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Arkansas Small Business Administration Director Edward Haddock holds a MBA from Rutgers University and Bachelor of Science in Organizational Management from John Brown University.
Prior to working with the SBA, Haddock served on active duty with the U.S. Air Force. In his last assignment, Haddock was instrumental in the development and implementation of several international aircraft maintenance training programs. Haddock’s 12 years of active duty service included several deployments spanning the globe supporting both humanitarian and combat operations.
Haddock began his SBA career in 2011 as an Economic Development Specialist in SBA’s Newark, New Jersey Office where he led the delivery of Veteran Business Development programs throughout New Jersey. While there he created the export outreach team and instituted a multifaceted program called Grow NJ Strong, a targeted recovery effort for small businesses impact during Hurricane Sandy. Haddock has led projects in roles as the Women’s Business Center grant technical representative and International Trade Representative.
In 2013, he was promoted to serve as the Senior Area Manager in Fayetteville Arkansas where his efforts led SBA development with partners across the northwest Arkansas community and was appoint to serve as a regional representative to the White House Initiative Asian and Pacific Islanders.
In May of 2015, Haddock was appointed as the SBA’s Arkansas deputy district director. In that position he directed the agency’s operations of its programs and services through the state where he oversaw program development and rollout of programs like Boots to Business and SBA Emerging Leaders.
Haddock is currently the District Director for the Arkansas District Office of the U.S. Small Business Administration. As District Director, he is responsible for the delivery of all SBA programs and services as well as coordination between the SBA, the district’s Small Business Development Centers, SCORE chapters, and the Women’s Business Center throughout the state. Programs and services delivered by the SBA include the loan guaranty program, which is delivered through more than 50 eligible lenders, assistance in government contracting, export development and entrepreneurship training. He brings with him a diverse business background in both non- and for-profit businesses with a concentration in finance.
Up In Your Business is a Radio Show by FlagandBanner.com
EPISODE 60
[INTRODUCTION]
[0:00:03.2] TB: Welcome to Up in Your Business with Kerry McCoy. Be sure to stay tuned till the end of the show to hear how you can get a copy of this program and other helpful documents.
Now, it's time for Kerry McCoy to get all up in your business.
[INTERVIEW]
[0:00:17.1] KM: Thank you, Tim. Like Tim said, I’m Kerry McCoy, and it’s time for me to get up in your business. For the next hour, my guest and I will be having a conversation of curiosity and storytelling. We hope you’ll learn something, want to get involved or be inspired to take action in your own life.
For me, the taking action began over 40 years ago when I founded Arkansas Flag & Banner. During the last four decades, Flag and Banner has grown from door-to-door sales, to telemarketing, to mail-order and catalog sales and now relies heavily on the Internet. Each change and sales strategy required a change in company thinking and procedures. My confidence, leadership knowledge my company grew. My initial $400 investment now produces nearly 4 million in annual sales.
Each week on this show you’ll hear candid conversations between me and my guest about real-world experiences on a variety of businesses and topics that I hope you’ll find interesting. Starting and running a business or organization is like so many things. It takes persistence, perseverance and patience. No one, and I mean no one has a straight path to success.
I worked part-time jobs for nine years before Arkansas Flag & Banner grew enough to support just me. Today, we have 10 departments and 25 coworkers, thus reminding us all small businesses are the fuel of our country's economic engine and empower people's lives.
Before we start, I want to introduce you to the people at the table we have. We have cohost and coworker Flag and Banner, Tim. Say hello, Tim.
[0:01:46.2] TB: Hi, Tim.
[0:01:47.1] KM: And running the board is Jesse. Welcome also, Jesse.
[0:01:51.4] J: Why, hello.
[0:01:52.3] KM: My guest today is director Edward Haddock of the Small Business Administration. Director Haddock began his SBA career in 2011 as an economic development specialist in Newark, New Jersey. There he worked on many programs ranging from veterans business development to grant writing at the Women's Business Center, and most notably the recovery effort for small businesses that were impacted by hurricane Sandy.
It was in 2013 that Edward came to live in Arkansas to first work in the Fayetteville and Northwest Arkansas communities. Two years later, he moved yet again, this time to Little Rock in the role of deputy director of the Arkansas District.
Edward served 12 years in active duty for the U.S. Air Force where he spanned the globe supporting in both humanitarian and combat operations. Mr. Haddock holds an MBA from Rutgers University and a bachelor of science in organizational management from John Brown University. It is a pleasure to welcome to the table, SBA Director Edward Haddock.
[0:02:53.8] EH: Hi, Kerry. Thanks for inviting me.
[0:02:55.7] KM: Edward, I saw that you are in the Air Force for 12 years when I was reading your bio. First, it looked like you were going to be a career Air Force person, but then you changed paths. Can you tell us what happened if there is one event that made everything change for you?
[0:03:14.4] EH: Great question. Well, I did enjoy a great career with the Air Force I enlisted in what I was 18 just coming straight out of high school and spent quite a bit of time flying around the world as a C-130 crew chief. Eventually I gained a better understanding of what I wanted, I think, ultimately in life and that set me out on a path to invest in some businesses and start pursuing the business world, and in 2009 I found myself a great opportunity to go out to go back to school and get my degree. So I figured, “Let's go ahead and do it,” and I jumped. Then 2009 I left the military and started with the U.S. Small Business Administration, which got me where I am today.
