Have you heard the expression "Cash is king"? I'm sure any banker or accountant you have ever spoken to has told you this but have you listened? Managing your business' cash is the most critical activity you can do to survive the current economic conditions.
What is cash flow? Simply put it is the difference between cash in and cash out of your business. Note...cash flow is about CASH. We are not talking about sales, receivables, loans, payroll we are talking about CASH. Granted all of these components impact cash but cash is cash. Cash pays the bills and makes payroll. I guaranty the cash flow statement is the first page a banker will flip to in your business plan if you are looking for a loan. It is the life blood of your business. The challenge is that at times business owners get distracted and lose track of their cash position. Don't do this! Don't count on your accountant to manage your cash flow, you do it. You are the owner, know and manage your cash! I have see businesses go out of business because their sales have decreased or expenses have gone up and they have not made the needed adjustments to manage and maintain their cash. That is unfortunately when we get calls asking for our help getting a loan. By that time it is to late. A bank is not going to lend to a business that is declining and doesn't have cash to pay the bills or more important to the bank their payment.
Let me point out that declining sales is not the only reason to watch cash flow. I have seen many businesses grow themselves out of business. I remember a period in the early 2000's when for several years in a row the top business in the "Fast 50" was out of business the year following the award. High sales rates can cause increases in expenses that could drain cash. This is especially true if you have to produce and ship before you get payment. This can also happen if you have to carry receivables and have expenses prior to receiving payment. Remember, receivables are not cash.
I am a big fan of Hyrum Smith the founder of Franklin Quest, now Franklin Covey. I have had the opportunity to meet Hyrum on several occasions and hear him speak, he does a great job. My most recent encounter with Hyrum was at the Association of Small Business Development Centers (ABSDC) annual meeting back in Chicago. I got an opportunity to speak to him when I bumped into him coming out of the elevator and then to hear his conference keynote later that evening.
Hyrum has written several books around the concept of life and time management including the 10 Natural Laws of Successful Time and Life Management. I wanted to bullet point a few concepts that Hyrum discussed in Chicago:
Determine "What Matters Most to You" then bring the events in your life into line with these governing values.
The only difference between today and 100 years ago is that we do things faster now. Technology has given us the ability to do more things so today it is even more critical that you know what is most important to you. Don't let the huge flow of information and activities overwhelm you. Control the events in your life by knowing what is most important and acting on that.
Practice the "Abundance Mentality" not the "Scarcity Mentality" ~ With an abundance mentality you strive to create a win/win situation with those you deal with. Someone doesn't have to fail so you can succeed. I use this in partnerships all the time. We strive to make sure our partners succeed and this will allow us to be successful.
Give Back ~ "Cast your bread on the water and it comes back 10 fold." Give back, pay forward...Make a difference!
Show true character ~ This is the ability to carry out a decision after the emotion of that decision has past. As a runner I have to practice this all the time...When I lay down to go to sleep I am always excited to run the next day...The key is to get out and run the next day when I'm tired and it is windy and cold outside. In business this is an important concept. There are a lot of big picture people that come up with great ideas but fail to act and make those ideas a reality. It is your actions in the moment of truth that will make you successful.
"Pain is inevitable but misery is optional" ~ Into every life some rain will fall. Everyone will face challenges but you have the choice to control how you react to those challenges...You are in control. You determine your actions.
Live out of your imagination not your memory. Memory is what once was. Imagination is Potential...It is what CAN be!
Building an investment ready business is both an art and a science. It takes research, planning and a product that solves a pain in the market. It also takes knowing when to trust your gut and make a move that will truly take your business into the stratosphere. That intuition is a combination of entrepreneurial sense and "been there, done that" experience. It is the ability to execute and know when and how to make adjustments. The more you are involved in a start-up the better you are at recognizing the signs and taking the appropriate action. That is why good investors value those that have failed, and learned, as much as they value those that succeeded in a previous start-up. It is the experience you gain that is important, whether in a winner or a loser.
