One of the primary reasons businesses go under is lack of capital. In some cases, the cause is poor planning. In other cases, it's due to inflated expectations of sales or minimized calculations of expenses. In still other cases, it's due to economic conditions surrounding the start up.
If this latest economic mess has taught us anything it's that you have to take small, calculated risks rather than monumental leaps in order to maintain control of your start up. Yes, you can take gigantic risks and there may well be a payoff down the road - but you'd better be prepared to capitalize that risk with your own money and you certainly want to have some sense that you're in the right business at the right time.
The television show that has start ups going before investors to pitch their companies should be required viewing for any would-be entrepreneur. Don't get me wrong - the show is built from the ground up to be entertaining and adversarial so it does not reflect reality in that aspect. But in looking at some of the business ideas people have and how much they've put into it, one has to ask why? Some of these ideas are great part-time, home-based businesses at best - and yet people are talking about dumping their life savings and more into them. I cringe (as do these TV investors) at the notion that these folks are selling their future for a flimsy dream.
Here's the reality in today's market - we are no longer in the dot com boom. Money is not flowing like water at the fountain. OK, well maybe it is if you're a bank taking government handouts, but we're talking about start ups here so stay with me.
If you're looking to start up a business today, think small, think incremental. Assume your revenue will be less than you project, your expenses higher than you think and your time to profitability longer than you've calculated. In other words, play it safe for now.
Take consolation in planning for a scenario in which you're wrong - in which sales do spike, profitability hits early. But don't convince yourself that's the likely road to success.
As someone in my youth always used to say - hope for the best, prepare for the worst and you'll never be surprised. Wise advise in today's start up environment.
If you're looking to start up a business and need some sound advice, check out virtualteam.com. But before you do that, ask your friends and family for some straight talk and run your idea by them. Tell them you don't want them to shine you on or please you by agreeing - see what they think of your idea. Then take small steps to make it real.
Tuesday, November 17, 2009
Saturday, September 12, 2009
The New Middleman
Back in the glorious dot com bubble days, there was a lot of talk about the Internet providing "disintermediation" - big word, lots of syllables - basically meaning cutting out the middle man. And it was true in many instances - companies were able to connect directly with consumers in new and interesting ways. There were a lot of false starts and a few crazy ideas about how that could actually work, but overall there was some disintermediation going on.
Fast forward to the current Internet/economic model. What I'm seeing now is a lot of 'intermediation' going on - lots more virtual middlemen. I see more and more websites that are portals - nothing more, nothing less. Portals are fine and some even serve a purpose, but if you read enough blogs out there, you'll run into people boasting that they used to run a company but now they just collect orders for others, pass off the work and skim a bit of the profit off the top for their meager efforts. Hey, if it works for you, that's fine, but as a consumer, I tend to look at who this company is and what value they're adding. With these new middlemen, I'm not seeing any value add at all. From a business model perspective, that doesn't seem sustainable - there's absolutely no competitive advantage, barriers to competitors, etc. It's just slap up a website, gather product feeds and skim off the top. How do you position that? How do you sell that to your would-be consumers? If you're looking to reap an extra $500 a month for your efforts, I suppose that's fine, but I you have to add more value than that to make a living.
I mention this because in lean economic times, people are increasingly desparate to find a way to make more money or to even earn a living. They can become incresingly targeted by these "get rich quick" schemes that involve spending some start up capital in hopes of getting a revenue stream out of it. Guess who makes money most of the time? The people selling the concept, selling the web design or web hosting, selling the ad words or the search engine optimization package...but not you. So beware. Be-very-ware.....
There are a million portals out there, some better than others. In some cases, portals make a lot of sense - they bring together products from various sources that you might not otherwise find together in one place (items that have a common theme) - and maybe wrap some interesting content around it. But in too many cases, it's just a product feed or two and a mediocre looking website.
As consumers, we vote with our dollars. Some voters are very conscientious about how and where they cast their votes - others, not so much. My economic votes these days increasingly go to companies that are adding value. After the enormous economic meltdown last fall where the bubble was created by companies who were not adding any real value, I think I'm even more aware of this issue than ever before.
So, from a business perspective, you need to look not only at how you're earning income but how you're adding value. If you're adding real value, you may have a sustainable business. If you're not adding real value, you're not likely to last. Just my 2 cents for today....what are your thoughts? Chime in.