[0:04:05.7] KM: Did you start your business while you were in the military?
[0:04:07.7] EH: I did. I was at what we would call a hustler, right?
[0:04:12.1] KM: For what?
[0:04:12.7] EH: Well, you name it. I always wanted to do more. So at the time I had seen, really, my money being invested into or put into rent knowing that that really wasn't going to give me any headway in my life and where I wanted to be, and I knew also if I did stay in 20 years in the military, that wasn’t going to be a well-cushioned retirement. So I said, “I better start planning for this now and really start figuring out what I want to do in 20 years, because if I just allow this path that I walked down without any direction, I’m going to end up where I’ve seen so many folks end up at the end of the military careers with very little to have in their pockets and kind of starting over at 50, 55 years old.”
[0:04:59.8] KM: I’m so proud of you. I’m not even your mother and I’m proud of you. You made a good decision at 18 to get some discipline in your life, and you join the military, which is a noble thing for everybody to do. Then you became very self-aware, it seems like, once you got your head straightened up.
[0:05:22.3] EH: I try to learn from other people's mistakes. It's one of those things I bring into the business world where, “Hey, if I can talk to somebody who's made that mistake or hasn't and has made a different decision that would propel them forward, I'm going to take that away and I’m going to use that in my own life.”
Again, by listening to other people and hearing their experiences, I don't necessarily have to make every mistake in the book and I can learn from them to get ahead of where I'm at. Imagine that, right?
[0:05:53.4] KM: No! That never crossed my mind when I was young. In fact I actually said, “Don’t tell me what to do. I want to do it myself.”
[0:06:01.3] EH: I did that before 18, but it seemed at that magical point when — When I was really ready to move forward and kind of change and grow up, I did that. Before then, I was a punk rocker. I had a 4 foot blue mohawk that I would wear to school. I used to listen to The Clash and the Sex Pistols and I mean I was a rock 'n' roll guy, and you know what? you couldn't tell me what to do, but at some point I had to grow up.
You know what? If you looked at my junior high school photo album versus now, two completely different types people. One that was against a lot of the bureaucracy that we’re in, but then at the same time, you know what? The only way to change it is become a changed agent in it. So that's what I decided to set my life out for, and I've been doing that ever since I enlisted in the military at 18 and I'll continue to do that as far as I can foresee.
[0:06:58.0] KM: That is so well said. So how did you end up with the SBA?
[0:07:03.1] EH: So when I did decide to leave the military, one of the great things I think our military has offered is the GI Bill. So during my time in, I had done some undergraduate courses and eventually moved up to getting a bachelor's degree while I was serving on active duty. At my 12-year point I said, “You know what? I’m going to get out here and I want to take this business thing to the next level.” I was really enjoying what I was doing in the real estate field and I had opened up a small retail store and I kind of wanted to pursue my business side. So I ended up winding down my retail store in and starting applying for graduate schools. I wanted to go and get my master’s, my MBA, so I could really focus on the business.
You know what Challenging enough, Arkansas has some good institutions, but you know what I decided to look out of state to go back to school. So I looked back to where I came from, the New Jersey, and I was applied and got into Rutgers University. So I decided to go back there and pursue my MBA.
[0:08:07.0] KM: That's good.
[0:08:08.3] EH: At the same time, what gave me the opportunity and searching the Internet, I spent about a year in transition of the military. Probably one of the hardest years in my life, really soul-searching, because you mourn the loss of one person you have to re-create the next person that you're going to be, at least for me.
[0:08:27.7] KM: Interesting.
[0:08:29.2] EH: You know what I found this job online. It was called an economic development specialist, and it was to talk about business and to really understand how businesses work and then how to work with small businesses to get them the resources that they need to grow and hopefully take some of my experiences and then park that on to other small businesses.
So I applied and I got the job and so I started with the Small Business Administration in January of 2011.
[0:09:02.6] KM: You just were throwing out resumes and saw that one.
[0:09:06.5] EH: Yeah, you do the whole resume turnover. I must've submitted at least 100, 110 resumes to different jobs. Really, coming out of the military, it was a struggle because you have this annual enlisted performance report and all you know is the military, and then kind of when you go and transition out, it’s a whole other world in there, this for-profit private world. It has a different level of expectation from what any soldier or airman’s normally getting.
There’s a transition period a lot of our military veterans go through, and I think I had a unique experience in that and I go back to Little Rock Air Force Base even today to work with their transition assistance program in teaching entrepreneurship and boots to business to our transitioning service members.
[0:09:57.8] KM: I think this is a great place to take a break. When we come back we’re going to learn more about the SBA Director Edward Haddock. Get tips on running a small business and find out what he sees for the future of small business in America.
[0:10:09.8] TB: You’re listening to Up In Your business with Kerry McCoy. If you miss any part of this show, a podcast will be made available next week on flagandbanner.com's website. If you prefer to listen on iTunes, YouTube, or SoundCloud, you’ll find those links there as well, lots of listening options.
