The ring of the cash register has long been the sound of music. But today the cash register of even the smallest business may be attached to a computer via “point-of-sale” (POS) systems. These systems have grown in popularity over conventional cash registers because they don’t just ring up sales. They amass vital, real-time information about your inventory and customers.

At the core of these systems are a standard-issue computers running specialized POS software, usually with a cash drawer and receipt printer, and often with a bar code scanner and credit card reader. Vendors often sell these systems pre-configured, or you can add these peripherals on as your requirements grow. The typical cost can be less than $1,500.

What do you get for your investment? Without a doubt, the biggest advantage is the ability to get an immediate, up-to-the-minute, accurate assessment of your inventory. Each time you check out a customer, the goods you ring up are immediately subtracted from your inventory list, which is maintained on the system’s hard drive.

That inventory may be surprisingly large. Many boutique clothing stores, for example, will stock SKUs numbering in the thousands, with actual counts exceeding 10,000 items. The same is true for shops selling everything from bicycles to cameras to cosmetics.

Keeping track of the thousands of items that make up a small business can be a real chore. However, consistently keeping hard-to-find items in stock can add up to a competitive advantage over much larger competitors. How to strike the balance?

A good POS system can help, allowing you to set an alert that lets you know when a given item is at the re-order point. When it’s time to re-order, some POS systems tell you both the most recent price you paid, as well as the average price you’ve paid in the past. Both can help you strike the best deal with your suppliers.

Off-hours, you can run a report that gives you inventory activity for the day, week or month. To get the big picture, some POS systems allow you to track your inventory year to year, allowing you to compare this year’s orders with those from last year. Doing so can help you anticipate where you want to head in the coming months.

Taking inventory is one of the most time-consuming and labor-intensive tasks every store owner faces. It is also one of the most crucial. Having too much stock, or too little, is costly. According to the National Retail Federation, U.S. retailers lose $224 billion due to excess inventory and $45 billion from not having inventory in stock.

While having a POS system track your inventory does not substitute for a physical inventory count, many shopkeepers find they can reduce the number of times each year they must conduct this time-consuming task. And when the time comes, the use of a wireless portable scanner in conjunction with a POS system can greatly reduce your footsteps, saving hours in the process.

In addition to tracking inventory, a good POS system will help you know who your best customers are and what they like. With the customer’s purchase history visible right at the cash register, a nursery owner might alert a tea rose lover to a new shipment of those flowers.

A camera store owner could tell a wildlife photographer about a new high-speed 35mm film ideal for capturing images of raptors in flight. Conversely, an auto parts store owner could query the POS system with a quick barcode scan to answer a customer’s inquiry about the availability of a spare part.

What it comes down to is this: In a well-run business, the point of sale is more than just the place where the money comes in. With the right equipment, it becomes your strategic service center, the place that will help you grow your business and keep your customers coming back.

And the ka-ching keeps on coming. According to Intuit market research, by using an affordable, integrated POS system, an independent retailer with revenue of $300,000 can cut costs by close to 10 percent, saving an average $30,000 a year. That’s a substantial return on a $1,500 investment. The question then becomes, How can you not afford a POS system?
Shopping for the Right POS System

In looking for a POS system, the choices are many, the price can range from hundreds to tens of thousands of dollars, and the final decision can be difficult. Here are some guidelines to help.

• Three words of advice: inventory, inventory, inventory. All POS systems ring up sales and track inventory. But a good one will let you assess your inventory easily and thoroughly. You should be able to set alerts for items running low, readily add new items when they come in, account for back-orders, and even generate purchase orders to send to vendors.
• Weigh ease-of-use against functionality. Generally speaking, the more complex your orders are, the more features you’ll need. But consider as well the time needed to bring new employees up to speed and the time you’ll invest training them. The best systems offer a balance of both.
• Look for a system that can start small and grow with your needs. If you are on a tight budget, you can begin with a basic setup: POS software running on a PC with just a drawer and receipt printer.

  Later on, you can add on as your needs dictate, perhaps a bar code scanner and credit card reader to begin with, then add an inventory tag printer, pole display, or PIN debit pad. Also, you should pick a system, based on your needs, that doesn’t require having someone set it up for you.

It’s easy to neglect the area of purchasing in your business. If you fail to devote enough attention to it, your cost of doing business could rise to an unnecessarily high level. As operating expenses increase, profit margins shrink, you would either have to live with lower profits or raise your prices, and neither of these choices is appealing.

