November 2015

News From The Louisville SBDC
5 Strategies to Grow Your Business in 2016

Most entrepreneurs want to see their hard work blossom into a viable growing business.  However, many small business owners are unaware of how to develop a growth strategy for their business.  A tough task, but there are some basic rules of the game.

1. Understand the current position.  A company needs to understand their financial position, management capabilities, operations, and market before determining a growth strategy.

2. Explore several growth strategies. There are several growth strategies, but business owners should develop a growth strategy that incurs the most results from the least amount of risk.  There are several growth strategies , but here are a few:

        •    Product development- a company offers a modified product or a new product to existing current markets.  Think coffeehouses offering lattes
             and frappacinos
        •    Market penetration- a company attempts to create more sales to existing customers without changing the product.  Anyone for a 24-pack of
             soda…remember when the only pack was a six-pack? 
        •    Market development – a company identifies and develops new markets for the current product.  A good example of this strategy is the fast
             food franchise. 
3. Develop a sound written strategic plan.  The old cliché, “Those who fail to plan, plan to fail,” aptly applies. 

4. Implement the strategy/plan.  Once the plan is written and the strategy is determined be sure to have a trustworthy, experienced leader, who wants to see the business succeed, at the helm.

5. Continuously evaluate.  If the plan is not working as predicted, re-evaluate.

If you are an entrepreneur seeking to accelerate your business to the next level,  I will be glad to help you. Contact Toni Sears, Management Consultant at the Louisville SBDC,  (502) 625-0124or email me at

Five Legal Issues for Small Businesses to Consider

There are many aspects that go into starting and maintaining a small business and it is important to understand the legal challenges that come with it. Here are five common legal issues for small businesses to consider:

1.  Business Structure: When starting a small business, it is important to determine the type of legal entity that best suits your needs.   The type of structure you choose will have an impact upon a variety of issues, including, but not limited to, how taxes are filed and personal liability.  Businesses can be classified as a sole proprietorship, partnership, S corporation, LLC, or PLLC. Sorting through the available options can be confusing.  Consequently, it is helpful to consult with an attorney who can analyze the different types of legal structures and advise you of the legal ramifications of each.

2.  Business Licenses: Most small businesses need an operating license and the type of license varies from jurisdiction to jurisdiction. The licensing requirements also vary based upon the type of service being provided or product being sold.  For instance, a start-up looking to sell alcohol will need a specific license that permits them to do so because of the heightened responsibilities and liabilities involved. Likewise, certain service-based businesses will need additional licenses and permits. 

3.  Trademarks and Patents: Intellectual property rights are an important consideration when starting your own business.  A small business might have a specific logo that distinguishes its products and wish to trademark it.  An owner may have developed a new process of manufacturing or have designed a new innovative product and need to take steps to ensure that their intellectual property is protected.   Similarly, a business owner will want to ensure that she/he is not infringing upon existing intellectual property rights so as to minimize liability. 

4.  Employment Law Issues: Small business owners who hire individuals need to be able to distinguish whether they are employees or independent contractors. Recognizing the distinction helps a small business understand its obligations to them as an employer. Employees of a business are people who work under the management of the owner while independent contractors are people who are typically part-time and usually work for other businesses or organizations throughout the year. Correctly determining whether someone is an employee or contractor will help businesses avoid costly legal problems in the future.

5.  Record-Keeping: Proper documentation of all the matters relating to operating a small business, such as tax returns, income statements, and expense reports, need to be kept in an orderly and accurate manner. Record-keeping is important for transparency. It makes it easier for small businesses to show the IRS that they are in compliance with regulations as well as other agencies that may legally have the right to monitor the business’s activities. This can be difficult for small businesses because human resources can be limited.  However, a small business owner cannot ignore the importance of proper record-keeping.

The nature of running a business requires legal counsel to help in its decision-making, but many small businesses just starting up have a harder time accessing legal business services because of the high costs associated with it. For small business owners who are financially struggling, there are other avenues to explore to receive this legal assistance. One of them is Louisville’s Legal Aid Society, whose Economic Development Program provides free legal services for low-income members of the community looking to start or maintain their small business. Navigating these legal issues is much easier with an attorney so it is important for small businesses to take advantage of the resources that give them affordable access one.

