Business North - Business Mentor
		with Daryl Erdman

The past year and six months has been a rollercoaster economic ride. In my humble opinion, Washington couldn’t have been more wrong about how to stimulate our economy. Public sector job creation doesn’t do it - this has been historically proven but the lesson needed to be learned once more, it seems.

Recently, in these tumultuous times, I have talked with friends and others who have called out of the blue to ask for advice. All have been frustrated by the continued lack of understanding by political types about what it takes to help get things going again. My own 50-year career experience has shown that the less government tries to help the better! All government’s constant interference does is create uncertainty.

I don’t know about you, but I tend to stop doing whatever I was doing and wait until things begin to settle down in Washington before I proceed on anything. Not knowing what new regulatory idea Congress is going to come up, or what new tax or new law might have an impact causes me to halt anything related to growth. I tend to conserve cash (that is if I have any) and wait to see what the cost impact will be to my business.

For example, the new healthcare legislation already has become a nightmare. Smaller businesses, which try to be self-reliant, are overwhelmed attempting to interpret requirements. This forces us (me at least) to hire a benefits specialist attorney to tell me what I need to do. In my own business endeavors, this meant creating a full-time position in our office to handle what I call “compliance issues.”

Like most of you, I already know that my taxes are going through the roof next year, I just don’t know by how much. So why would I add jobs at this time?

Enough of this rant. What I am learning from this experience is that the changes and challenges caused by government are not going to cease for a long time. I need not expect Beltway politicians to understand the issues they cause at my level.

Yet, this climate causes a certain amount of unrest among those wonderful people who help you run your business. Morale is hard to maintain when you are concerned about your company’s future. This puts added pressure on you, as an owner, to assure people that you will somehow muck through. Albert Johnstone once wrote, “Morale is faith in the person at the top.” Remind yourself of that everyday.

As long as I am quoting I will give you one more from Robert Byrne, “Everything is in a state of flux, including the status quo.” Somehow in this sea of constant instability you need to figure out a way to become as flexible as possible to withstand everything coming at you. In every historical time of rapid change, each of you can point to organizations that have been able to withstand change and, in fact, many have thrived. So how do you get to that point?

When faced with massive economic upheaval - and the resulting regulatory and tax implications - it is best to not tilt at the windmills and learn to adapt. Fighting changes will do little good. It is natural to become selective and choose which changes you will support and which you will not. The thing that happens is that the ones you do not support will come back to haunt you, consume an inordinate amount of your time - and in the end you will have to give in. In the meantime, your organization has been placed on hold and you have increased uncertainty in people’s minds. The quicker you learn to adapt your organization to these changes the quicker you can get back to concentrating on how to continue to grow and survive.

Addressing your own attitude while attempting to adapt your organization as quickly as possible and moving past the situation will not assure coming through it all issue-free. Change is disruptive to any organization and while going through this, it is important that you communicate frequently. Progress reports and regular updates are critical.

Change, like that which is coming will cost money, both in added taxes and in compliance, no doubt. You need to prepare everyone in the organization. This again means communication, being open and honest so everyone knows what it is that you must do in order to survive and thrive. Share all information regarding regulations and the true cost of compliance, and then you build an understanding throughout the organization of why things are done.

Lay out cost impact in an understandable fashion. If you haven’t yet started keeping regular monthly cash flow statements, start tomorrow. You need to carefully track cash at all times and this is even more important when massive change is beginning to have an impact. (The critical importance of the cash flow statement is a topic that once again will be detailed in next month’s column.)

It is probably unnecessary to regular readers to also mention the importance of open book management, which is another concept I feel passionate about for business. This means that your cash flow statement should be a subject of discussion at your next employee meeting. This openness will create support, understanding and a sharing of responsibility to help you through the rough seas ahead. It also does wonders for morale in good times and develops a sense of camaraderie among all.

Erdman is chief executive of Strategic Growth Resources, a business acquisition firm. Previously, he founded entrepreneurial programs at the University of St. Thomas in St. Paul and the University of Iowa. You can reach him at derdman@concertoventures.com, or by telephone at 218-326-6939.

• Openness can build trust in times of turmoil -8/3/2010
• The entrepreneurial gender gap -8/3/2010
• Your associates and your sales -5/26/2010
• 50 best places for growing and what it means for your community -4/14/2010
• Buying an existing business -3/23/2010