Advice

Last week I was asked the question: Why do businesses fail? There are many answers that professional advisors like me can give you that will generally answer the question. Responses such as the under capitalization – or not having enough cash, poor management skills – making bad decisions or underestimating the completion and/or ineffective marketing are all very good reasons as to why businesses fail. However I would sum up all those responses by saying that businesses fail because they don’t manage their expectations properly.

Here’s what I mean. Many inexperienced business owners don’t expect a lot of problems so they don’t plan for them. Novice entrepreneurs innocently believe that when they are open for business the crowds will come running. They don’t really expect to need a marketing plan or for things to fail or go awry so they don’t create a contingency plan (or a plan at all in most cases). Most business owners are quite optimistic about their business idea or concept so they naively trust that things will go as THEY imagine. Most seasoned business men and women know this is not true. While optimism is most certainly necessary, there’s a healthy bit of practically that is needed as well.

Because there is so much to learn for a new entrepreneur, it’s easy to get overwhelmed, miss critical strategic decision-making information or simply run out of research time to investigate how to proportion time or dollars wisely. And to add insult to injury, the new entrepreneur doesn’t really know what he/she doesn’t know. Often it can be very difficult for a novel entrepreneur to grasp the vast amounts of information and critical thinking and planning skills needed to create success in the business. In addition, much of the learning has to be done congruently– while running the business– which is difficult at best.

It is possible, however, to beat the odds of business failure–simply by considering the following 5 planning strategies:

1. Plan to have a consortium of advisors that have business experience and that are willing to share their advice and knowledge with you. And then use this group of advisors regularly –getting advice from them about your plans.
2. Plan for the worse possible outcome, but expect the best. Make sure your financial forecasts are conservative, meaning extremely modest.
3. Plan your sales and your expenses. Forecasting a loss or break even is ok and shows that your planning is probably more realistic than not. Don’t expect the business to be able to support you right out of the gate; have other funds available to pay your personal bills.
4. Plan your ramp time to take longer than you initially intended. Plan to grow slowly so your costs can keep pace. In business, every dollar you earn cost you something either in marketing, people costs, manufacturing costs, etc. So if you plan exponential growth –it will cost you exponentially, so be conservative and operate within a budget.
5. And finally, plan to continuously change the plan. Your strategy has to be flexible enough to keep up with a consistently changing market, including economic highs and lows and consumer demand. If you don’t adjust your plans quickly you could lose your shirt at the cat’s meow so you must be willing to throw out ideas and plans that aren’t working without being emotionally attached to being right.

As an entrepreneur, you have to know that things are not always going to go according to plan or imagination — expect the wheels to fall off and prepare for it. Your business will have a much better chance at success if you do.

For some entrepreneurs the switch from the corporate cubicle to the home office offers substantial anxiety while for others it appears to be a breeze. Which group you fall into really depends on your circumstances and how well prepared you are for the change.

For those strapped with a harness of unresolved anxiety and fear, here’s something to think about. In the corporate system, the masses are systematically taught how to be good followers – not leaders. However, becoming a successful business owner requires being a good business leader. A Good business leader has a healthy dose of bona fide confidence; and having confidence is directly related to the strength of what we know to be true or what we believe to be true. In other words, successful business ownership is linked to good leadership and good leadership is linked to how well you know your business.

For the well adjusted entrepreneurs, generally you will find that they were some how well prepared for their entrepreneurial journeys either by having 1) Extensive leadership experience: being far enough up the corporate food chain to have a legacy of strong leadership skills and resources, 2) Adequate financial resources – by having enough cash in the bank (or at the bank) to allow them the time to focus on the planning and start up aspect of their new venture or 3) Confident Ability – because they simply left the corporate world to do what they were already well paid to do. This does not mean that the people in these scenarios did not have risks, it just means that they had some rather heavy insulation that allowed them to re-group at a different pace than the previous group.

So how do you get to that coveted place of the confident and competent entrepreneur and move as far away as possible from the fear-racked, displaced, disgruntled, down-sized, self-employed business owner? By planning to become confident and competent. That’s right, it’s back to planning. You’ve heard it all before and it’s still true: Confidence and competence can be accomplished through well thought out and committed planning. It’s done by researching and learning as much as possible about your business venture of choice and planning to be and do better at it than anyone else.