[0:10:38.2] KM: You are listening to Up In Your Business with me, Kerry McCoy. I’m speaking today with SBA Director Edward Haddock of Little Rock, Arkansas. Okay, you’re now the economic development specialist in Newark, New Jersey. You lead the Veterans Business Development, you instituted a multi- faceted program for Grow New Jersey Strong, which was called Grow New Jersey Strong, but it was about hurricane Sandy.
[0:11:03.3] EH: Right. That was a Sandy recovery efforts where we are able to really get a lot of our small business partners around the table and help those businesses that were affected by hurricane Sandy to reconstitute and get capital access and also get out and reach those customers in their devastated towns.
[0:11:23.0] KM: What was the biggest struggle during that time for the small businesses? Was it —
[0:11:27.4] EH: Liquidity.
[0:11:28.4] KM: Yeah, money.
[0:11:28.9] EH: Liquidity. Yeah, absolutely. I mean when you're in that situation and now evermore present today than it even was during hurricane Sandy, we've got the trifecta going on out of Houston, Florida and Puerto Rico. The U.S. Small Business Administration is a direct lender at that point for disaster loans, and so the U.S. SBA comes in and starts creating liquidity for those small businesses. As you file your disaster applications in through FEMA first and through your insurance agencies, sometime those take a little bit longer, so SBA offers that interim liquidity loan in order to help you get from point A to point B.
[0:12:13.2] KM: Do you have to meet the same qualifications, because you don’t have any income?
[0:12:16.6] EH: Right. It’s nowhere near a stringent of qualifications, but there is two different factors in that and they do look at the ability to repay as part of that. Again, they're trying to create that safety net for those businesses in those times of need.
[0:12:31.9] KM: You’ve got to build your building back. Most of these or a lot of these people probably kept their employees on the payroll, because they didn’t want to lose them, and it was just a good thing to do for as long as they could. So you’ve got all these out-of-pocket expenses going on and you have no income coming in. Do you give them, like you said, “Yeah, here's your loan. You’ve got a year to start paying them back.” Is it like a bridge loan?
[0:12:54.8] EH: Yeah, basically a bridge loan, because, again, the thought process behind it is insurance is going to be able to cover most of those losses, right? So you do have insurance coverage on some of those, and what's not covered is really that that measure that we’re looking to help support and so you can get back up on your feet and start running again. That could be, again, either water remediation to clean out and to get sales up and running again.
[0:13:20.4] KM: None of the money can really be used for construction to rebuild the business?
[0:13:23.8] EH: Yeah, absolutely. It is.
[0:13:24.8] KM: It can. Then can you put like a lien on their insurance that says when the insurance pays, you have to give it back us?
[0:13:31.5] EH: Absolutely.
[0:13:32.4] KM: Oh! That's why they do it that way. Then the government, like you said, makes it less stringent. Okay, what were you proudest of that you did during that time?
[0:13:43.8] EH: I still have some businesses every once in a while call me and just say thank you. Really, in that position, I was able to get out into small businesses, and I was able to sit down with those entrepreneurs and those small business owners and really take what I was learning in my MBA and help them apply to their business.
[0:14:03.0] KM: Like what?
[0:14:03.3] EH: Either looking at their balance sheet, looking at their cash flow statements. To be able to look at their tax returns and identify uses of funds that they didn't necessarily see. Maybe some areas of taxes they were paying on that they could have done a distributional a little bit differently and save that tax liability.
There was just a lot of interaction, one-to-one with small business owners that don't necessarily get as much today, but at the same time in New Jersey — I had a great, just a great population to work with and both some of the underserved markets in Jersey City, which is one of the most densely populated counties in the nation, and then I would also get a chance to get out to some of the more rural areas of New Jersey where there's farms and there's seaside resorts in those areas and work with the smaller entrepreneurs out there. You really got a taste of everything working in that area.
[0:14:59.0] KM: Because probably, most of the time you sit at your desk, people come to you, they as you loans, you look through business plans, and in this particular case it sounds like you went out into the field.
[0:15:09.4] EH: Yeah. So we always say at the SBA, “If you're doing economic development and you're in your office, you're not doing it right.”
[0:15:16.9] KM: Really?
[0:15:18.5] EH: Yeah! Economic developments not done from behind a desk, right? Especially us. Our jobs as economic development specialists is really to go out and educate the small businesses on what resources are available for them and then help them engage with those resources and make sure they're using those adequate resources, or if they have some need, that we help identify what that need is and where can we get service and help them out.
[0:15:44.7] KM: So what are Arkansas resources that people need to know about?
[0:15:48.6] EH: The SBA of courses is a small federal agency. We are present in all 50 states, in U.S. Virgin Islands, and Puerto Rico. There are actually 68 district offices around the country and ours here in Little Rock covers the entire state. With that, we have some great, we like to call the three C's and a D; counseling, capital access, and contracting, and disaster assistance. Everything under the counseling, we have seven partners throughout seven centers, small business and technology development centers that are in each one of the higher education universities around the state. All seven of those do individual one-on-one counseling with small businesses.
[0:16:36.7] KM: So if I wanted to go and take one of your courses, what would I do?
[0:16:42.0] EH: Well, you would obviously see which ones we had out on our calendar sba.gov\ar for Arkansas, and that will take you out to our website where we list any of those trainings at either us or our resource partners are giving.