Fast forward to the current Internet/economic model. What I'm seeing now is a lot of 'intermediation' going on - lots more virtual middlemen. I see more and more websites that are portals - nothing more, nothing less. Portals are fine and some even serve a purpose, but if you read enough blogs out there, you'll run into people boasting that they used to run a company but now they just collect orders for others, pass off the work and skim a bit of the profit off the top for their meager efforts. Hey, if it works for you, that's fine, but as a consumer, I tend to look at who this company is and what value they're adding. With these new middlemen, I'm not seeing any value add at all. From a business model perspective, that doesn't seem sustainable - there's absolutely no competitive advantage, barriers to competitors, etc. It's just slap up a website, gather product feeds and skim off the top. How do you position that? How do you sell that to your would-be consumers? If you're looking to reap an extra $500 a month for your efforts, I suppose that's fine, but I you have to add more value than that to make a living.
I mention this because in lean economic times, people are increasingly desparate to find a way to make more money or to even earn a living. They can become incresingly targeted by these "get rich quick" schemes that involve spending some start up capital in hopes of getting a revenue stream out of it. Guess who makes money most of the time? The people selling the concept, selling the web design or web hosting, selling the ad words or the search engine optimization package...but not you. So beware. Be-very-ware.....
There are a million portals out there, some better than others. In some cases, portals make a lot of sense - they bring together products from various sources that you might not otherwise find together in one place (items that have a common theme) - and maybe wrap some interesting content around it. But in too many cases, it's just a product feed or two and a mediocre looking website.
As consumers, we vote with our dollars. Some voters are very conscientious about how and where they cast their votes - others, not so much. My economic votes these days increasingly go to companies that are adding value. After the enormous economic meltdown last fall where the bubble was created by companies who were not adding any real value, I think I'm even more aware of this issue than ever before.
So, from a business perspective, you need to look not only at how you're earning income but how you're adding value. If you're adding real value, you may have a sustainable business. If you're not adding real value, you're not likely to last. Just my 2 cents for today....what are your thoughts? Chime in.
Saturday, August 22, 2009
Plan To Succeed
I love when a phrase has multiple meanings and this one is one of my favorites: plan to succeed. If you don't have a plan, you cannot succeed. Period. However, you should also plan to succeed vs. plan to just get by. You might not understand the subtle difference, but read on.
Here's a true story. Years ago, a friend of mine wanted to go on vacation but she didn't have much money. So, she sat down and figured out exactly how much it would cost to go on this vacation. She was driving to a nearby state, staying at youth hostel or something - well, you get the picture.
She figured it out down to the penny. She had this all planned out (so she's got part one complete, she has a plan). Over the next month or two, somehow a little extra money found its way into her hands and to her delight and surprise, she had exactly the amount she needed for her vacation.
So she packed her bags, jumped in her car and drove. She got to her destination, checked in and went to grab a bite to eat. That's when it hit her. She had planned on just enough for her vacation - driving to and from and the cost of her lodging, the cost of her meals, but she didn't plan a spare penny for things like the $5 to get into the national park to head out into a wilderness hike. So, here she was having planned this out, but she didn't plan on success. She planned on 'just enough.' (Yes, her plan was flawed but we'll give her credit for having one). She subsequently learned that success in this case means having an extra $50 for 'incidentals' to make the vacation a real success.
Word to the wise. Plan to succeed by creating a (thorough) plan and by planning on being successful, not just on scraping by. Think big, plan big. (The full phrase I recommend actually is "Think big, plan big, start small.") If you just want to scrape by, there are a lot easier ways of doing that than starting your own business.
Action item: Write a powerful business plan. Create a solid financial plan. Design an actionable marketing plan. Develop an effective operating plan.
Looking for assistance? Contact me at VirtualTeam Consulting - easy, no hassle results-oriented consulting.
Here's a true story. Years ago, a friend of mine wanted to go on vacation but she didn't have much money. So, she sat down and figured out exactly how much it would cost to go on this vacation. She was driving to a nearby state, staying at youth hostel or something - well, you get the picture.
She figured it out down to the penny. She had this all planned out (so she's got part one complete, she has a plan). Over the next month or two, somehow a little extra money found its way into her hands and to her delight and surprise, she had exactly the amount she needed for her vacation.
