So Many Entreprenuers, So Much To Learn
In a recent survey, the Kaufman Center found that one in twelve Americans are actively trying to start a small business, and that 91% of Americans view starting a small business positively. It's no wonder that the SBA estimates that there are currently 800,000 new businesses being started annually in the United States, and projects that number to grow to 1 million per year by 2010.So Many Entrepreneurs, So Much To Learn
There was a time when I thought everyone knew what I knew about business stuff. I didn't think the things that I knew about business in general, and operating a small business in particular, was anything special. Even though I had educated myself in business, and spent years in the marketplace, business was so intuitive for me that I thought it was the same for everyone else.
Then one day I began to realize that, for many, business is not at all intuitive. I began to see business as a professional discipline like every other profession. Success as a business professional requires education (not necessarily college), experience, knowledge of specific fundamentals, techniques and protocols, plus industry knowledge and training. And like other professions, business is not easily mastered.
When I started in business, there weren't many resources available to help a budding entrepreneur. No one even used that word - entrepreneur. Today there are many entrepreneurial resources to help you get your business off on the right foot: Tons of books, the Internet and all the websites and associated applications, entrepreneurial and small business courses available in virtually every community, mastermind groups, etc., etc. And of course, we can't forget The Small Business Advocate show, our website, and this newsletter (see links below).
But even with so many resources to choose from today, many entrepreneurs still don't know where to start. Consequently, many of the questions I get from beginners are out of synch with their entrepreneurial development: Don't ask me where to buy your products if you don't yet know how you're going to pay for them. Don't ask me how much profit you can make in a business if you don't yet understand how a profit is made.
The Questionnaire
Once, someone asked me to prepare a questionnaire to be used by business incubators as they considered prospective tenants. In case you aren't familiar with business incubators, they combine the availability of office/shop space with centralized administrative support to help relatively new businesses get off the ground. Many incubators are funded with public funds, while some are private enterprises, but all want to grow businesses for their community. Therefore, with limited space and resources, they only allow the most viable prospects to locate in their facilities. Thus the value of a comprehensive evaluation. This questionnaire helps them find out which prospects have their cornflakes together.
I offer these questions as a quick test for those who are thinking about starting a new business for the first time. Even if you are already the owner of a small business, take a look at the items below. I promise there will be something there for you, too.
I don't have room here to provide the answers. Do your own homework - the research will be good for you. But here's a hint: Many of the answers can be found in the Advocate Archives and Articles sections at smallbusinessadvocate.com. I don't consider these to be all of the questions you need to ask yourself, just some of the most important ones. Here you go...
1. Accounting / Finance / Taxes
Do you know the difference between cash flow and accounting? This is the most important financial issue you will face. If you can't answer yes with any degree of confidence, find out before you hock the house to start your business.
Do you know the difference between operating funds and capital funds? All assets, including money, must be employed efficiently. Make sure you know how to allocate operating cash flow, and investment and borrowed capital before you crank up your corporation.
Do you know what is necessary for all tax compliance? The taxes your business will have to pay are enough by themselves, without adding on penalties and interest because you were ignorant of compliance. In some scenarios, the interest and penalties train wreck can equal or exceed the amount of taxes owed.
2. Banking
Do you have a relationship with a business banker? The banker who made your last car loan may not be the one to help you with the financing you are probably going to need. And when you find a business banker, don't stop until you find another one. You're going to need two.
Do you know what a banker needs to help you with a loan? You must be able to articulate, both verbally and graphically, what you are going to accomplish with the money you want to borrow. And you must produce this information in a form that your banker can use. If you can't do this, you won't get your loan. For most small businesses, no loan means no business.
3. Business Planning
Do you have a business plan? Not the one in your head. A business plan on paper. Does it include financial projections? A budget does not qualify as a projection. Your plan doesn't have to be 50 pages, but it needs to be more than one page. It has to be your work, because it must be a plan you can articulate and defend.
4. Credit and Accounts Receivable
Do you sell on an "open account" basis? Which is to say, do you extend credit to your customers? If you do, how are you planning to finance your accounts receivables? Did you know that without such a plan, and without solid credit policies, you could literally grow yourself out of business? Have I mentioned "train wreck" yet?
Do you understand the relationship between Accounts Payable Days and Accounts Receivable Days? If not, your first clue that you are AR/AP challenged will be urgent and stern phone calls from your banker and/or your vendors, both wanting cash that can be deposited - TODAY!!
5. Customer Service
Do you know the difference between Quality Service and Quality Process? The first one is always making the customer happy, no matter how many times it takes to get it right. The second one means getting it right the first time. Quality service costs money. Quality process requires some investment, but ultimately makes you money.
What value do you add to your customers? There are probably at least a dozen other options available to your customers and prospects besides your company. What makes you so special? Don't talk to me about features. Customers buy benefits! Do you know what would compel someone to do business with you instead of the company down the street, or the dot com on the other side of the planet?
6. The Entrepreneur And The Operator
Can you operate what you had the entrepreneurial vision to create? Do you know how to think like an owner instead of an employee? In order to be a successful small business owner you have to have the spirit of an entrepreneur, AND the heart of an operator.
7. The Family
Have appropriate family members been involved in comprehensive discussions about how the new small business will affect the family? If the family is not happy, the owner will not be happy. Unhappy small business owners are usually not owners for very long. Don't drop this ball!
8. Human Resources
What personnel resources do you need? If you have to hire employees, do you know how? Who's going to manage them? Who's going to prepare the payroll? Do you understand the regulatory and legal issues of an employer?
Have you considered strategic alliances or independent contractors? Do you know how to use these options instead of employees?
9. Technology and Internet Strategy
What are the national and global opportunities available to your business? Using the Internet, even tiny businesses can reach out and touch customers who are thousands of miles away, or one town over. Do you have an online strategy? Your competitors do!
What are the national and global threats for your business? Remember the dozen options I mentioned earlier that your customers have? Half of them are online. How are you going to compete? Are you investing heavily in a product or service strategy that is being delivered by a Big Box company cheaper than your direct costs?
What are you doing to take advantage of the Internet? Website? Email? E-commerce? Do you know the challenges and opportunities?
Have you identified ways that technology can make you more productive and cut payroll expense? Your competitors have!
10. Marketing / Advertising / Networking
Do you have a plan for marketing and advertising? Does that plan have a budget? The day you open your brand new business, how are people going to find you?
Do you know how to network? Do you like to network? Do you understand how networking can be a vital component of your marketing strategy?
On Any Given Day
On any given day, one or many of these things will steal precious time out of your schedule. One of the most frustrating things you will discover as a small business owner is when one day, at the end of the day, you realize that you've worked hard all day, and didn't accomplish one thing that your company does, like make a product, deliver a service, close a sale, or find a prospect.
The only way to minimize administrative overload is to realize that this work must be done, plan for it, do what you can yourself, and delegate or outsource the rest.
Write this on a rock... Have my questions made you blink? Frightened you? Made you re-think your plans? I hope so. And if so, you're welcome. But if you are really passionate about your dream of being a small business owner, you won't let an old curmudgeon like me stop you. You'll take this list and start finding the answers. You'll take my little "tough love" challenge and turn it into an opportunity.
