This holiday season, consumers are watching their credit cards like hawks and turning to the old tried and true cash for transactions. In many ways, this seems to be a very significant economic event unfolding without much commentary. Think of the implications -
Credit cards became popular years ago when the interest you paid on them was tax deductible. Tax laws changed and the interest was no longer deductible but by then, people were hooked. Like an addictive drug, credit allows you to enjoy the future fruits of your labor now....
For businesses, credit is an important lifeline that helps companies manage cash flow. However consumer credit often just allows people to buy things they can't really afford. Granted, used appropriately, a credit card can be a free 30 day loan from the bank. But most folks don't use it that way and it instead becomes an expensive addiction.
So, if consumers are permanently dialing back their use of credit - how will this impact your business? If your company sells high ticket consumer items, you probably have already taken the hit, but it might continue to hamper you unless you get creative.
If your company sells less expensive consumer items, you've likely already seen the shift to debit cards, cash and (gasp) old fashioned paper checks.
Remember as we go into 2010 that cash is king and you should find ways to enable your customers to do business with you without requiring credit cards.
On the flip side, if you're a small business looking for funds, credit cards are one of the most available but currently the most expensive options for cash. Instead, see if you can work with your vendors in new and creative ways. One new start up company I know about simply asked if they could pay their vendor net 14 instead of net 7. Having 8 months of solid payment history, the company granted them net 14. That helped their cash flow enough that they were able to eek by without credit cards or other borrowing.
So, find ways to cooperate with your vendors, your suppliers, your landlord, your customers and if you look for win-win arrangements, you're more likely get what you need and help someone else at the same time.
Hang in there - 2010 looks to be a better year than 2009 for business all the way around.
Sunday, December 20, 2009
Tuesday, November 17, 2009
Starting Up By Starting Small
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.
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.
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).
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