By keeping your costs under control, you’ll be able to keep your prices at competitive levels and maintain a desirable profit.

Purchasing Policies

To purchase wisely, you need to buy the right quality and quantity of materials or products at the best possible price and at the appropriate time from the best vendor.

The purchasing process is much more streamlined in small companies than in larger businesses, especially when the businesses are still fairly new. The owner usually decides what to buy, when to buy, where to buy, and how much to buy. As the business grows, however, the owner may no longer be able to handle this task and will have to delegate it to others.

While a small business probably won’t need to create an entire purchasing department, it will need to have a purchasing manager. By selecting one person to manage all of the business’s purchasing activities, you will decrease the risk of duplicating orders for the same materials.

Purchasing need not be the purchasing manager’s sole duty; in fact, your business may not do enough purchasing to require a full-time purchasing manager. You should select an employee who can handle purchasing, as well as the other duties he or she my already have. This individual should be able to communicate clearly with your business’s suppliers.

Although purchasing duties probably won’t occupy all of this individual’s time, there is more to purchasing than placing orders. The purchasing manager will have to gather orders, make sure they are complete, and stay within any limits the company may have set on spending, select an appropriate vendor, order the goods, check their condition upon receipt, make sure the invoice is correct, and speed payment of the invoice by forwarding it to the accounting department.

Before you delegate the purchasing function to another employee, you should write out a purchasing policy for your business. You may even want to create such a policy while you are still responsible for purchasing, as a guide for yourself.

The purchasing policy, according to the SBA, should answer the following questions:

• Who has the authority to purchase items for the company? What items can that person purchase? Are there any spending limitations?
• What are the business’s requirements for adequate supplier competition and what criteria will be used to select possible vendors?
• What is the company’s position on the acceptance of gifts?
• Which types of contracts can the business enter into with successful bidders or vendors?
• What is the company’s position on conflict of interest and personal loans from suppliers?
• What kinds of information does the company consider confidential?
• What is the procedure for dealing with legal questions?

The Ordering System

The steps your employees and purchasing manager will follow to request, order, receive and pay for goods and materials make up your ordering system. A good ordering system will help maintain satisfactory supplier relations, improve cash management, aid in inventory control, and increase the overall profitability of your company.

The Purchase Order

Once the purchasing manager has received a requisition, her or she will need to select a supplier and check the price of the items ordered. After agreeing on a price, the purchasing manager will send a purchase order to the supplier.

This order is a formal request to the supplier to deliver materials or supplies according to the terms and prices agreed upon. Purchase orders, like requisition forms, can help small businesses keep track of their purchasing activities.

Firms can refer to their purchase orders to see if suppliers have shipped the correct goods in the correct quantity. They can also see if suppliers are delivering goods on time. Purchase orders can also serve as support in any legal disputes if they arise between you and the supplier.

Although you can write out purchase orders by hand, you would give a better impression if you used standard multi-part forms that you can purchase at any stationery store. They should include information such as the type of product or service you are ordering, the quantity desired, price and delivery terms.

The orders should also have an area for any additional information. Purchase orders should also include your company name, address, telephone and fax numbers, and logo. You can simply write in this information, stamp this information on your purchase orders with a rubber stamp, or design and print your own purchase order forms. Purchase orders should have at least three parts: a vendor copy, an internal file copy, and an accounting copy.

In addition to the standard purchase order, you might choose to use two other types: blanket purchase orders and annual contracts. If you routinely order fairly inexpensive items from a single vendor, you might want to place a blanket order for those items with the vendor. The blanket order covers specific items to be delivered over a specific period of time, such as six months or one year.

This type of purchase order lets you take advantage of quantity discounts and saves you the time and trouble of reordering small items you need often. You will also receive a monthly invoice covering your purchases for a given month, instead of several small invoices covering each individual purchase.

Annual contracts cover the purchase of a specific product from a vendor over a period of 12 months. An annual contract will usually let you fix the price for buying a specific quantity of a given item over a year. You can also arrange to have goods delivered as needed, either monthly, weekly, or on another specific schedule.

Receiving Records

A packing list will accompany orders you receive. Make sure that the items shipped match the items indicated on the packing list. Inspect all of the items shipped carefully, paying special attention to items that appear damaged. Initial the packing list to verify receipt and file it in a folder until you receive the invoice for the shipment.