Generally, what will find is SBA, we don't do too many trainings directly for the small businesses. That's where our resource partners come in, like the Small Business Technology Development Center, score in the Women's Business Center. Those are the ones that do the one-on-one training to the small businesses. Now, my staff that has a goal in order to train so many small businesses with the resource partners. So their job is to really engage the community and help bridge that gap between the small businesses and the service providers that give that counseling service.
[0:17:34.4] KM: And you’re talking about banks.
[0:17:36.6] EH: No. So that's under the capital program. Now, under a capital program —
[0:17:39.8] KM: How many programs are we talking about here?
[0:17:42.0] EH: Well, if we were to really talk about the full portfolio of SBA programs, there's probably over 60 programs.
[0:17:42.0] KM: What? Because there's a women's, there’s —
[0:17:51.3] EH: Right. We have women’s business initiatives and we have the Innovate Her Competition.
[0:17:56.3] KM: I don’t even know about that.
[0:17:56.8] EH: Right, and so that's a pitch competition for businesses that can possibly impact women's lives. The administrator, our former administrator and officer, women's business ownership, has created at pitch, a challenging program so businesses can go and pitch and win prize money to go ahead and start —
[0:18:16.4] KM: Just like an elevator pitch.
[0:18:17.4] EH: Absolutely.
[0:18:18.1] KM: And you do it in front of a bunch of people and then you have a panel of judges and they pick up which one is the best one.
[0:18:23.6] EH: And we hold these all across the country and eventually get up to a national competition.
[0:18:23.6] KM: How much money can they win?
[0:18:29.3] EH: They can win up to $5,000.
[0:18:31.8] KM: That’s not enough.
[0:18:32.8] EH: Yeah, I know.
[0:18:34.3] KM: It needs to be more than that. I want 500,000. Is there a program for that?
[0:18:40.3] EH: If you're ready to take out a loan, we can help you with that.
[0:18:43.8] KM: I don't want to take out a loan.
[0:18:45.8] EH: Yeah.
[0:18:47.2] KM: That’s grant. So I’m talking about grants —
[0:18:48.9] EH: Oh, yeah.
[0:18:50.5] KM: If you want to be given money, that’s a grant.
[0:18:53.9] EH: That G word we don't use too often.
[0:18:56.6] KM: You don’t. SBA don’t have anything to do with grants.
[0:18:58.7] EH: The only grants we give are directly to our resource partners to provide that one-on-one training, or there's a program called SBIR and STTR. Again, when we look at this portfolio of programs SBA works, it's pretty wide and pretty deep. Now, the SBIR program is really —
[0:19:17.4] KM: SBIR. What’s that?
[0:19:18.9] EH: Small Business Innovation Research, and those are grants. Those are grants to organizations that are working on cutting edge technology development. That can be applied to government agencies. So for example, DODs SBIR program.
[0:19:37.0] KM: Boy! You are an acronym freak. DOD, what's that mean? Dead on arrival? No? DOD.
[0:19:42.9] EH: Department of Defense.
[0:19:44.2] KM: Oh, sure.
[0:19:45.1] EH: Those are of course all our brothers and sisters in arms under that agency. In there, let's say the DOD has put out solicitations to really improve battery life and find out how can we create a battery that's war ready and can hold a sustainable charge longer because we know our war fighters are going on to the front lines more equipped with technology now, but that technology has to be powered.
They usually solicit SBIR nominations in order to find a better technology to create the next best battery that our soldiers and war fighters can use.
[0:20:21.4] KM: I think Tesla is working on the next best battery, aren’t they?
[0:20:24.1] EH: I think a lot of folks are in that realm, because we know that's a big challenge, but not only in Department of Defense but in Department of Transportation, NASA and all the other agencies have been SBIR program that a business, usually a research-based business, can apply to and get grant funding to test their theories.
[0:20:43.4] KM: So let's say that I wanted to — I know I’ve been to the SBA and I’ve used — And Arkansas Flat & Banner has used the Small Business Development Center, and I've had them on the show because they taught me to write a business plan 30 years ago. Do you think most people know how to write a business plan or even rate a business plan? I head you say in New Jersey you went out and kind of worked with people on their balance sheet and income statement. Do most small businesses know the difference between a balance sheet and an income statement?
[0:21:09.5] EH: Not a chance.
[0:21:10.4] KM: Yeah.
[0:21:10.7] EH: Yeah. Really, it comes — We've got so many great businesses out there and you know what they're doing? Exactly what they know to do, and that's usually to sell, to work, to build, whatever it is that they’re earning money on. That's what they know best. They don't necessarily know the business side of starting a small business.
A lot of times we’ll sit down with folks that maybe, let's say plumbers or electricians and they’ll talk about, “Yeah, I want to start my own business,” and they’ll talk about how they want to work on more of their item, their widget, their plumbing, their whatever, but they don't really understand that. Really, being the CEO of the company, starting your own business has less to do with what you're actually doing, the plumbing, the electrical work, than it does about organizing and managing plans and people and money.
[0:22:04.6] KM: I know, right?
[0:22:05.3] EH: Right?
[0:22:06.8] KM: It took me 10 years to figure that out.