Having said that, what if this is your first cut at a start-up how do you avoid the pitfalls of many first time entrepreneurs? One way is to tap the experience of others. Using resources like ours at the SBDC or TechColumbus provides experienced advisers that can help you move forward. Networking and meeting other entrepreneurs through on-line sources such as Twitter or Columbus Tech Life or live meet-ups like are found at Columbus Tech Life Meet-up can provide mentors that are willing to help along your journey. It is truly amazing the power of these resources to connect entrepreneurs.
One final resource I want to mention is our upcoming Capital Crash Course 2009. This has become an extremely popular event for those looking to get a lot of information in a very short time on building a high-growth, investment ready business. This is the sixth year I've put this together and I think this might be the best overall line-up of speakers we've ever had. I want to touch on some of the key points we are going to cover and why they are critical for entrepreneurial success Download capital_crash_course_2009_agenda.doc.
Point One ~ As I've mentioned before experience is a great teacher. One of my favorite entrepreneurs is Patrick Murphy founder of Brand Thunder. Patrick has been successful in accessing investment funds both from TechColumbus and the Ohio TechAngels fund . Why has he been successful? Because he knows his customers. Back when I first met Patrick he was bootstrapping Brand Thunder. He was doing everything himself but what set him apart was that he was out talking to customers finding out what their needs were and modifying his product accordingly. His product and customer knowledge is what interested me and TechColumbus and eventually helped him raise funds.
Point Two ~ I talk to people all the time that have a business idea and are hellbent to pursue it but haven't really done a go/no-go feasibility plan. I feel that you really need to take this a step beyond just running the business numbers. It is important that you have an idea of whether the business will work
for YOU not just work...there is a difference. A business idea may
have legs but until you have determined what you want and need out of
the business it is difficult to ascertain if you should proceed.
Point Three ~ You may have a feel for how much money you need to raise for your business to move forward but do you know what a convertible, participating preferred stock is? What if the investor requires anti-dilution provisions? How would that impact your cap table in the case of a down round? Enough said, knowing what the numbers and terms mean that VC's will use will help you negotiate a deal that is fair for everyone involved.
Point Four ~ Regardless of what you see on the late night commercials with that nut running around with the question marks on his coat (man, that guy makes my job hard) there are really not millions of dollars of government money for you to start a business. Most government financial programs are loan based. They may be targeted and offer special preferences but they are loans. However, if you are doing science and technology research there are Small Business Innovation Research grants (SBIR) available if you qualify. There are tricks to playing this game and knowing them can put you in a better position to get the award.
Point Five ~ Another source of funding is through the TechColumbus TechStart program. TechStart is a $22.5 million initiative to build and grow technology businesses in central Ohio. What many people don't understand is how to prepare their business to qualify for the funds whether it be TechGenesis, Regional Commercialization or the Ohio TechAngels. There is no application to apply for the funds. What you need is a solid, scalable business model. You also need time to work through the learning curve with TechColumbus. They need to understand your business, help you adjust your business model if needed and be confident enough in your opportunity to put you before the various funding boards (of which I am a part). Moral of the story...start early meeting with us and or TechColumbus, it's a process.
Point Six ~ What if you really don't have a business but have a product? What if you would be better served partnering with a larger business to take your product to market? These are legitimate options that many entrepreneurs don't think about. If they are options learning how to negotiate the licensing terms or the joint venture agreement is critical if you are going to survive.
Point Seven ~ To get funded you need to turn your Idea into a Deal (that would be a good name for a blog). Knowing what is on the investor's mind is critical. Know what peaks their interest and gets them to understand your opportunity is what will get your deal funded. How about a sneak peak at what investors expect. This is from Capital Crash Course 2008. It's the full hour angel panel presentation from last year. Full of good stuff and you can expect more of this at this year's event. New panel, new insights including John Huston's presentation "How Do I Make $10,000,000?
One of my favorite saying is " Being forewarned is forearmed". Be prepared to succeed. Don't hope you are ready...be ready.