In many cases, you won’t have to send payment with your order; your suppliers will either include an invoice with the shipment or send the invoice to you separately soon after sending your order. When the invoice arrives, check it against the packing list and the purchase order. Write a check for the appropriate amount, note the check number on a copy of the invoice, and file the invoice and packing list.

If you receive any damaged items, or if a vendor sends you items you did not order, let the vendor know as soon as possible. The vendor will tell you the best way to return the items and to receive the ones you actually ordered.

Fill out an internal receiving report and distribute it to those who need to know when shipments come in, such as the person in charge of inventory control, the buyer, the employee requisitioning the items, and the person in charge of accounts payable in accounting.

Although purchasing is certainly an important task and deserved careful attention, you will not be able to spend the same amount of time on all of your purchases, nor should you. More expensive items, for instance, deserve more careful attention and consideration than less expensive ones. The following four considerations will help you decide what items deserve the most attention, according to the SBA:

1. Unit cost. The SBA recommends that you give more attention to costly items than to less expensive ones. The more money you have tied up in a given type of inventory product, the more attention you need to give to that product in your purchasing, even if you sell few of these expensive items.
2. Extended cost. The SBA points out that some items may have a low cost, but you may buy and sell them in high volume. In this case, you may need to give a higher priority to these items, although their unit cost is fairly low.
3. Lead time. You need to consider the time to allow between ordering an item and receiving it. If a low-cost item has a long lead time, for instance, you would need to make regular checks on its delivery status. In that case, the SBA says, you may need priority.
4. Shipment rejection. If there is a high possibility you will reject an item because of technical problems or deficiencies in quality, the SBA suggests assigning it a high priority.

The Costs of Buying

In addition to the cost of goods you buy, you also have to pay and account for the costs of acquiring and carrying inventory.

Inventory acquisition costs are costs associated with generating and processing orders, and include the following:

• Portions of employee salaries and operating expenses directly pertaining to purchasing, inventory control, receiving, inspection and accounts payable.
• Costs of supplies such as forms, envelopes and stationery.
• Costs of placing orders (telephone, fax, postage, etc.)

Inventory carrying costs usually consist of the following elements:

• Interest charged on your financial investment into inventory.
• Cost of insurance covering your inventory.
• Property taxes paid on inventory.
• Cost of storing inventory.
• Obsolescence and deterioration of items in inventory.

Buy Wisely

Prices for the goods and materials you buy may fluctuate. If you find that the price for a given item is rising, do not buy large quantities of this item thinking that the price will rise even higher if you wait. Instead, the SBA advises that you buy smaller quantities of this item, but buy them more often.

You can quickly sell off the items you bought at high prices, instead of tying up money in overpriced inventory. Keep buying small quantities as prices return to their normal level. You will save money on your purchases, as well as reduce demand for the item, “encouraging” prices to drop. Once prices have stabilized at their normal level, you can resume buying in larger quantities.

Comparison Shopping

While you might purchase many items from catalogs that list specific prices on specific quantities, you may need to contact suppliers for price quotes on other items. Before you buy an item, you should contact a number of suppliers and compare prices, delivery options and expenses, and so on. You can do this by visiting suppliers’ websites or requesting quotes in writing.

Discounts

Suppliers extend a variety of different discounts to their customers. Many vendors offer quantity discounts: the more units you buy, the less you pay per unity. These discounts can apply to individual purchases or to a specific group of purchases made over time, as you would make under a blanket order.

Suppliers also offer seasonal discounts that apply to merchandise being sold out of season. The danger with buying off-season goods is that they may go out of style or become obsolete, and never go back “in-season.” Vendors also offer cash discounts that you earn by paying the entire invoice within a specified time period. If you received an invoice with the notation “1/10, Net 30,” it would mean that you could take a one-percent discount from the net amount of the invoice if you paid within ten days. You would otherwise have to pay for the entire amount of the invoice within 30 days.

Dealing With Vendors

Once you have compared prices from a group of suppliers, you can then select your vendors. Before you place an order with a vendor, you not only need to compare prices, but you also need to compare credit terms, emphasis on customer service, standing in the industry, and other related factors.

If you buy a number of different kinds of products, you may have to use a variety of vendors. If, on the other hand, a single vendor can meet all of your needs at reasonable prices, you may want to give that vendor the bulk of your business. Do not, however, rely solely on this vendor.