If you are an entrepreneur who is low-income and unable to afford an attorney, the Legal Aid Society might be able to help. Contact the Economic Development Coordinator, Sue Eng Ly at (502) 614-3156 for additional information and to see if you are eligible for their services.
502-614-3156 l

8 Tips to Collect on Past Due Customer Accounts

Every business owner knows that accounts receivable management is top priority in running a successful business. Even seasoned professionals often struggle with how to deal with clients/customers/patients that don’t pay in a timely manner or don’t pay at all. Developing and implementing a sound collection policy is vital to running a successful business. By following these simple steps, you can help your business thrive while maintaining cordial relationships with your customers.

1. Establish a Defined Credit Policy
A written policy gives staff a detailed document for reference and support. Have one policy for the practice, not one for each line of business or physician/attorney. Include payment policy. Assign someone who is not involved directly involved with services rendered to discuss financial matters.

2. Create a Customer Financial Clearing Process
Have an internal “financial advisor” talk to clients or customers before services are rendered. Keep the financial arrangements and services rendered separated. For example, a patient that owes a balance may not return out of embarrassment over their balance. Offer payment plans. Often patients would like to pay but are unable to pay in full.

Though the process may take place over a given time, payment plans keep customers loyal and they will return. Establishing payment arrangements is a two-way street; you create the rules and your customers have to play by them if they want to do business with you.

Be fair and reasonable.

3. Know How to Talk to Customers and Ask for the Payment
Empathize with individual’s situation. Remind your customer of his or her obligation to pay. Get commitment for payment. Make sure the arrangements are in accordance with the credit policy.
          Do Not Say:
          “How much can you pay?”
          “When can you pay?”
          “Can you pay something?”
          “Can you try to pay by this date?”
          Do Say:
          “How much are you short?”
          “Will you be in today or tomorrow?”
          “Will you be paying by cash, check, or credit card?”

4. When Making Collection Calls Becomes Necessary
Schedule a regular time to make collection calls. Have all account information on hand before making the call. Leave messages, but do not reveal that the call is about an unpaid bill. Get the customer to acknowledge the debt by asking if there was a question about the charge. Offer to take a credit card or check over the phone for payment. Ask when they will pay and wait for an answer. Only set up payment arrangements if a customer cannot make payment in full. Let the customer know you are documenting whatever commitment they make about a payment on their account. Use the “Three Strikes” rule. If a payment has been requested three times without response, use a third party.

5. Know your Collection Options
            a. Status quo: Continue to do what you are doing
            b. Write the account off
            c. Hire an attorney
            d. Go to small claims court
            e. Enlist the help of a collection agency

6. Know your Third-Party Options
            a. Collection agency
            b. Percentage collection agency
            c. Flat fee collection agency

7. Know the Disadvantages and Advantages of using a Third Party
            a. Disadvantages
              i. High Costs
              ii. Alienating the Client/Customer/Patient
              iii. Loss of Control of the Account
              iv. Already invested a lot of work to win the account over
              v. Small balances don’t get as much attention, therefore go uncollected
            b. Advantages
              i. Gets the customer’s attention and makes an immediate impact
              ii. Removes your business’s staff from the position of being the “bad guy”
              iii. Creates urgency on the part of the customer to resolve the account

8. Know What to Look for in a Third Party
            a. Proper Accreditation and Licensing
            b. Solid, Long-Term Reputation
            c. Experience
            d. Ease of Doing Business with
            e. Cost-effectiveness
            f. Partnerships and/or Endorsements with Key Professional Associations
            g. Hold Harmless Agreements

There may be a point in which your internal procedures are not enough. A third party can motivate a customer to pay simply because the demand for payment is coming from an outside agency. Before paying a percentage to a collection agency, or using small claims court or an attorney, check into using a flat fee, diplomatic pre-collection service. These services provide accounts receivable solutions from the time an invoice or statement has been sent to when the account is past due.

Always remember that in many states, businesses are governed by the same collection laws as collection agencies. If you’re not sure, call your state’s department of finance or consult an attorney.

In the end, even with a carefully designed and administered collection plan, there are some accounts that your business will never collect.  By identifying those accounts early, you will save your business time and money, and benefit from improved cash flow from the vast majority of accounts that will pay.

Chris Luckett is a Cash-Flow Management Consultant with Transworld Systems, Inc.  Further questions relating to this article can be sent to or 502.295.6211.  
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