Tag Archives: Finance

Better Than Dilution & Debt

One of the most interesting websites we’ve discovered recently about entrepreneurs is called Under30CEO. Today the site featured an interview with Trevor Mauch, founder of AutomizeIt and Mach One Media, serial entrepreneur and founder of a few multimillion dollar businesses. Excerpted from the interview is the quoted section below:

One of the things I see a lot of people I’m coming across, they’re making the funding part (of entrepreneurship) out to be a huge deal [when it’s not.] As a great example…this guy was selling his linen [or garment] business services for hotels or whatnot. He bought his equipment for 500 bucks. And this guy bought this equipment, and then he went to the biggest account in town, which is our local hospital and said “what do I have to do to have your business?” (After he heard the answer,) ..he said “okay, I can’t do all of this capacity right now but if you fund $25,000 to get into a facility and to buy our equipment that can service ..what you need, then will accept this bid.”  …The hospital..it’s like (a) $15,000 – $20,000 dollar a month account! ..The hospital ended up going with this guy and funded the whole growth of his business!

..With two of my different businesses, …we saw what people wanted, and we went out there and pre-sold one of our training programs before it was ever created! We made sure that people wanted it, made sure it’s really quality, and we pre-sold to our customers, and our customers funded that startup.  And same thing with our software company.  We funded that company with our revenues from the publishing company, and same thing we went out there before we were finished. We pre-sold memberships in it and that help us get some cash to start that goal. So yeah definitely don’t look at funding as an obstacle because there’s a lot of different ways to get funding, especially from your customers, and sites like Kickstarter.

(At Kickstarter) anybody can go there and post their project, their business or products whatever their looking at launching. And they raise funds for their business by getting people to “pre-buy” whatever it is. So, I was last week and uhmm there’s this one [business], that was some kind an iPod speaker and so they had a prototype…they sold a prototype and said “that’s what you’re gonna get,” and they had a goal they wanted to raise, I think that one is about $50,000 bucks. And they raised their $50 grand in about 14 days after they started, just from people seeing this idea and jumping pre-buying one of the things from it!! And that’s just a killer model.

So, the moral of the story is…become creative in your approach to funding your business! It’s not necessary to run up exorbitant credit card debt, nor follow the angel-VC-dilution pattern. Mauch started his first business with $600 cash. Stretch your mind–think hard about how you can accomplish your objectives without copying someone else’s success path. You will be so happy you did when it’s your turn to be interviewed.

Bureaucracy: The Entrepreneur’s Kryptonite

As Dan Sullivan says in The Strategic Coach® Program, “The human brain cannot do extraordinary things, only normal things.” “So the trick,” he says, “is to make the extraordinary normal.”

Corporate employees operate based on policy: that’s what keeps them from having to think. Entrepreneurs depend thrive on having the freedom to constantly grow and change, to make new connections, and to ask questions that shake everything up. To an entrepreneur, groupthink (i.e. bureaucracy) is like Kryptonite.

Just because we don’t like being bogged down by over reliance on structure doesn’t mean that we are always creative. Following established patterns and trying to approach every issue with the same solution is a bad habit even for an entrepreneur. Rather than seeing opportunity, we can become fixated on solving a problem.

When Jim Collins wrote about Big Hairy Audacious Goals (“BHAGs”), he was challenging small thinking. Simply considering an aggressive goal causes the mind to see the environment differently. Unable to stop thinking about the “What ifs,” we are empowered to consider new concepts,  linkage and alternative ways of viewing the same issue. Divergent thinking is modeled by the likes of Richard Branson, who tweeted, “My interest in life comes from setting myself huge, apparently unachievable challenges, and trying to rise above them.”

Your definition of “normal” daily experience becomes unique when you think in terms of BHAGs.  Dream for a moment about what life could look like in 5-7 years. Can you imagine performing at 10x today’s level? Earning 10X what you do today?

Bureaucracies are based on keeping everything the same so they can preserve their status. Policy and rules “protect” the structure from the effects of individuals, whose participation is measured in hours on the clock, not in results. In an entrepreneurial organization, by contrast, change is life, because “holding your ground” means stagnating and falling behind. Individuals are sought out and rewarded for their ability to think, create, and make a unique contribution.

Make a habit of  what Sullivan terms the “10x Mindset,” and innovation, risk-taking, and teamwork will all come together for you in a completely new way. Bureaucratic thinking and structures simply won’t survive in your environment because you and the people around you will be entirely focused on building, adapting, and expanding a path toward your “bigger future” vision.