The more I use it the more convinced I am that social media can
really help get your message out to those looking for what you do. Social media technology and strategies have truly leveled the playing field between large and small businesses. A great example is how social media was used for outreach can be found in the election of the 44th President of the United States, Barack Obama. My.Barackobama.com is the social media tool the campaign used to raise funds, mobilize volunteers and target their message to specific markets. Check out the article in Technology Review, "How Obama Really Did It" for a description of the campaign's social media strategy. This allowed Obama's message to go directly to volunteers in areas that previous democratic candidates had not been able to penetrate. By getting to volunteers that could more directly relate to their neighbors Obama was able to turn many red areas blue. In a local example a grassroots effort by a group of committed volunteers put together an event called Ohio 2.0 featuring Reid Hoffman (founder of LinkedIn) and Judy Estrin (author of Closing the Innovation Gap:Reigniting the Spark of Creativity in a Global Economy. In a span of four weeks, through the use of only social media channels, the event went from an initial discussion of what could be, to over 200 people being inspired about the future of innovation, business and social media. Very powerful.
OK, so now you are ready to implement a social media strategy as part of your overall marketing and outreach plan...how do you do it? While social media can be very valuable it just doesn't happen. It can be very viral but it social media is a skill that you have to learn (and keep
learning). I've recently found a great blog called "Brand Box Blog" by Amber Naslund, that can help you get started. In a recent post called "Getting a Social Media Foothold" Amber added a FREE
e-book called "Getting a Foothold In Social Media: A Get-Started Guide
for Small and Medium Businesses". It is an easy to understand guide to
help you work through many of the in's and out's of using social media for your business. What I really like about this compared to some other social media "How-To's" is that it is doable. I doesn't overwhelm you. It gives you specific recommendations to implement the tips (I recently read another e-book on social media that made me wonder how I would be able to fit my full-time job into my social media schedule). I highly recommend you visit Amber's
blog and download the e-book.
People are out there asking where to find
a product like yours...shouldn't you be part of that conversation?
I love entrepreneurship and small business development. I especially love the innovation that takes place in the technology space. Something special happens when like minded, passionate entrepreneurs come up with an idea and decide to build on that idea and create something new. I don't think it's an institutional , I think it grows organically. It's about an attitude, a shared desire to create a fix for a problem or as Guy Kawasaki says...to change the world.
I think that in a lot of ways we have that attitude here in Columbus but in a lot of ways we don't. Maybe it is our midwest culture that leads us to a feeling that we can't create big innovations. There is so much emphasis on the mechanics of business development and attracting funding that we sometimes fall into an add-on mentality. I've actually heard "leaders" in the local technology space say that we in Columbus are best at tacking on to something already created on the coast. This sometimes creates a lack of commitment to try to create the next Big Thing. I also think that central Ohio tends to look to OSU or Battelle to create the innovation. While certainly there is innovation there it is not the end all be all of innovation as you might be led to believe.
Two of the keys to creating a culture of innovation are talent and a collaborative, supportive environment. Clearly we have the talent. I have met some very smart technology entrepreneurs over the past nine years and without question they would stack up to anyone in Silicon Valley. What we need to improve is the collaborative, supportive environment. We need to be able to walk into a coffee house and see groups of people huddled around laptops or discussing how to build the next big thing over drinks. We need to support those that want to build the future not just work inside a large corporate bureaucracy. We need to celebrate "Trying" as much as we celebrate "Success".
This is where Columbus TechLife comes in. Columbus TechLife is a virtual network of technologist, entrepreneurs and business support people with one goal...create an environment where those in the technology space can interact and build collaborative networks that can lead to innovation. This is not an institutional effort, it is grassroots. Those of us that are interested in this idea are building the environment on our own time as volunteers. There is no membership fee or application to join, just a commitment to making the greater Columbus a place where ideas can flourish and grow into opportunities in technology development. Through the various on-line networks of Columbus TechLife you will also find a community where you can meet and interact with like minded professionals. You can take the on-line experience to a face to face level by having access to a variety of events such as the structured programs of TechColumbus or the Columbus Chamber or more informal "meet-ups" over coffee or a few drinks.
I first started this blog sitting in a Starbucks in Palo Alto when I was attending a conference at Stanford. It was a great experience and one that we can have here in Columbus...Join The Movement!