[0:22:09.3] EH: Then you got a short course. I takes some people a lifetime to figure out and some of them never even figure that out. So our job is really to help them in that development path wherever they're at and whenever they're ready, because one of the biggest challenges we have is getting in front of that person when they're ready to hear us.
[0:22:29.3] KM: Yeah, everybody's challenges getting right in front of somebody when they're ready to hear it.
[0:22:33.1] EH: Right? And that's every businesses challenge out there. You have to hit them six or seven times and they won't hear you, but until they're ready, once they're ready, if you're not there, you're not there. You lose that customer. For us, that could be a potential job creator that we’re losing, and that's where the economic development component comes in, is each one of these businesses that we’re talking to are essentially job creators, and if we don't support them, we’re not going to support the net new job creation that we have in the United States, because we know two-thirds of all new jobs come from small businesses.
[0:23:13.7] KM: Wow!
[0:23:15.1] EH: So with that, we have to support these small businesses and we have to get them prepared so they can hire one more person or the next person and grow, because if we don't, our employment is not going to be able to grow, and these are usually the small, flexible, innovative companies that are resilient and can go through the competitive times that we’re currently in.
[0:23:39.1] KM: You know, when I had the Small Business Development Center guy on, somebody called in and said, “Tell me he —” was a plumber or somebody who drove — He was a service man and he drove around his truck all day long and he owned his own small business and he said, “I just can't stand at the end of the year to pay my taxes and do all that and come back with my receipts.” He can even keep up with hapless receipts probably.
The gentleman I was with said, “Put an accordion folder in your front seat of your car and every time you spend any money on any supplies or anything, file it into this accordion folder that’s sitting on your seat right there and then hand it to bookkeeper.” I was like, “Well, that's pretty easy. Everybody can do that, even if you don't like that part of the job.”
[0:24:25.0] EH: Absolutely, and it's making those little steps. But, again, for most people, that's a challenge, just to stay that organized. Now, there's more apps on your iPhone that will track every dollar you spend in every way you spend it and anywhere you spend it, right? But it still means getting into that and doing it on a daily basis.
[0:24:43.9] KM: That sounds awful. I don’t want to do anymore things on my phone. I’m so sick of my phone. It's like a part of my — It’s an appendage.
[0:24:52.9] EH: It is, and there's a divergence there in the small business world, because that helps in productivity and hopefully organization and management, but if you don't really set that, right? If you don't set that schedule and exercise that, you're not going to win. You're not going to grow in that area. It's just like losing weight and going to the gym. You think you're going to get muscles overnight? Good luck. IT takes every day of going and working on those and eating the right diet in order to get more fit.
[0:25:20.1] KM: So for everybody out there listening that owns a small business, they need to learned what I learned, which was basically I would — Which was I sold so much one year. I doubled my sales. I went from $75,000 in sales one year to $250,000 in sales one year. I can’t even remember the number amount, and I lost money.
[0:25:42.7] EH: Yup.
[0:25:43.4] KM: That was like, “What?” My accountant said when I turned in my taxes, I said, “I was so struggling earning money,” and he said, “Well, you lost money.” I said, “How can that be? I sold more.” All I thought about was my sale. I didn’t think about the margin, the profit margin.
[0:25:58.4] EH: You thought about top line revenue, not bottom-line net profit.
[0:26:02.3] KM: That’s all I thought about.
[0:26:05.4] EH: And so those are the lovers, right? Those are the levers we try to talk about in the business that you have the ability to either raise your price to sell more of an item or to lower your cost of an item or to lower some overhead costs that you have.
[0:26:18.4] KM: That’s all you’ve got. You can either raise your price or lower your cost. That’s all the options you have. Most people, probably if you’re listening out there, I bet most of y’all have not raised your prices in five years, and I promise you all your vendors have, all your expenses have gone up, your gas, your utility, probably everything.
[0:26:37.0] EH: We run a program here that I started actually when I got into Arkansas. We’re going on our third year. We just graduated our third cohort, and it’s called the SBA Emerging Leaders Program, and what that is is it is an intensive eight-month long learning session with the SBA and our partners in order to take a business and what we’re looking for in those businesses is they have been in business for at least three years. They have at least one other full-time employee besides themselves, and they have at least 500,000 in revenue. Okay?
We’re looking for those types of businesses that are at that rate, because those businesses have done something right. They've made it past the three year mark, which is a big hurdle for small businesses. They've made it up to 500,000 in gross sales, which is a pretty decent number.
[0:27:31.8] KM: Yeah, it is.
[0:27:32.3] EH: So you know at least you're doing something right to get up to that number. Now, one other person, because ultimately what we’re taking is this business owner and helping them turn into a CEO. So they can really begin to focus of working on their business instead of in their business.
So this eight-month long program helps teach them a mini-MBA program basically where we go through customer acquisition costs, we go through customer marketing, we go through finances, we go through financial dash-boarding so you can build your own financial metrics to know what your cost of goods are, to know which some of your quick ratios are and your liquidity ratios.
[0:28:15.4] KM: Yeah.
[0:28:17.3] EH: To truly how to run the business from not only the financial end, but across the spectrum of what you need to be as the CEO, and that starts with setting a company vision and mission. So we walk them through that over their eighth-month in hopes that this place-making economic development strategy, finding businesses that are in this area. If we can help grow them, they’re most likely going to hire people like them from around where they live. So it's a job creator for Little Rock.