Cultivate a creative mindset that makes growth and progress “normal.”

What Entrepreneurs Should NOT Do

When entrepreneurs start businesses, they are susceptible to making mistakes that others have made before them, climbing an unnecessarily steep learning curve, and burning through dollars and emotional energy. Without the help of an experienced mentor and some principles of start-up management, it is no wonder that many start-ups are not in existence 5 years later. Yes–success stories abound–mainly because few want to read or write about businesses that didn’t make it!

David Bakke is a writer for Money Crashers, and was featured on Brazen Life, a Brazen Careerist site recently with the list below of mistakes an entrepreneur should seek to avoid (& can with mentoring and education): http://ow.ly/ataho

1. Starting a business in a new field

Trying to launch a business in an industry or area where you don’t have any prior experience can quickly lead to failure. Before you make the leap into starting a business, make sure you focus on your talents, passion and experience to pinpoint the right business for you. Combine your enthusiasm, experience and knowledge with a solid, organized business plan if you really want to succeed.

2. Trying to start your business on your own

Trying to go it alone will only hamper your efforts to grow and expand your business. Initially it makes sense to cut costs by working alone, but soon enough you’ll need to make intelligent, calculated decisions about working with like-minded individuals to help your business grow.

3. Not adapting to changing business conditions

Learn to adapt as you grow your business. Don’t be afraid to change your target market or scrap unsatisfactory marketing initiatives. Recognize the fluidity of your small business, focus on what positively and negatively affects your business plan, and adjust your growth model accordingly.

4. Being deathly afraid of making mistakes

You engage in a great deal of risk when you launch a small business, and most of it involves your personal finances. Learn to quickly identify errors in judgment, determine why they occurred, and make immediate adjustments so they don’t happen again.

5. Avoiding risk

Continue to take risks as your business evolves. If you encounter an idea to expand your business that feels “risky,” research the pros and cons of the concept. If the idea still seems viable after your analysis, go for it!

6. Quitting if you run out of cash

No successful entrepreneur ever let money stand in the way of achieving business goals. If you have a great business plan, a passion for the concept, and you’re willing to work hard, you can always find ways to fund your business proposition. Cut costs in your everyday life to free up capital, apply for an SBA loan, approach angel investors, or even approach friends and family after you’ve bootstrapped as much as you can.

If you can’t find funding, you don’t have to give up on the business idea altogether. Timing also plays a role in business success. It might make sense to start more slowly, and to put off aggressive expansion efforts and attempts to find additional funding until your business begins to show a steady profit.

http://www.Entredot.org is one approach to what entrepreneurs SHOULD do–come check it out!

 

Successful Business Plans: 5 More Keys


EntreDot Executive Director Bill Warner wrote a blog post this week for the Raleigh Emerging Designers Innovation Incubator website about business plans. In it, he shares keys to success.  Yesterday’s post here dealt with 5 keys; 5 more are offered below:

“Have a compelling value proposition.”

  • Solve a truly important problem with an attractive return on investment.
  • Make sure it fits into your buyer’s priorities.

The Challenge: You must fit within your buyer’s priority list for planned purchases. The benefit of your product has to be at the forefront of your customer’s needs. The best way to express the value of your product or service is to present a return on investment (ROI) analysis. You should be providing either higher revenue or lower cost/expense, and it should take less than a year to pay the investment back. Anything else is probably a “nice to have,” and is unlikely to win in a market where buyers are only purchasing “must have” solutions.

“Have a targeted marketing plan.”

  • Know how to reach your buyer to gain awareness
  • Establish a cost effective lead generation plan

The Challenge: Select the right way to deliver your message to your potential buyer: advertising, trade articles, mail or email campaigns, telemarketing, distributors, value added remarkets, dealers or direct sales force. Many companies are over-reliant on franchises as offering a silver bullet strategy for support and getting started. They don’t sufficiently analyze what the franchiser brings to the table that you can’t do for yourself. Franchisees sometimes over-estimate the value of the support from the franchiser; in that, is it worth the franchising fee and the royalty payment? Can those costs be made up by efficiencies offered by the franchiser? Can those costs be passed on to your customer? If not, the franchisee is at a competitive disadvantage. Those with a “brand” that can bring customers in the door on “day one” and provide active business operation assistance, rather than arms length promises, are particularly worth looking into. Once you have generated qualified leads, manage them through the entire sales process.