So she packed her bags, jumped in her car and drove. She got to her destination, checked in and went to grab a bite to eat. That's when it hit her. She had planned on just enough for her vacation - driving to and from and the cost of her lodging, the cost of her meals, but she didn't plan a spare penny for things like the $5 to get into the national park to head out into a wilderness hike. So, here she was having planned this out, but she didn't plan on success. She planned on 'just enough.' (Yes, her plan was flawed but we'll give her credit for having one). She subsequently learned that success in this case means having an extra $50 for 'incidentals' to make the vacation a real success.
Word to the wise. Plan to succeed by creating a (thorough) plan and by planning on being successful, not just on scraping by. Think big, plan big. (The full phrase I recommend actually is "Think big, plan big, start small.") If you just want to scrape by, there are a lot easier ways of doing that than starting your own business.
Action item: Write a powerful business plan. Create a solid financial plan. Design an actionable marketing plan. Develop an effective operating plan.
Looking for assistance? Contact me at VirtualTeam Consulting - easy, no hassle results-oriented consulting.
Four Tips For Starting Up In This Economy
As much as it may feel like we're still in the trough of the economic 'correction' (to be polite about it), it's probably a great time to start a business. The competition is relatively quiet, some of the shakier competitors may have bailed by now - so what' stopping you?
To successfully start a business, you need four things: a great idea, an actionable plan, financing and tenacity. If you have enough tenacity, you generally also get a bit of luck as a side dish. So, to go along with your four elements, here are four tips for starting up in this economy.
TIP #1
Re-evaluate your idea.
Suppose you think you already have a great idea. Re-test your assumptions. Ask a few strangers about it. Your friends and family will shine you on because they love you or they are blinded by your immense talents. Either way, friends and family are NOT a good indicator of a good idea.
Also, be sure to re-evaluate your idea in light of this 'new economy' - the structure of the new economy is not entirely clear yet, nor is it settled in any meaningful way. So, it's hard to declare your idea is suitable to this new economy but if your idea is, say, sub-prime mortgages, you might want to re-think it.
TIP #2
Take whatever estimates you have for start up costs and multiply by 4.
No, not 2. Don't cheat here. You need the ice cold water of financial reality to shock you into understanding that it takes longer and costs more than you can currently imagine. Don't let stories of 'overnight' success sway you. Most famous actors and musicians will tell you that their overnight success came 10 years into their careers....
TIP #3
Take your revenue estimate for the first three years and divide by 2.
Yes, this too seems harsh but most entrepreneurs are optimistic by nature (scratch that - successful entrepreneurs MUST be optimistic by nature). Being optimistic is a requirement for the job, but there a difference between being optimistic and being delusional. Be realistic and optimistic and you'll position yourself for success.
TIP #4
If it feels like you're banging your head against the wall, stop.
Being tenacious is not the same as being stupid. Stupid is trying the same thing over and over and hoping for different results. Tenacious is giving something a few tries then trying something else. A slightly different angle. A slightly different approach. Learn to be intelligently tenacious and you'll find you get a couple of great ideas that lead you in the right direction. Is it easy? No. Will you know when to quit trying one approach and consider another? Maybe not. But if it feels like you're knocking yourself out over and over, that is a clear sign that you should stop and re-orient yourself and look for another approach to the situation.
That's it for today. Thoughts and comments always welcomed.
Want help getting started? Visit www.virtualteam.com. Accelerate Your Success (sm).
Want to see a start up in action? Visit www.shopOrganic.com. For The Greater Goods (sm).
To successfully start a business, you need four things: a great idea, an actionable plan, financing and tenacity. If you have enough tenacity, you generally also get a bit of luck as a side dish. So, to go along with your four elements, here are four tips for starting up in this economy.
TIP #1
Re-evaluate your idea.
Suppose you think you already have a great idea. Re-test your assumptions. Ask a few strangers about it. Your friends and family will shine you on because they love you or they are blinded by your immense talents. Either way, friends and family are NOT a good indicator of a good idea.
Also, be sure to re-evaluate your idea in light of this 'new economy' - the structure of the new economy is not entirely clear yet, nor is it settled in any meaningful way. So, it's hard to declare your idea is suitable to this new economy but if your idea is, say, sub-prime mortgages, you might want to re-think it.