[0:28:48.9] KM: You’re awesome. I agree with every bit of that. You know, I even went back to college when I was like 40 years old which I hate school. I’ll just say that right now, and I had go back to school and I took accounting 101 to learn all the ratios.
[0:29:02.5] EH: Got to love accounting.
[0:29:04.0] KM: I love accounting. Who knew I loved accounting? I absolutely love this. You’re going to teach it to these people that meet the quota of one employee, $500,000 in sales in three years.
[0:29:13.5] EH: So I'd say one of my biggest personal areas that I focus on is financial literacy.
[0:29:20.5] KM: I think that's so important.
[0:29:21.8] EH: I think everyone, either for personal finance or business finance. First of all, if you can't get your own personal finances correct, the last thing I want you doing is running a business, because guess what you're going to do in that business? Unless you get somebody else to handle the finances —
[0:29:39.8] KM: Which you can.
[0:29:41.1] EH: Which you can, but again you’re going to stick your head in the sand and usually end up managing by your bank account balance.
[0:29:47.7] KM: That's right.
[0:29:48.3] EH: Right? Or you’re going to go ahead and tackle these things that are the most challenging and saying, “How do I either create some financial freedom for myself or at least educate myself on the minimum that I need to know to have these relevant conversations?”
[0:30:03.2] KM: I love it. All right, we’re going to take a break. When we come back we’re going to learn more about the SBA Director Edward Haddock.
[0:30:09.1] TB: You’re listening to Up In Your business with Kerry McCoy. If you miss any part of this show, a podcast will be made available next week on flagandbanner.com's website. If you prefer to listen to it on iTunes, YouTube, or SoundCloud, you’ll find those links there as well, lots of listening options. We’ll be right back.
[0:30:38.4] KM: So Edward was just telling me he’d really liked our Bachman-Turner Overdrive song, because it was — Did you say it was your first concert?
[0:30:43.6] EH: It was. That was that was my first concert ever.
[0:30:46.1] KM: So when we left, Edward and I were talking about capital. So is there a rule about how much capital you should have in your business at any one time?
[0:30:55.9] EH: You know what? That's going to really be dependent upon the CEO and the risk level. I think —
[0:31:01.5] KM: Oh, that’s why I never have any capital, because I have high risk tolerance.
[0:31:04.8] EH: Exactly, and so that really kind of goes back to when you’re thinking of the CEO and even personal finance. How much do you have in your bank account in case things were to go bad and how long can you survive before you're out of money?
[0:31:20.5] KM: How long is that supposed to be?
[0:31:22.2] EH: Well, generally for small businesses, we could say up to a year, up to a year of capital and it depends on the type of business you're at and the stage of business as well. As an early-stage startup or a younger business, if you run out of cash and you don't have sales to recoup, well that's the end of your run. And as soon as you're out of cash, no one else is going to loan you money, so you’re done. Unless you can convert that revenue into organic growth, that's the end of your runway.
[0:31:57.5] KM: Yes, it is. Is the SBAs main — Education is a big part, like you said, and I can tell that's what you're passionate about. I wish everybody could really kind of see your face, because you really are passionate about what you do. You love it.
[0:32:11.6] EH: Absolutely.
[0:32:11.8] KM: You really do, and that's why you’ve been moving around the country I think, because you had a great track record in New Jersey and then you had — And so you came to Fayetteville and then you somehow got recruited to Little Rock. How did you end up in Little Rock?
[0:32:24.5] EH: Yeah. So I graduated from my MBA program in 2013 and I was in New Jersey. Really, looking at, again, internally what did I want? After living in Jersey City and the New York Metro area, I got a little tired of it. As much as New Jersey is a nice place, the cost of living is just absolutely ridiculous, the pace to deal with New Yorkers all the time. As much as I do like Manhattan y’all, I tell you, they can be challenging.
[0:33:02.3] KM: So you said there were three Cs. We’ve talked about capital.
[0:33:06.5] EH: Capital, contracting.
[0:33:07.9] KM: Contracting, which is what he does. What’s the other one?
[0:33:10.5] EH: Then the counseling.
[0:33:13.6] KM: Oh!
[0:33:14.1] EH: Those are the three Cs, and then the D, disaster assistance, which we talked about a little bit. Really, our capital pieces is kind of phenomenal, because we don't do — Most of SBA lending is indirect through the SBA. My team really works with the lenders, and their job is to go into banks and educate the bankers on how to use our products.
We have different products that vary from either a micro loan, that can be as small as $500 and go up to $50,000, and that's going to be for that borrower who doesn't necessarily fit in a bank. Their credit score is not great, or maybe they don't have the collateral that the banks are looking for. So a lot of times that micro-lender is a developmental loan for that early-stage small business or that small business startup who needs 15, 20, $30,000 to get started and make that gap or —
[0:34:09.6] KM: How long should they have to pay it back? Three years?
[0:34:12.5] EH: We give them up to six.
[0:34:14.5] KM: Good, because you don’t want to pay a bunch back fast.