You should keep in contact with other vendors, and watch for new ones. It’s a good idea to be on good terms with more than one supplier. If your primary supplier ever fails to ship goods on time, suspends operations because of some natural disaster, or starts offering poor service, you will have other sources to use as back-up.

By using a few different sources of supply, furthermore, you will build more credit than you would if you used only one. Your primary supplier may also offer you better discounts or otherwise try to win all of your business.

Evaluating Suppliers

You not only need to evaluate suppliers before you place an order, but you also need to evaluate their performance constantly. Consider the following points when you evaluate a supplier’s performance:

• Timeliness of deliveries
• Completeness of orders shipped
• Quality of items shipped
• Quality of customer service
• Competitiveness of price
• Previous performance with similar orders
• Strength of financial condition
• Ability to meet design specifications
• Expertise of sales representatives and technical staff

Locating Suppliers

Before you can approach a supplier, you need to know where to find them. You need to be aware of where you can find suppliers both before you begin business and after you have started. Keep looking for new suppliers.

To look for suppliers in your area, search online and consult the Business-to-Business Yellow Pages and your local Chamber of Commerce. To broaden your search, consult websites, publications and associations pertaining to your industry; these sources should be able to give you a number of leads.

Many trade associations and publications publish directories listing suppliers to their industries. If you require industrial or mechanical equipment, consult manufacturers’ directories such as the Thomas Register of American Manufacturers. Finally, talk to your employees. They may know of excellent suppliers you might use.

Start-up financing is the initial infusion of money that advances an idea or an intention into something tangible. It is appropriate for any business. Even though it’s everywhere, it’s sometimes difficult to find.

It’s best use is for commencing initial operation to the point where outside investors can see and feel the venture, as well as understand that you took some risk getting it to that point.

Startup financing will possess two of the following three qualities: good, cheap and fast. It will never possess all three qualities. How easy it is to get depends on two things. If you have nothing, it’s difficult. If you have personal assets, the hard part is putting them at risk. But doing so is the rite of passage to both success and failure.

First Steps

If you’re starting a business, it’s your baby. This idea may leave you feeling simultaneously liberated and inspired. But it also has an edge. Specifically, if it’s your baby, it’s also your obligation to finance it beyond the “I’ve got an idea” stage.

How do you get that first dollop of funds that will either advance your idea to the point where it can attract outside capital, or perhaps jump-start you into profitable operations? Here are some options:

• Sell Assets. If you own things, you can sell them. It’s that simple. Jewelry, rugs, pool tables, boats, time-shares, second properties–the list goes on. Most people’s largest assets are their homes and cars. Homes are covered later. Here’s what you can do with automobiles.
• Borrow Against Your Home. This is the oldest trick in the book. It’s also one of the best because you can exert almost total control over the process. Here’s how it works: Say you need $50,000, your home is worth $250,000 and you owe the bank $100,000 on your mortgage. You can borrow against the equity, in this case $150,000.
• Borrow Against Insurance Policies. If you want to know where all your money goes, look at your insurance payments. Each month you probably pay for health insurance, life insurance, disability insurance, auto insurance and perhaps homeowner’s insurance. Unfortunately, you can only borrow against whole life policies, but most have some cash value after three years.
• Friends and Family. Friends and family present a formidable source of capital. Your typical friend or family investor is male, has been successful in his own business and wants to invest because he wishes someone had done it for him, according to Kirk Neiswander, senior vice president of Enterprise Development Inc., a nonprofict subsidiary of Case Western Reserve University’s Weatherhead School of Management in Cleveland. But, take the following steps to protect everyone from each other:
  • Get an agreement in writing. This will eliminate all conversations that start with, “You never said that.”
  • Emphasize debt (loans) rather than equity (ownership). You don’t want friends and family in your company forever. Before you know it, they start telling you how to run the place, and long-buried emotions emerge. Make it a loan, and pay it back as fast as you can.
  • Put some cash flow on their investment. If Dad says, “Here’s $50,000–try not to lose it, and pay it back as soon as you can,” that’s great. But consider paying some nominal interest at regular intervals so that you and he have a reality check. And it’s better to pay this quarterly rather than monthly. This way, when things are teetering, your lender won’t immediately know it.
• Borrow Against Your Investments. If you’re starting your business part time while keeping your full-time job, a potentially stable investment is borrowing against your employer’s 401(k) retirement plan. It’s common for such plans to let you borrow a percentage of your money that doesn’t exceed $50,000.
• Credit Cards. They’re not terribly creative. But credit cards are quick and easy. In a perverse way, they are also cheap. That is, a minimum payment of $50 per month can hold down a whole lot of debt. Of course, if you only make the minimum payment, your balance continues to grow, and if the business fails, you have to pay the piper. But if things go well and the business pays off the balances without missing a beat, then you look back at your early credit card financing with a nostalgic fondness, and perhaps a twinge of longing for simpler days.