“Create the most efficient sales channel and excellent customer support.”

  • Ensure the sales approach is affordable
  • Build satisfied customers

The Challenge: Establish a sales forecast. Hoping for sales is not planning. Sales forecasts are based on understanding the buyer in your selected market segment and on the experience of others in it. Many new companies underestimate the time it takes to build a business to the point where it is profitable. As a result, many new businesses are under-financed and have insufficient working capital to sustain themselves in the initial growth period or during seasonal downturns. Being new and small is no excuse for cutting corners in dealing with customers. Would you go into a shop in the mall with cheap looking furnishings and lighting? Don’t try to save money there. Your sales and support efforts should be guided to create a satisfied customer who is willing to be a reference to other potential customers and give you repeat business as well.

“Understand your entire financial model.”

  • Establish realistic sales, cost, capital and expense plans
  • Understand cash flow and profit dynamics

The Challenge: Establish a solid financial plan. Many new companies are unplanned or under-planned. Planning cannot deal with all the surprises in the real world, but why be surprised by things you can anticipate and deal with beforehand? Planning requires a highly detailed and kinetic vision of the future of the business that reduces that vision to the language of business, dollars and cents. A financial plan is required to raise money from banks and investors in addition to helping you set financial objectives. Many new companies try to save money by avoiding the costs of lawyers, accountants and insurance agents. One mistake can cost you many times the small cost of relying on experts. Operationally, the most important financial dynamic to understand is cash flow. Know how money comes into and goes out of your company and when the transactions occur. The penalty for not managing your financials well is running out of money and probably losing your business.

“Ensure you have a winning team.”

  • They should have the passion for success
  • Attract the best experience and know-how

The Challenge: Pick the best people for your company. Many new businesses reach too far in a single step; for example, starting a trucking business without any prior experience. Take it “step-by-step”. Often the first step is to get a job in a business similar to the one you want to start. Learn the business from the inside out. Then start your own business.  With the right experience under your belt, build your team with people that fill out the strengths that you need to run your business. Pick only the best people that can get the job done. Avoid hiring friends and family.

Reverse the Mentoring Stereotype

In its most common context, mentoring is understood as someone with experience (and a few grey hairs!) showing someone younger how to perform key job functions. Yet, one of the hottest trends in human resources is termed “reverse mentoring.” Whether due to job loss and the need for new training, or “Second Act” entrepreneurship, or simply the precipitous amount of change being introduced in organizations trying to compete globally, there has arisen a need for this practice where younger workers are now showing the older ones “the ropes.”

While the concept is that exposure to those outside the corporate suite may be good for staying in touch with the values held by newer workers, there are several other benefits. Higher employee retention rates among younger workers are cited as an unexpected, but welcome outcome. Exposure to management issues and how decisions are made are additional upsides.

When Jack Welch was the CEO of General Electric, he  was mentored on how to use the internet by a young employee in her 20s. He saw such promise from the process that he mandated that 500 of his top executives reach out to younger employees to do likewise. These days, mentees are learning how to use social media effectively from their younger mentors. Even at top ad agencies like Ogilvy & Mather, a worldwide managing director admitted that his more youthful mentors had shown him how to enhance his Twitter posts to be less boring. His eyes have been opened to new possibilities and he now plans to utilize Skype and videoconferencing to facilitate distance mentoring across the firm’s 450 offices. HP & Cisco also have reverse mentoring programs in place.

Michelle Rafter, in a blog post entitled “8 Ways to Make a Reverse Mentorship Work For You,” suggests the following guidelines:

1. Find a compatible partner –someone with skills in areas you’re lacking

2. Set expectations- create ground rules for what you want out of a partnership, such as how often you’ll meet and what both parties will get out of it

3. Get your boss’s OK- A lot of reciprocal mentoring can happen on an informal basis. But if you want or need to set up a formal program, you’ll need your manager’s or company’s approval.

4. Be open to suggestions and criticism- learn in days from someone else what one could take decades otherwise by having a thick skin

5. Make it more than just about tech- maybe a younger person could help you learn about sushi, Chinese, popular music, or even how to lead the next generation more effectively

6. Give as much as you get-the relationship should be mutually beneficial

7. Experiment with approaches– a single department, a program that crosses departments, and a multitude of variations

8. Don’t stereotype- not every 45-year-old has the same knowledge or expertise, so don’t assume every Gen Y worker does, either.