Dear Dave,
My wife and I started selling Avon a few years ago to make some extra money. We were pretty successful, and we started hosting vendor events in our town. Now we’re thinking about moving the business out of our home and into an office in order to appear more professional. Do you think this is a good idea?
Terry
Dear Terry,
I don’t think anyone interested in buying Avon products would be put off by the fact that you work out of your home. Most people in a multilevel like Avon work from home, so what you’re doing isn’t unusual.
If I’m in your shoes, I think I’m going to spend my time, money and effort to make sure these vendor events are high-profile and highly successful. Make sure they all want to come back each and every time. As a vendor who is buying a table or booth at these events, I don’t give a flip about where your office is located. I care about the event and the opportunity to leverage that into sales. If I pay $25 for a space, will there be 25 people there or 200? If I pay $250 for a booth, will there be 3,000 people there? Will they buy stuff, or are they just a bunch of gawkers hoping for freebies? In other words, is the event going to work for me?
By doing this, you’ll build more and more credibility and have the opportunity to solicit testimonials from existing clients and from fellow reps. Your “office” location simply doesn’t matter in this scenario.
—Dave
Dear Dave,
I’m a small business owner with $300,000 annually in gross sales. I net $50,000 a year and have $110,000 in total debt, and that includes business and personal debt. I make lots of purchases from vendors using net 30 terms. How do net 30 terms fit within the Baby Steps?
Brad
Dear Brad,
They don’t. You shouldn’t be making purchases unless you have the cash flow to cover them. It’s just like having an electric bill. You pay for the electricity you’ve used. If you buy stuff from a printer, you don’t prepay the job. You pay it when the materials are finished. A pretty basic scenario would be they drop the stuff off, leave you an invoice, and you pay it within 30 days.
At my company, we generally clear those kinds of transactions in eight to 10 days, assuming everything was done right and the pricing and purchase order are on target. If we don’t have the money, we don’t order things. We don’t play games and hope we can sell it after they deliver and then pay them.
That’s planning debt and riding on the backs of your vendors. And that’s no way to run a business!
—Dave
Dear Dave,
I run my own business, and my son works with me. Our wives help out with things too. I’d like to retire in a couple of years and have him take over the company. The business has a $45,000 yearly net profit, and my son makes up to $55,000 a year. For the transfer, he would still use my building for the short term, but buy the tools and equipment he wanted and sell the rest. What’s the best way to make this transition?
Matt
Dear Matt,
Let’s say he gives you $50,000 for the tools and stuff within a year. If he owned the business, he’d have extra income in addition to his salary. I don’t think that’s an unreasonable deal at all. He’d make $80,000 to $100,000 a year as the sole owner between his income and the profit. If he gave you $50,000 out of the first year’s business, even if he had a slim year, it’s a pretty good deal.
Make sure, too, that you clearly define his role in using your shop. If you just say he can use it until he needs to move, there’s a chance you’ll look up 10 years later and find him there. “Short term” should be clearly defined, fair and put down on paper. If there’s a major problem with the business or the economy, you can always work that out later. But there needs to be a definite agreement and schedule for when the business and everything connected to it is his.
It’s very important for you guys to be on the same page and in total agreement with this situation. Communication is absolutely vital when family works together or tries to come to terms on an important issue. Adding the wives to the negotiation would be a really good idea too. There will always be an emotional attachment to this business for you and your wife, even after you’ve retired and you guys are no longer part of the everyday workings. Plus, you want to ensure that your son and daughter-in-law feel good about the arrangement so that there are no hard feelings later.
So talk it out and make sure everyone feels the terms are fair. Then put your stamp on it and move forward!
—Dave
Dear Dave,
Is it okay to pay two employees who do the same jobs different salaries?
Eric
Dear Eric,
Sure, it’s okay. Fair isn’t always equal, and equal isn’t always fair. There are no two people on earth who do the same, exact jobs with the same, exact levels of competency and precision.
Here’s a more detailed example. Let’s say I had two personal assistants within my organization. Both of them worked as assistants to vice presidents, but one has been on my team for 10 years and is the assistant to someone whose department is very large and profitable. The other assistant works for a vice president who runs a new department that’s not yet profitable. Besides that, she was hired only 10 months ago.
In my mind, it’s easy to understand why the assistant who has been there longer and is working for a more profitable department would be making more money. That just makes sense to me.
—Dave
Dear Dave,
I have several large customers. These customers are a big enough part of my business that if I lost one it would have a significant impact on my bottom line. Should I be trying to grow them, or would my time be better spent prospecting and adding new customers?
Ryan
Dear Ryan,
I think you should be doing both. You need to have lots and lots of new customers, so that while they become a bigger part of your world, it would become less impactful financially if one suddenly went away. You never want to have a customer situation where the tail is wagging the dog. As a business owner, you don’t want a customer that’s so big, such a huge part of your world, that it would devastate you financially if the relationship ended. That puts you into a situation that’s based in fear, not in serving.
There’s nothing wrong with someone being an important percentage of your business world. I have two advertisers who have been with my company and our radio show for many years. In the old days, the ad revenue those two companies alone generated was a huge deal to us. Now, we collect a lot more ad revenue from them than we did back then, which means we’ve helped them grow their businesses significantly. Meanwhile, our business has grown substantially. So even though these guys bring in four or five times the revenue they did back then, we’ve grown significantly in other areas. This has made them a smaller percentage of our world.
That’s what I mean when I say the answer is both. You want your customers to be successful, but you also want to do very well so you’re not quite as dependent on any single one of them as you go along.
—Dave
