I’ve been the fortunate beneficiary of caring, business-savvy family members my whole life. Advice and support have never been in short supply.
My father likes to say that he started out an engineer and wound up selling ladies’ underwear. There’s enough truth to that. Before I was born, he worked at Edwards Air Force Base. When I was in high school, he founded BJ’s Wholesale Club.
Recently retired, now he delivers advice pro bono for SCORE, a nonprofit dedicated to helping small businesses achieve their goals.
At an important juncture in Sheepscot Creative’s development, he and I had a series of face-to-face conversations about where the business was headed. A few days later, he sent me an email. I’ve copied and pasted his notes below.
Why Small Businesses Fail
Assuming you have a product or service that has promise, I believe the probability of your success depends on several factors that have a great impact and potential for disaster.
Your belief in the value of your offering as well as your ability to deliver it is of paramount importance. If you can’t convince yourself, it is doubtful that you will be able to convince someone else.
DON’T WEAR MORE HATS THAN YOU HAVE HEADS
Concentrate your personal efforts on the areas in which you excel. Find other sources for missing functions.
DOCUMENT YOUR BUSINESS PLAN
While you do not need a verbose business plan with a host of financial and theoretical discussions and financial exhibits, you do need a brief set of bullet points and a calendarized cash flow estimate.
The business plan should include a simple statement of:
- Description of the product or service to be offered
- The market size: both dollars and geography
- The competition
- Percentage of market to be won
- Your niche and raison d’etre
Project cash flow monthly for the first two years, quarterly for the third year, and annually for the fourth and fifth years. While initially it will be just your best guess and not very accurate, it will be heuristic process, if you review and re-forecast based on actuals that you have achieved.
HAVE SUITCASE MONEY AVAILABLE
Last, but by no means least, you need a source of funds available to you, when unplanned needs arrive. I believe that the lack of adequate cash at critical times in the life of the company is the main reason for failure of small businesses.
Eventually, you will be able to arrange for a line of credit with your bank, but in the interim you should handle this area with a separate savings or money market account established specifically and only for this purpose. All businesses experience small lapses and unexpected variances in cash flow during the course of their operations due to the vagaries of the normal business cycle. Not having this sort of facility available creates a terminal situation for the viability of the company.
Postscript: My father also sent me workbooks and guides to flesh out that business plan. Many such resources are available, of course, but you could do worse than starting with How to Really Start Your Own Business, a free publication from SCORE and Inc.com that addresses any number of start-up challenges.