It’s done by creating a road map for yourself and by looking at it often so that you stay the course and measure your progress accordingly. Prepare for the journey by considering the type of terrain you’re going to be traveling and the type and mode of transportation you’ll have access to while on the course. In other words, you must know all you can about the business you’re getting into and understand what it takes to succeed in that business. You need to know how what you bring to the table helps or hinders your chosen business venture. Know where the bumps in the road are and the places where construction is holding up traffic. This just means you’re familiar enough with the business to understand where the pitfalls are and slow downs are and that you are prepared for them. While planning is NOT a cure all, it is a great place to begin the entrepreneurial journey.

So as far as getting off the corporate mother ship is concerned, plan your exit as far out as possible. Plan to have the resources required to get you through the start up phase. Once you’ve opened your doors for business, commit to operating by a plan, and then tweak that plan until you have a system that works and works well. Having a successful business requires a commitment not only to the venture itself, but also to planning and implementation and then more planning and more implementation. The more you know the better your decisions, the better your decisions, the more confident you become, the more confident you become, the better business you build.

How to Get Free Advice from a Business Guru

As a consultant, I receive many frantic calls from micro entrepreneurs who want to obtain some immediate and free advice from me.

It’s usually a friend of a friend or a student that I’ve taught somewhere in the past who wants my help with some aspect of their new venture.  Most of the time I find myself coaching them on how to ask me to help them before I ‘m actually able to give them the first piece of “free business advice”.

Here are the common mistakes these guys make and how I recommend solving them:

1. Being vague about your concept.  If you should be fortunate enough to speak to an entrepreneurial wizard for free, don’t be vague in your description of your concept.  You should be able to articulate your business idea and what it is you intend to do with it in two or three sentences.  This is NOT the place to start talking about why you came up with the idea, how long it took you to get to this point, or all the other people in your network who can’t help you.  Wizards and gurus are busy people, and they tend to like specific information so they don’t have to sift through scenes of drama to figure out what it is you want from them or how they can help you.  Get to the point quickly with professional courtesy, with purpose and intentional respect for their time.  You may get more of it as a result of your conscientiousness.

2. Not knowing what problem you want help with.  Know specifically what is it you want from the entrepreneurial wizard and get to that point as efficiently and quickly as possible.  Study your business obstacles and problems so that you can communicate the type of help you think you need with ease and clarity.  Often the business wizards will be able to direct you in multiple areas, but before they do, they need lucidity from the entrepreneur.  

3. Rambling on and on or over talking your free expert.  When you are able to communicate your problem to a business superstar, it tells the business leader several things about you:

• 1. It says that you are working towards being a serious business owner;

  2. It says that you respect their time;

  3. It communicates your business maturity – having this lends you credibility to the mentor so that they are more willing to help you;

  4. It focuses the conversation, which in turn focus the mentor in a specific direction so that they can guide you towards more of what it is you want.   

Have one or two things you’d like help with, thank your expert, and then get off the phone.  If you can establish a professional rapport, you can always call again at another time, but if you wear out your welcome, then this will more than likely be the final conversation.

4. Being argumentative or defensive.  If a business resource tells you something that causes you to offer an explanation – don’t.  Successful or knowledgeable business owners will typically call things as they see them.  If they happen to mention something to you that they see as a mistake, just suck it up unless they ask why you made a particular decision.  One of the reasons that it’s good to just suck it up is because business resources are just resources, and they can offer objective opinions on things.  It’s not personal.  Process your decisions (right or wrong) with your peers, not an unfamiliar business resource.  Also, your defensive position could shut the resource down, and they could begin to view you as un-teachable or too sensitive to accept their advice.

5. Not being willing to invest or pay for the good advice.  It is well understood that young businesses don’t have much money, however the young entrepreneur should be willing to invest in their own education and understanding, even if it’s just a book.  If your guru advisor is an author, purchase a copy of their book as good measure and as a token of your appreciation for the investment they just made in you.  You could also send a gift card to Starbucks or make some other appreciative gesture that is not convenient.  Doing this simply gives a nice warm feeling to the person who took time to invest in your situation and is a small way of giving back.

Rhonda Novak