In the beginning, it’s natural to try to do as much as possible yourself. It’s the most cost-effective, comfortable, sensible way to do things. As your enterprise grows, you’ll find yourself stretched thinner and thinner.

Eventually, you’ll find you just can’t continue to oversee operations and sales and accounting and fulfillment and marketing–and hope to continue to grow your business.

When you reach this point, it’s time to think about bringing other high-level managers on board to help you out. You need to build a senior team that’s able to manage all the critical areas of your business to take it to the next level.

Building your team demands matching jobs to people’s strengths. That means giving people responsibilities according to skill level, not based on how close a friend they are, or how closely related they are to you, or whether you just like their sunny personality.

That includes you as well–don’t give yourself an impressive title and job unless you’re right for the job. The fact is, many smart entrepreneurs hire their own boss when they realize their skills lie elsewhere in the company.

When it comes time to hire an executive team, you’ll need to find people to fill the following roles:

• Chief Executive Officer (CEO). The fact of the matter is, the CEO is the boss of everyone and is responsible for everything. They determine the company’s strategy. They hire and build the senior team. They make the final call on how resources (read: money) get divvied up, and they’re the one whose face appears on the cover of BusinessWeek.

  The CEO’s skills must include strategic thinking, the ability to rise above the daily details and decide where the industry and business are headed. They must then be able to decide the company’s best route for navigating the future market conditions. They have to be able to make good bets.

  The CEO’s key skill, however, is in hiring and firing. The right management team can cover a CEO’s shortcomings. A CEO may be able to set strategy, predict the future and control the budget, but if they don’t hire the right team, they have to master it all themselves. So they need to be able to identify and hire the best, fire the ones who don’t work out, and run the show in between.

  You know you need a professional CEO when you’re mired in the details for way too long and can’t pull yourself out. CEOs think about where the organization is going, the people and processes needed to get there, and how they’ll work in the current market. If you like details rather than strategy, either shift your thinking or hire a CEO to do the job for you.

• Chief Operating Officer (COO). A COO handles a company’s complex operational details. Think about UPS moving three billion packages in the two weeks before Christmas: The company’s COO insures the business can deliver day after day.

  He figures out just what needs to be measured so he can tell if things are going well. Then his team creates the systems to track the measurements and takes action when the company isn’t delivering.

  In a one-location retail business, the store manager is effectively the COO. When you expand to multiple locations or when ensuring smooth operations becomes a big part of your business, it’s time to hire someone who revels in measurements, operations and details.

• President. No one knows just what a president does. I’ve asked dozens of executives, and everyone’s answer is different. Some say a president oversees staff functions–human resources, finance and strategy–while the COO oversees daily operations. Others proclaim that the president is a synonym for COO, especially in smaller companies.
• Chief Financial Officer (CFO). Plain and simple, your CFO handles the money. They create budgets and financing strategies. They figure out if it’s better for your business to lease or buy. Then they build the control systems that monitor your company’s financial health. The CFO is the “bad guy” who won’t let you buy that really cool videoconferencing equipment and makes you pay down a commercial loan instead.
• Chief Marketing Officer (CMO). Recently, companies have been bringing in a marketing expert at the C-level rather than as just a vice president. The reason is simple: Many current business battles are battles of marketing, so corporate strategy often hinges on marketing strategy. The CMO owns the marketing strategy–and that often includes the sales strategy–and oversees its implementation.
• Chief Technology Officer (CTO). I’m a techie from way back, so I’m pretty opinionated about CTOs: Many of them just don’t belong in the C-suite. A CTO should keep up with technology trends, integrate those trends into the company’s strategy, and make sure the company keeps current when it’s necessary. They should not be buying new toys and leading-edge technology just because it’s the latest, greatest thing out there.

