Business Families (hublerfamilybusiness.com) and an adjunct professor at the University of St. Thomas.

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Five Painless Ways to Raise Prices this Year

| Blog | Daily Dose | Entrepreneur.com


BY Carol Tice| 23 hours ago|




It may sound odd, but small businesses are increasingly handing out pay raises. …

Apparently, the pay-raise trend is pretty widespread. A Pepperdine University/Dun & Bradstreet Credibility Corp. study showed 43 percent of small businesses have already hiked worker pay in the past year, and 42 percent said they plan to raise pay this year. …

This may be a critical time to raise prices for many businesses in any case, as prices are rising or remaining high for many basic materials.

With the economy still so uncooperative, how can you sell customers on a price hike? Here are five ideas:

1. 

   Image via Wikipedia

   Phase it in. Let customers know prices are going up next month, or next quarter. … Give clients a chance to buy in volume ahead of time to save money. It feels like a deal, but, sooner or later, customers still end up paying the new price. …
   Related: More Small Businesses Plan to Push Up Prices in 2012
   
   
2. Offer valued-customer discounts. Take a page from grocery stores and offer one price for your loyal frequent shoppers, and a higher one for occasional users. That way you can start grossing more without alienating your core customer base. Don't make those customers haul around a loyalty card, either -- keep the information on who gets the good prices on file yourself.
   

3. 

   Image via Wikipedia

   Revamp or repackage old products or services. Add new features, bundle existing products to create a new one or redesign your packaging. Freshen it up, and you've added value -- or at least created the appearance of added value -- and can command a better price for it.
   
4. Introduce new products. … What can you sell that your competitors don't? Add fresh items that can't be easily price compared and you can charge a better markup on them.
   Related: Four Rules for Pricing Products
   
   
5. Review and retool your product assortment. Do you know which of your products has the lowest margins, and which has the highest? … Then drop slower-moving, low-net products and add more high-end ones. Also review competitors' pricing to see whether some products are priced unnecessarily low. Small, strategic increases on a few popular items can add up quickly, while customers may barely notice the difference.

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The No. 1 Predictor of Startup Failure: Premature Scaling

 PEHub
Posted on: September 5th, 2011
Joanna Glasner

…The Startup Genome Project … published last week, crunches data from a set of more than 3,200 companies, seeking to identify the qualities that make startups most likely to either succeed or fail.
… The most consistent predictor of failure, …was a startup’s propensity to engage in premature scaling.

What is premature scaling? The authors define it as “focusing on one dimension of the business and advancing it out of sync with the rest of the operation.” For example, a startup may overspend too early on customer acquisition, hire too many employees, or focus too much on engineering at the expense of customer development. …

Researchers at the Startup Genome project, an eight-month-old effort supported by a collection of startup industry insiders and academics, also churned out some other interesting findings related to startup success. Insights include:

Pivoters do better: Switching a core facet of one’s business model, or pivoting, is sometimes the only way a startup can stay competitive in a fast-changing market. …

Image via Wikipedia… Researchers found startups that pivot once or twice raise 2.5 times more money, have 3.6 times better user growth, and are 52% less likely to scale prematurely than startups that pivot more than two times or not at all.

Co-founders scale faster: Researchers found solo founders take 3.6 times longer to reach scale stage compared to a founding team of two, and they are 2.3 times less likely to pivot.

Business and Technical Partners Outperform: Teams with one business and one technical founder raise 30% more money, have 2.9 times more user growth, and are 19% less likely to scale prematurely than technical or business-heavy founding teams.

Founders are ridiculously over-optimistic: Researchers found that startups need two to three times longer to validate their [market] than most founders expect. Startups that haven’t raised money, meanwhile, tend to over-estimate their prospective market size as 100 times bigger than it actually is.

Interestingly, while premature scaling is quite common, its opposite, which the authors call dysfunctional scaling, is quite rare. … Curious to see if you’re committing any of these startup sins? The Startup Genome Project has a tool for companies to test whether they are scaling prematurely.

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Five Ways to Build Business Credit

Entrepreneur.com
BY Kelly K. Spors | Yesterday|

… [Getting] credit is much easier when you don't need it. …Here are five options to get started.

1. Mind your personal credit rating. The biggest factor in many banks' decision to initially lend businesses money is the owners' personal credit ratings and they typically look for a personal credit score of at least the mid-600s, says Ami Kassar, co-founder and chief executive of MultiFunding LLC, a Broad Axe, Pa.-based company that helps businesses connect with lenders. … Moreover, lenders will also often check the personal credit of any investor or business partner with more than a 20% stake in the business, Kassar says.

Image via Wikipedia2. Apply for credit before you need it. To begin building a credit history for your business, apply for at least some sort of credit soon after starting up, Kassar says. A small business will often have to establish itself for two years before a bank feels comfortable offering a sizable credit line. … Some major retailers that supply to small businesses, such as OfficeMax or Home Depot, offer commercial credit accounts that can help build a credit history for your business.

3. Grow your credit and use it. Many businesses with enviable credit histories applied early for business credit cards and credit lines and used them as early as possible, says Wayne Sanford, owner of New Start Financial Corp., a credit consultancy in Allen, Texas. … Also, check to see if you have a profile with Dun & Bradstreet, a business data and credit reporting agency, suggests Gwendolyn Wright, a San Francisco business consultant and former first vice president of the Bank of San Francisco, a community bank. …

4. Forge relationships with more than one lender. Banks can change lending policies on a moment's notice and cut your credit limit overnight, so it can help to not have all your financial eggs in one basket, Sanford adds. …

5. Consider alternatives. Remember that traditional banks are not your only shot at credit, Wright says. … Other resources include asset-based lenders, which focus more on collateral rather than credit worthiness, factoring -- which lets you borrow against your accounts receivables -- and peer-to-peer lending and crowdfunding sites, such as Prosper.com and Kickstarter.com. …

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