TIP #2
Take whatever estimates you have for start up costs and multiply by 4.
No, not 2. Don't cheat here. You need the ice cold water of financial reality to shock you into understanding that it takes longer and costs more than you can currently imagine. Don't let stories of 'overnight' success sway you. Most famous actors and musicians will tell you that their overnight success came 10 years into their careers....
TIP #3
Take your revenue estimate for the first three years and divide by 2.
Yes, this too seems harsh but most entrepreneurs are optimistic by nature (scratch that - successful entrepreneurs MUST be optimistic by nature). Being optimistic is a requirement for the job, but there a difference between being optimistic and being delusional. Be realistic and optimistic and you'll position yourself for success.
TIP #4
If it feels like you're banging your head against the wall, stop.
Being tenacious is not the same as being stupid. Stupid is trying the same thing over and over and hoping for different results. Tenacious is giving something a few tries then trying something else. A slightly different angle. A slightly different approach. Learn to be intelligently tenacious and you'll find you get a couple of great ideas that lead you in the right direction. Is it easy? No. Will you know when to quit trying one approach and consider another? Maybe not. But if it feels like you're knocking yourself out over and over, that is a clear sign that you should stop and re-orient yourself and look for another approach to the situation.
That's it for today. Thoughts and comments always welcomed.
Want help getting started? Visit www.virtualteam.com. Accelerate Your Success (sm).
Want to see a start up in action? Visit www.shopOrganic.com. For The Greater Goods (sm).
Sunday, December 28, 2008
Living Like Warren Buffett
I was reading Warren Buffett's "predictions" for 2009 this morning. They're not really predictions, they're more along the lines of Mr. Buffett's thoughts on the economy. The essence of what he said was that economies go through cycles, it's what they do. We happen to be in a low spot now, but that followed numerous years of expansion (albeit on the back of a housing and mortgage bubble). Mr. Buffett is not alarmed by the recent meltdown - he's a 'value investor', he purchases investments that have a good value (low cost to future earnings potential). He's looking at the current environment and seeing opportunity. Of course, there's more opportunity when you have a pile of cash in your corner....
Rather than get into economics and investing theories, I mention this because I thought about how this economic cycle impacts Mr. Buffett...which is 'hardly at all.' On the other hand, it seems those at the lower end of the economic pile in this country (or in this world) bear a disproportionate burden - sort of like being at the tip of the whip - it makes the widest arc and experiences the sharpest change of direction.
I mention this because many small business owners are over-extended financially right now - they're experiencing being at the end of the whip. I know several people in various business segments who were preparing for continued prosperity (or outright expansion) in the months leading up to the notorious 'crash' of 2008. They, like so many others, are now running on credit and hope - a dangerous foundation.
Mr. Buffett on the other hand may have seen his personal fortunes decline but when you have billions, that's not a hardship story by any stretch. However, Mr. Buffett is a unique individual in another sense and one that's worth noting right now even while you're experiencing the sharp pain of economic whiplash.
I've never met Mr. Buffett, but I did make a tenuous connection to him. I was invited to make a presentation on business and technology at the University of Nebraska a couple of years ago. I was told that Bill Gates and Warren Buffett had given a presentation in the same room, at the same podium just the year prior. One of the school officials told me that it was a fascinating day. Security for Bill Gates came in and spent the better part of a day securing the area and that he showed up surrounded (and protected) by his staff. Mr. Buffett drove himself in from Omaha in his old pickup truck.
I don't begrudge Mr. Gates his security detail, his face and fortune are well-known. However, Mr. Buffett still lives in a modest home in Omaha and drives an old pickup truck, despite being among the wealthiest men in the world.
My point? Even as a small business owner facing slowing sales and rising debt, you can use Mr. Buffett as a role model. Chances are good you started your business because you believed in what you were doing and you wanted to control your own fate (and fortune). No doubt you were also looking for the potential payoff down the road. Have you been living beyond your means in hopes that the payoff would come sooner than later? Have you spent too far ahead - personally or in your business? A you living more like Mr. Gates or Mr. Buffett?