Finding Your Team Members

Unfortunately, good executives don’t grow on trees (and you wouldn’t want to hire the ones that do). Since their decisions can make or break your business, you want the best. Newspapers, classified ads and internet bulletin boards are not the way to go.

Mass-market ads will attract exactly that–the mass market, people who have no other job prospects. (A skillful, former executive rarely lists themselves in the same newspaper section as used backyard grills and heavy farm machinery.)

If you have the funds available, executive search firms are a good way to go. Although they charge through the nose to find candidates, they do due diligence and present you with pre-screened candidates, so when you’re running around handling the emergency of the day, they can be a huge time-saver.

They also monitor the pool of executive talent and can likely reach candidates you couldn’t approach on your own. Search firms may specialize by industry, function, geography and level of job, so if you decide to hire one, make sure you know what you’re getting.

Networking is a time-honored way to find new hires. Let your professional and personal networks know what kind of person you’re looking for. Then get one-on-one introductions, and take the candidate to lunch to test the chemistry.

When networking, avoid specific “networking forums.” Go straight for what you want. If you want a law firm CMO, spend a weekend at the Legal Sales and Service Organization’s Raindance conference, which attracts senior marketing folk from law firms. Network, network, network–but make sure it’s targeted.

Once you’ve got a potential candidate, how will you know for sure they can do the job? Executives have great impact–on employees, on systems, on profits–so it’s worth your time to check them out thoroughly. Call each of their references, and listen between the lines (with lawsuits today, recommendations always glow).

A CFO may have embezzled from his last company, but the employer still says “They did a good job” (I swear–this is a true story). This grade inflation means you need to listen for less-than-glowing opinions. “Fred showed up and sat at his desk like a real trooper” is a sure sign that Fred enjoys taking every Wednesday off to go golfing with the boys.

Interviewing Tips

When it comes time to sit down with your potential C-suite candidate, there are a few things to know that will make your job a little easier:

• Make sure your candidate really knows the job. If your CMO-to-be doesn’t know the difference between marketing and sales or your CFO can’t tell you the difference between LIFO and FIFO, pass ‘em by.
• Interview for chemistry. Do you trust this candidate? Do you want to spend time with them? Believe me when I say, you don’t want an abrasive team member, no matter how talented they may be. One COO I know, scared to make the hard decision, reorganized his entire company around a highly talented, incredibly obnoxious executive that everyone despised. The exec’s talent got to shine–but everyone within 100 yards quietly subdued theirs.
• Talk to people from your candidate’s former company. Are the candidate’s claims of divine brilliance reflected in what their former peers and subordinates have to say about them? Find out if they got the work done and also how they contributed to the company’s culture. In a small business, cultural issues can be every bit as important as getting things done.
• Always hire really smart people. Here’s a good guideline to follow: Every new hire should increase your company’s average IQ. That means they should all be smarter than you. Get used to it.
• Look for evidence of learning ability. Will your candidate repeat mistakes they’ve made in the past? Or will they learn from those errors and adapt that knowledge to your company?
• Use “behavior description interviewing” techniques. Don’t ask about principles, knowledge or “what if” stories. Instead, ask your potential executive team member to share specific past events. Their stories will reveal their values, skills and abilities. For example, you might ask a CFO to describe a budget they set up and how they handled it when a manager exceeded their budget and asked for more.

One word of caution: Be wary of hiring friends or family members. They’ll expect you to trust them and just assume they have a high skill level. What’s worse, you may trust them and assume they have a high skill level without any evidence to the contrary until after you’ve hired them. And unless you take care to be very clear about the boundaries between friendship and work, you may find your friendship in ruins over workplace disagreements.

Making The Deal

Once you’ve found the executive you’d like to hire, you have to entice them to join your team. There are no standard rules for the best deal to offer them. Hourly workers may be thrilled to get cash, but executives aren’t so easily satisfied. They often want stock options, exorbitant pay and an annual–or even quarterly–bonus.

Since their job is to make the entire company succeed, use stock options and a bonus plan to link their income to the company’s overall performance. Stock options should be aligned with long-term performance, while bonuses and profit sharing should be based on the past year’s results.

Of course, not all executives crave stock. Ideally, you’d love someone capable who’s happy with a challenging job and modest salary. And they’re out there! Some well-qualified people care much more about family time, a fun culture, a challenging job, or being part of a world-changing effort.

The more you understand each person’s drivers, the more you can craft deals that satisfy them in ways that transcend mere dollars.

