ABC Hardware: conclusion Tom Jones, the owner of ABC Hard- ’ ware, wants to borrow $60,000 to expand his premises and extend his lines. His banker asked Tom to prepare precise estimates of the cost of expansion and two-year projections of income and ¢x- penses. The banker also visited Tom’s store. In this concluding instalment of the Case of ABC Hardware, Tom and his banker are meeting in the latter’s office. "- “The $60,000 that you want, Tom,” says the banker, ‘‘is more. than you need and more than you can comfortably af- ford to carry. We can cut your loan ap- . plication by half if you’ll follow my ad- - : vice.”” : by Phil Hartl Manager, Terrace Federal Business Development. Bank _ Tom is surprised to hear this. He was up past midnight check- ing his figures. The $60,000 — $40,000 for the cost of premises, $20,000 for new inventory — still seems to be his absolutely - minimum requirement.-He says so but adds he is prepared to fear what the banker has to offer. a - “In the first place,’’ says the banker, “you are not rolling over your stock as rapidly as you should. Here it is March and you’ve™ - still three snow blowers on your floor. I figure ‘you’ve $10,000 of winter.stock which you could clear out. Sell it off now. Even if” you just break even, you’re still better off than you would be car- rying it to next winter. | _. “And if you keep on clearing out your seasonal stock, instead — ‘of carrying it over, you should only need $10,000 to stock your new addition. That would bring down your loan to $50,000.” ‘‘Alright,’’ says Tom. ‘‘I can see the savings there but you say you'll loan me $30,000. There is no way ] can improve the premises for less than $40,000 and Pll still need that other $10,000 for inventory.”’ a _ “Wait,” says the banker, ‘‘What about that $10,000 in savings you have on deposit? You’d be making better use of them if you put them into your store expansion.” “But”, Tom protests, ‘‘those savings are earning me a clear 20 percent with no risks.”’ “That may be,’’ says the banker, ‘‘but if I loan you $50,000, : your ratio of debt to equity will have been pushed too high, leav- _ ing you with a cost for debt service which is too much for the business to carry. You would soon have to draw on those savings to service your debt anyway. Better to put your savings into the reduction of your borrowing requirements.”" “And if you do,’’ the banker continued, “‘you'll reduce your loan requirement to $40,000, But we can do better than that. You ~ have a $10,000 line of credit with us but your receivables, with which it is secured, are fluctuating between $15,000 and $30,000. { would be justified, in these circumstances, in increasing your line of credit to $20,000 and it would cost you less, on average, than a comparable term loan.” - “Tf you do. what I say,” the banker concluded, ‘‘if you roll over your inventory faster, which means carrying less of it, and if you use your savings to reduce your borrowing which means " eventually a better return on them, and if you take out a larger - line of credit which costs you less than term borrowing, you'll be ‘able to expand your store for a $30,000 term loan.’’ _ Needless to say, Tom went along with the deal. It meant he had to invest $10,000 of savings in the new addition but, if he managed properly, he would recover that from the increased revenues the addition would bring. At the same time, the carrying | costs for the loan he originally sought — $60,000 at 20 percent for $12,,000 a year — were reduced to half that plus the cost of his extended line of credit. ~- donsered Super 670 © _ Heavyweights: i's Cool... It’s Fast... {i's Tough Will out cut anything in its class This new conterder from JONSERED with its stronger mid-section can really take a beating. The Super 670. packs o powerful punch. gig Accept tha challenge . and be o cut cbove the rest. ProLine A CUT ABOVE THE REST 4 SEE THE JONSERED SUPER 670 AT YOUR DEALER | RIVER INDUSTRIES | (TERRACE) LTD. P.O, BOX 538 — TERRACE, B.C, VBG 485 5130A HIGHWAY 16 WEST -- 635-7983... ~ Keeping valua Terrace Review — Wednesday, October 19, 1988 13 ble resources contributed by Phil Hart! | Small Business Week: Oct. 23 - 29 In today’s competitive environment, there’s no question that people ‘ie your existing staff and those you can attract to your company — are among your key resources for the future. - Increasingly, gaining and keeping the com- petitive edge depends on improving your business activity. Among the best ways to reach that goal is to invest time and money in motivating, training, and developing your staff. Owner-managers also must learn to manage people gracefully and effec- tively if they intend to retain their most vital resources. ve - Dealing with people can be tough —‘a lot tougher than'dealing with, say, blueprints, pro- duction schedules, or even your budget. But there probably are few investments that will provide a great return as learning to manage your staff more effectively. Be | Some Managers Lack “People” Know-how In many cases, owner-managers enter business ‘with a strong technical background in marketing, sales, production, or finance. Rarely are they comfortable. wearing all the hats required of a well-rounded general manager. And they seldom start their own businesses with any real experience of managing people. . Once you launch your own business, you’re cast in the role of ‘‘leader’?, whether you feel fully comfortable in the role or not. Fortunately, many excellent low-cost courses and seminars are available to help owner-managers polish their business skills — including those in the area of in- terpersonal relations, staff management, and motivation. What Makes A “‘Good Boss”? Beforé you can ‘take steps to improve your people-management skills, it probably pays to ask just what makes a good boss. Ideally, the ‘‘good boss”’ is the person who can balance the company’s need for productivity with the employees’ needs for respect, responsibility, and attention. Remember, each person will have a different set of needs that you, the boss, must learn to meet. . You'll be unable to lend an ear each time an _ employee requires it; however, what you can and . should do is convey to employees that you care about them as people. | Especially in smaller companies, it’s often im- possible to allow employees a few extra days off to attend a personal or family crisis. And with creativity, you can find much-appreciated ways of saying “thank you’? when your staff goes the ex- tra.distance for you and your company. Adopt Good Ideas When you as the boss actually can appreciate and adopt your employees’ good ideas, then you've really begun to get full value from your valuable human resources. Bearing in mind that your employees are a vital company resource, your goal is to ensure that you and your employees share understandings about job functions, productivity, and expectations. Valuing your people as an important resource for the future is one of the surest ways to ensure productivity and success of your company. . "The Federal Business Development Bank | MONDAY - OCTOBER 24th, 1988 OPEN HOUSE - 4:00 - 6:00 p.m. Federal Business Development Bank, Branch Office 4641 Lazelle Avenue, Terrace, B.C. WEDNESDAY - OCTOBER 26th, 1988 WORKSHOP - “Building Your Enterprise Through People”’ ~ Most businesses have financial plans and marketing plans but what about human resource planning? Your employees are a valuable asset and your human resource planning should include: projecting future needs, establishing responsibities and identifying training and recruiting needs. In any business it’s the people who make things happen. Take advantage of this thought-provoking workshop and plan for your company’s short-rern and long term growth. Inn of the West THURSDAY - CHAMBER OF COMMERCE - Dinner (Roast) & Presentation - Inn of the West - — Contacts: - 7:00 - $:30 p.m. - Cost: ‘10,00 per person OCTOBER 27th, 1988 = ‘‘Business Executive of the Year’’ 6:30 p.m. - Cost 515/20 Phil Hart!, Manager Paul Williams, Senior Account Manager Wes Beeston, Small Bus. Dev. Officer _ Telephone: 635-495 | OF COMMERCE r YZ ministry of Regional Development wr THE CANADIAN CHAMBER Federal Business Banque fédeérale Development Bank de développement Canadil