[0:34:17.1] EH: And that's the point of the SBA guarantee. So when you go up to the different levels of products, the 7A loan, which is pretty much our premier flagship product. We can go out to 20 years on the amortization. So that means we’re going to stretch it over a longer time, so you monthly payments are lower. Yeah, you're going to pay a fee for that, but it'll effectively reduce your payment in half of what you would get from a normal business loan.
[0:34:45.4] KM: And so your cash flow is not crippled.
[0:34:46.7] EH: Exactly. So you have some breathing room, and one of the best parts about it is you have a permanent financial solution. Most bank loans are usually done for three years with the balloon, or five years with the balloon. So that means your rate is adjustable and once you get to that five-year point, your bank and pull it from you. If they don't like your business anymore or let's say they went out and got themselves into some trouble with some other businesses of your sort and now they want to clean up their portfolio. They can call your loan and then not renew it at that point.
[0:35:18.8] KM: I know it, and they change your interest rate every year. Don’t you lock-in with an SBA usually or not always?
[0:35:24.5] EH: We can. Hey can adjust it. It's up to the lender. So we have to manage that balance of giving the lenders flexibility.
[0:35:31.2] KM: So they want to do business with you. Yeah.
[0:35:32.6] EH: Well, and also to make sure they’re serving their customers, right, because at the same time if you lock in 20 years out, we have no idea what's going to happen in 20 years.
[0:35:43.1] KM: Yeah, that's asking a lot. You're not family.
[0:35:45.4] EH: Exactly, but that SBA guarantee is, and that SBA guarantee is going to be in there and that'll at least give you that loan permanency for the life of the loan.
[0:35:55.5] EH: Did I ask you what you think the biggest mistake most people make? Most small businesses make? Did I ask you that already?
[0:36:00.1] KM: No, you didn’t ask me that though. But hey, if you want to, go right ahead.
[0:36:04.1] KM: Okay. What's the biggest mistake most small business owners make?
[0:36:06.7] EH: I would say it's lack of planning, and that usually equates to lack of funding.
[0:36:14.0] KM: Shooting from the hip.
[0:36:15.4] EH: Shooting from the hip and not knowing how many bolts they’re going to need.
[0:36:18.9] KM: This is a good example. When they invented the Internet, we put all our products online and everything that I thought customers wanted was not what they were buying online. When they would call me on the phone and ask me for an indoor presentation set I would say, “Oh! This is the one you want,” and I just tell them about the one I thought they wanted. When I put indoor sets online and I put out three different styles, they didn’t pick the one that I always thought they wanted. So I'm not sure that you always know what your customers want.
[0:36:49.3] EH: So I think we've learned so much from the emergence of technology and even the development of technology companies in the way they look at the business process. When we look at the lean startup and lean methodology of, let's say, technology development in these tech companies, they’re building to the customer, right? So they're actually building the products to what the customer wants at that moment, not kind of like you're saying, is I went and built the house and I filled it all up and then I said, “Okay. Who wants to buy this thing?” Versus finding the buyer first and asking them, “What do you want to buy? Let me help you solve that problem.”
[0:37:25.7] KM: That brings up another thing I see small business owners do, is they'll go out and borrow money and build a beautiful shop and not have one sale, and then they sit there and wait for sales to command some in. And so when people call me and ask me for advice, I say, “Well, don't spend all your money on —” because they're dreaming of themselves in this beautiful shop with these beautiful storefront and they’re dreaming about that. And so they’re like, “I’m going to build all these and then they will come.” I said, “No. No. No. No. No. Make sales out of the back of your house until you get your business going and then get your storefront.”
[0:38:03.5] EH: Absolutely. I tell people, I say, “The easiest thing you could ever do is open a business. The hardest thing you'll ever do in your entire life is keep it open.”
[0:38:12.4] KM: Yeah.
[0:38:12.7] EH: Right? And that's getting the customers there and that's managing the business. That's getting new customers in every day, turning over your inventory at those proper rates. We go back to that. What's that thing that drives businesses to fail? Again, if you have a bottomless amount of cash, if you have a never ending money tree that you can just pull money off, it doesn't matter if you make money in your business or not, because you got plenty of cash to fund it.
[0:38:37.1] KM: Oh! Wouldn’t that be nice?
[0:38:39.0] EH: But how many of us have that?
[0:38:40.9] KM: Nobody.
[0:38:41.2] EH: So let’s be realistically. We got to understand what goes into the planning process, so we know how much do we really need to have and some cushion in order to start those business to get it to a point of success.
[0:38:52.4] KM: Yes. Look at my income statement every month, every single solitary month. I run my ratios that you're going to teach everybody that comes to see you after this, that they’re going to come down there and I’d run my quick ratios and I find out —
[0:39:06.8] EH: Where you are at, right?
[0:39:07.3] KM: And let me just tell everybody, do not wait till you need money to go to the bank. You better know in advance, “My ratios and getting bad. I need to go ahead and start trying to find money,” because once you need money, nobody will loan it to you.
[0:39:20.8] EH: Absolutely.
[0:39:22.0] KM: That’s a sad thing.