But no matter what you decide to offer, keep it simple. If your bonus formula requires a PhD in higher math to understand, it won’t motivate anyone.

Delegating to Your New Executives

Once the new members of your team are on board, it’s time for the truly hard part: trusting them. Your gut will fight you every step of the way. You’ll assume your instructions are clear and misunderstandings are their fault.

You’ll assume when you disagree that you’re right and they’re wrong. But you’ll sometimes be wrong. The key to successful executive relationships is changing what your gut tells you.

Remember how you interviewed for trust? That’s important because once you hire an executive team, you must let them take their responsibilities and run with them. That means agreeing with them about what their roles are, what deliverables they’re responsible for and on what time frame.

It’s also worth deciding in advance how you’ll handle disagreements. You hired this person assuming their judgment was better than yours. So when you disagree, if you did your job right, chances are that they’re right and you’re wrong. Discuss early on about how you’ll make the call, so you get the most benefit from constructive conflict.

Just remember: If you agree on everything, one of you is redundant.

Entrepreneurship is about going for the things that are much bigger than what you could do alone. Your job isn’t to reach the goal; it’s to build a team that will reach the goal. If you really want to reach your goals, you’ll need to bring on others to help.

Creating a good executive team means knowing what you need them to do, finding good candidates, and giving them what they need to do their jobs. If you choose well, they’ll be successful and make you successful as well.

Do you draw a blank when you try to write a sales letter? Do your ideas sound good in your head but don’t come together on paper? You’re not alone.

These seven tips can help you write more effective sales letters:

1. Be the customer as you write. This is the most important aspect of a good sales letter, but it’s often overlooked. Imagine yourself as the reader of your letter, and write what the customer wants to know–not what you want to say. You have one page to attract a customer; you’ll lose the opportunity if your sole emphasis is on your business. Remember, your customer’s main concern is fulfilling his or her needs and desires, not increasing the balance in your bank account.

2. Organize your letter. Sales letters, just like high school term papers, need an introduction, a body and a conclusion. In the introduction, tell why you’re sending the letter. The body is your “sales pitch,” where you’ll explain why your offer is irresistible. The conclusion wraps it up by briefly bringing your points together and asking the customer to take advantage of the offer.
3. Make it easy to read. Many sales letters are thrown away without being read simply because they appear too complicated. Don’t let this happen to you. Use the following guidelines:
   • Write in a conversational style. Write exactly as you normally speak; formal tones are usually unnecessary in sales letters.
   • Use short sentences. Once you start writing more informally, you’ll notice your sentences will get shorter.
   • Compose short paragraphs. People like to have breaks in their reading. If it doesn’t flow smoothly and sound natural, rewrite it.
   • Edit and then re-edit your letter. Besides being difficult to read, misspelled words and grammar errors destroy the credibility and effectiveness of your letter.
4. Capture your reader’s attention. Headlines are not limited to ads. They can also be used in letters to tell readers something they want to know in a bold way that grabs their attention. You can also use longer headlines–up to three or four sentences–to present important information. In either case, always make the headline compelling so customers want to read the rest of the story.
5. Get your readers interested. Involve the reader in the letter by bringing it to life with a steady flow of interesting information. Write in an active voice.

   Build on your sentences and paragraphs so the reader is encouraged to continue reading. Every sentence needs to be interesting; a reader can become bored quickly.

   June Van Klaveren, owner of Compelling Communications, a copywriting firm in St. Louis, recommends including a handwritten note or an arrow in a different color ink to highlight an important fact and retain your reader’s interest. “I also include a `P.S.’ at the bottom of the letter,” says Van Klaveren.

   “You can count on this and your headline being read because you’ve piqued the reader’s curiosity.”

6. Make your readers want your product or service. This is best done by answering the reader’s question, What’s in it for me? People are bombarded daily with billboards, commercials and direct mail–all trying to sell something. Your letter can stand out by not selling, but offering benefits.
7. Ask your readers to take action. Potential customers won’t know what you want unless you tell them what to do next. If you want them to call you, say that in your letter and provide your phone number. If you want them to visit your facility, invite them to stop by and give them clear directions and specific office hours.

It’s also important to urge your readers to take action right away. The longer it takes them to respond, the less likely it is you’ll hear from them. If you’re running a promotion, offer the special for a limited time. If you only have a few units available, be sure to state that quantities are limited. This generates urgency to follow up on your letter.