What about value? Have you examined how you create it, how you measure it, how you demand it? Does your business provide value in its products or services? Do your current customers appreciate the value you offer? (Note: if not, don't chastise them, just do a better job communicating it or go find customers who do value your offerings). Have you looked at how you create value and whether or not what you create is of value in this economic climate? Do your vendors and staff provide value to your company or are they just coasting along?
You might want to start the new year by doing a value inventory - where is your company in the value chain? How can you increase the value you provide? How can you increase the value you receive? If you look at this economy as an opportunity to increase value, you'll be well positioned for any economic cycle. (Note: that doesn't mean things get easy, it just increases your chance of surviving this economy).
Here's an example. A real estate broker is struggling to pay rent for offices he signed a five year lease on in early 2007, when he thought things were going to continue along. He's had to let most of his agents go and the big office is now just a huge anchor on his finances. After coming to grips with the current economic outlook, he decided to change direction a bit. He's now working with homeowners to help them through the mortgage minefield to help them keep their houses. He is consulting, for a reasonable fee, with homeowners who still have some funds to pay for assistance and who are willing and able to continue paying their mortgage if they can make it through the current maze. He also is inviting financial professionals who might be looking for smaller digs to move in.
Time will tell if this approach will work, but what he did was shift his value proposition. He looked at his skills, knowledge and experience and found a way to put those skills to work in ways that are valued right now. While the approach may or may not work, it certainly is a better approach than continuing to go down a path that would simply lead to dwindling cash and the closing of his business. And who knows? By applying his skills in a new and different way, he might discover a unique path that leads to a more fulfilling and profitable future.
So, in this tough economic environment, look at the value you're providing and the value people are looking for. Find a way to meet that need within the context of your skills, expertise, knowledge and constraints. Be creative in value creation and you might find untapped earning potential you might never have discovered otherwise.
Here's to a better year ahead.
Rather than get into economics and investing theories, I mention this because I thought about how this economic cycle impacts Mr. Buffett...which is 'hardly at all.' On the other hand, it seems those at the lower end of the economic pile in this country (or in this world) bear a disproportionate burden - sort of like being at the tip of the whip - it makes the widest arc and experiences the sharpest change of direction.
I mention this because many small business owners are over-extended financially right now - they're experiencing being at the end of the whip. I know several people in various business segments who were preparing for continued prosperity (or outright expansion) in the months leading up to the notorious 'crash' of 2008. They, like so many others, are now running on credit and hope - a dangerous foundation.
Mr. Buffett on the other hand may have seen his personal fortunes decline but when you have billions, that's not a hardship story by any stretch. However, Mr. Buffett is a unique individual in another sense and one that's worth noting right now even while you're experiencing the sharp pain of economic whiplash.
I've never met Mr. Buffett, but I did make a tenuous connection to him. I was invited to make a presentation on business and technology at the University of Nebraska a couple of years ago. I was told that Bill Gates and Warren Buffett had given a presentation in the same room, at the same podium just the year prior. One of the school officials told me that it was a fascinating day. Security for Bill Gates came in and spent the better part of a day securing the area and that he showed up surrounded (and protected) by his staff. Mr. Buffett drove himself in from Omaha in his old pickup truck.
I don't begrudge Mr. Gates his security detail, his face and fortune are well-known. However, Mr. Buffett still lives in a modest home in Omaha and drives an old pickup truck, despite being among the wealthiest men in the world.
My point? Even as a small business owner facing slowing sales and rising debt, you can use Mr. Buffett as a role model. Chances are good you started your business because you believed in what you were doing and you wanted to control your own fate (and fortune). No doubt you were also looking for the potential payoff down the road. Have you been living beyond your means in hopes that the payoff would come sooner than later? Have you spent too far ahead - personally or in your business? A you living more like Mr. Gates or Mr. Buffett?
What about value? Have you examined how you create it, how you measure it, how you demand it? Does your business provide value in its products or services? Do your current customers appreciate the value you offer? (Note: if not, don't chastise them, just do a better job communicating it or go find customers who do value your offerings). Have you looked at how you create value and whether or not what you create is of value in this economic climate? Do your vendors and staff provide value to your company or are they just coasting along?
You might want to start the new year by doing a value inventory - where is your company in the value chain? How can you increase the value you provide? How can you increase the value you receive? If you look at this economy as an opportunity to increase value, you'll be well positioned for any economic cycle. (Note: that doesn't mean things get easy, it just increases your chance of surviving this economy).