[0:39:23.4] EH: That’s a great point you make though, and we like to say, “Start fostering that relationship with your local lenders. Find out if you have an SBA lender in your bank. Start having that conversation of what that may look like.” Don't necessarily approach it for a loan just yet, but start understanding what their wants and their needs are for their banking institution because, again, they’re also a business and they’re there to make money off of selling loans and financial products.
[0:39:51.2] KM: People need to realize that. Everybody is a business. They get mad at these people because they're making money, “They’re like making money on me.” You’re like, “Well, they’re in business. If they don’t make money, they can’t be in business,” and they’re also employers.
[0:40:01.2] EH: Absolutely. Absolutely. So follow the money, right? Wherever the money is, that's where the value to that organization is.
[0:40:09.1] KM: What do you think about the future of small business in America? I'll tell you what I'm scared to death of, is that the healthcare crisis in America is going to be put back on small businesses’ shoulders again. When they ended Obamacare, it took small businesses and all businesses out the business of healthcare, and I am scared to death they're going to put it back on our shoulders and say, “All right, all you business owners out there, start providing health insurance, because we’re not going to do it anymore.”
[0:40:41.0] EH: Yeah. I would agree with that sentiment that I think that's going to be one of the major challenges. Honestly, I think we have a bigger challenge that we as a nation have to address and that's the globalization of the world and the globalization of our economy. Our small businesses are going to have to better understand the Internet and become technologically savvy in order to navigate a more competitive business world.
So I think that is going to be, again, centralizing a lot of our big businesses and only making them bigger. So that challenge is going to be put on those small businesses of how they compete.
[0:41:22.1] KM: Yeah. How are we going to compete?
[0:41:23.7] EH: They’re no longer competing in a local level.
[0:41:25.9] KM: No.
[0:41:26.1] EH: We do have some semblance of a March Back to Main Street, which were seeing a merging and some small towns, and that may continue.
[0:41:36.7] KM: It’s the end of the show. Thank you for coming on.
[0:41:38.8] EH: Thank you for having me.
[0:41:39.2] KM: I could talk to you forever. I already gave you tickets to Dancing into Dreamland tonight. That’s why our show is kind of haphazard today, because we've got a lot going on. Dancing into Dreamland is at Dreamland Ballroom tonight and I hope you come, Edward.
[0:41:54.3] EH: It sounds good.
[0:41:55.4] KM: Look what I got you. A desk set.
[0:41:56.9] EH: Thank you.
[0:41:57.8] KM: You're welcome. It's a U.S. flag and Arkansas flag, and do you know what flag that is?
[0:42:03.3] EH: That, I do not.
[0:42:04.6] KM: It’s New Jersey.
[0:42:05.7] EH: That’s New Jersey.
[0:42:06.1] KM: Where you came from.
[0:42:07.4] EH: Look at that.
[0:42:07.5] KM: Oh! He’s not a flag lover. He didn’t even know what New Jersey’s flag is.
[0:42:10.5] EH: I’ll tell you. I’m an Arkansas boy at heart.
[0:42:12.6] KM: I bet if I had put an Air Force flag on there, you’d known.
[0:42:15.3] EH: No problem.
[0:42:16.8] KM: I wasn’t thinking. I should have done that. Let's see. Who do we got next week, Tim?
[0:42:21.4] TB: Next week is going to be retired Lieut. Col. David Cooper to talk to us about the Association of the U.S. Army, and I want to bring up one think. Last week we talked about the four Cs. This week we talked about three Cs. I wonder if next week we’re going to have two Cs.
[0:42:36.6] KM: Tim, I thought the exact same thing when he said the three Cs. I said, “What do in Cs last week?”
[0:42:41.4] TB: We did four, yes. Now, we did three. Net week we do two, and the week after that we’ll do one, and we’ll just count it down.
[0:42:47.6] KM: The four Cs were about the quality of a diamond. Could you name them?
[0:42:52.1] TB: Carat, cut, color, clarity.
[0:42:56.2] KM: Cost.
[0:42:57.9] TB: Cost wasn’t one of them.
[0:42:59.8] KM: It wasn’t?
[0:43:01.0] EH: It should be if you’re financially literate, right?
[0:43:04.8] KM: there should really be five C's right.
[0:43:04.4] J: There should really be five Cs, right?
[0:43:07.4] KM: Yeah. All right. We’ve got Dancing into Dreamland tonight. We’re almost sold out. I think there're only about 20 tickets left, I think.
To my listeners, if you got a great story that you'd like to share, I’d love to hear from you. Send a brief bio and your contact info to questions@upyourbusiness.org and someone will be in touch.
Thank you for spending time with me and with Edward. If you think this program has been about you, You're right, but it's also been for me. Thank you for letting me fulfill my destiny. My hope today is that you’ve heard or learned something that's been inspiring and enlightening and that it, whatever it is, will help you up your business, your independence or your life.
I’m Kerry McCoy and I'll see you next time on Up in Your Business. Until then, be brave and keep it up.
[END OF INTERVIEW]
[0:43:49.5] TB: You’ve been listening to Up in Your Business with Kerry McCoy. Want to hear today’s program again or want someone else to benefit from it? Jot this down. Next week a podcast will be available flagandbanner.com. Click the tab labeled “Radio Show”, there you’ll find today’s segments with links to resources you heard discussed on this program. Kerry’s goal: to help you live the American Dream.
[END]