Here's an example. A real estate broker is struggling to pay rent for offices he signed a five year lease on in early 2007, when he thought things were going to continue along. He's had to let most of his agents go and the big office is now just a huge anchor on his finances. After coming to grips with the current economic outlook, he decided to change direction a bit. He's now working with homeowners to help them through the mortgage minefield to help them keep their houses. He is consulting, for a reasonable fee, with homeowners who still have some funds to pay for assistance and who are willing and able to continue paying their mortgage if they can make it through the current maze. He also is inviting financial professionals who might be looking for smaller digs to move in.
Time will tell if this approach will work, but what he did was shift his value proposition. He looked at his skills, knowledge and experience and found a way to put those skills to work in ways that are valued right now. While the approach may or may not work, it certainly is a better approach than continuing to go down a path that would simply lead to dwindling cash and the closing of his business. And who knows? By applying his skills in a new and different way, he might discover a unique path that leads to a more fulfilling and profitable future.
So, in this tough economic environment, look at the value you're providing and the value people are looking for. Find a way to meet that need within the context of your skills, expertise, knowledge and constraints. Be creative in value creation and you might find untapped earning potential you might never have discovered otherwise.
Here's to a better year ahead.
Wednesday, December 24, 2008
Saving Your Bacon
In lean economic times, businesses often look for ways to cut non-essential spending. One area that often gets cut first is business continuity and disaster recovery spending. But, if you're like many businesses, you don't have a BC/DR plan at all...and if your business doesn't have a BC/DR plan, you're risking your future.
Research shows that the most common business 'disaster' is fire. Studies show that businesses that do not re-open within days of a disaster have about a 10% chance of long-term survival.
So, make a plan - even if it's just a plan to protect your valuable corporate information. There's plenty of information out there to assist you, I've included a book that I've written to get you started - it's an easy read and brings you step-by-step through the process. Also check out a blog post with some barebones suggestions.
Make a New Year's resolution to create and implement a BC/DR plan in 2009. When the deck is stacked against you, take every opportunity to reshuffle the deck in your favor. A BC/DR plan is a good start.
Business Continuity and Disaster Recovery for IT Professionals
BC/DR blog post
Research shows that the most common business 'disaster' is fire. Studies show that businesses that do not re-open within days of a disaster have about a 10% chance of long-term survival.
So, make a plan - even if it's just a plan to protect your valuable corporate information. There's plenty of information out there to assist you, I've included a book that I've written to get you started - it's an easy read and brings you step-by-step through the process. Also check out a blog post with some barebones suggestions.
Make a New Year's resolution to create and implement a BC/DR plan in 2009. When the deck is stacked against you, take every opportunity to reshuffle the deck in your favor. A BC/DR plan is a good start.
Business Continuity and Disaster Recovery for IT Professionals
BC/DR blog post
Sunday, December 14, 2008
Credit Crunch Redux
Here's part two. I was listening to NPR the other day and heard that due to Bank of America closing out a credit line for a small business whose sales were declining, 300 people were suddenly out of work.
Come on, (banking) folks. The US government did NOT give you all our taxpayer dollars so you could sit on the money and pull back credit for companies that are doing their best to survive.
My earlier post on American Express giving small businesses a hard time said that Bank of America was among the good guys. Based on the NPR story, it seems we may have to revise our view of BoA. We'll wait to see what happens in the coming weeks, sometimes there's more to the story than we hear.
Still, if the government keeps handing out money to companies and doesn't step in to help individuals, this US economic boat may just capsize. Let's hope someone recognizes this and starts tipping things in the other direction soon.
Come on, (banking) folks. The US government did NOT give you all our taxpayer dollars so you could sit on the money and pull back credit for companies that are doing their best to survive.
My earlier post on American Express giving small businesses a hard time said that Bank of America was among the good guys. Based on the NPR story, it seems we may have to revise our view of BoA. We'll wait to see what happens in the coming weeks, sometimes there's more to the story than we hear.
Still, if the government keeps handing out money to companies and doesn't step in to help individuals, this US economic boat may just capsize. Let's hope someone recognizes this and starts tipping things in the other direction soon.
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