A McKinsey multi-year study involving in-depth interviews, workshops, and surveys of more than 2,500 executives in over 300 companies found that innovation involves a set of “crosscutting” practices and processes to structure, organise and encourage innovation. Continue reading “No matter how brilliant your idea if you don’t have resources, you won’t be able to get it off the ground”
At a small rural town that I was visiting I came across an interesting business relationship between a butchery and a small micro-enterprise trading on the street cooking and selling meat products from the butchery. The small enterprise, run by a husband and wife team, had set up and warning canopy and were grilling boerewors (farmer’s sausage) and vetkoek (fat cake) and curried mince. They were doing a brisk trade because many people were stopping at the parking area which also led onto a liquor store. The butcher benefited because customers could taste his meat cooked outside and the small business benefited from the quality of the meat products as well as the steady stream of customers that flowed into the butchery. Continue reading “Do you have a cash kitty to invest in your new business idea?”
Some people see other people doing business and say to themselves “I can do that”. It may work for a handful of people but to grow a business beyond a certain scale takes more than just the desire.
The consequences can be disastrous. I’m reminded of Catherine Tate, the “I can do that” woman. If you’ve seen any of her television skits, you will know that when she says “I can do that” and tries to do whatever she sees, it turns out into hilarious disaster. It’s fun to buckle over with her slapstick brand of humour and irreverence but in the real world of small business you will end up choking on your laughter. Continue reading “Can you really do this?”
What separates the doers from the talkers when it comes to implementing new business ideas?
Sometimes it could just be that some people like the idea of talking about an idea that they want to implement but never get around to doing something about it. Others may justifiably be uncertain about whether they could really pull off starting something of their own or from scratch. Yet others may not be able to handle the uncertainty that comes with entrepreneurship.
Take one would-be small business person who has a number of sideline activities yet has a brilliant idea for a food business but talks about it all the time. Yet he’s never actually taken one step towards starting the business that he believes has a strong potential market. It’s not that he’s lazy. It’s just that when you remind him of the reality of what he needs to do to start such a business, he backs off. Continue reading “What prevents you from starting something of your own?”
My father who was a part-time jazz musician in his early years used to often sing this song “You’ve got to put your money in the bank Frank, you’ve got to have money to start”. Yes, you can’t start a new business or anything else if you don’t have money saved. But the real challenge is building up a cash kitty when you are running your business.
I recently came across a small business that was forced out of its premises because the landlord had increased the rent. The problem was that the small business owner did not have the cash to secure new premises and inform all its existing customers that they had to vacate their present premises. The result was that customers started making plans about obtaining alternative suppliers of the service that the business was offering. Whether this business will find new premises and bring along all their customers that they have built up over years is difficult to say. But the likelihood is that they have lost many customers and it will be difficult to rebuild their customer base that they had acquired. But there is another issue and that is that by not having cash reserves the business wasn’t even able to move all their fittings and equipment from their existing premises with a professional mover and had to rely on friends and family to cart the equipment out piece by piece over more than two weeks.
You know what it’s like with a small business, once family and friends know that you are a small business owner you are leaned on for all sorts of cash requirements. Children who need motor vehicles or education or even airline tickets home from faraway places. Extended family suddenly need money and lean on you for loans. Soon the business becomes a cash machine for many people and is unable to build up cash reserves.
Without cash reserves, you become extremely vulnerable and there is a strong possibility that your small business will deteriorate. Just think about it. If you don’t build up a cash reserve, where’s the money going to come from when you need to protect your business against a fierce competitor? How can you keep running the same business for years on end without improvements or even giving the inside and outside a coat of paint? Your business can also remain stagnant or trapped in that you are not able to do improvements or expansions.
We all know how tough times are at the moment. With a large strain on your cash resources, how is it possible to build up a cash reserve to make your business more resilient? How can you stop the drainage? How can you put an end to living from hand to mouth?
It all starts with making sure that you pay your business first before you pay anyone else. You need to set aside a small amount each month and put it into a cash reserve fund so that you can build up a cash kitty to tide you through bad times. Even very small amounts in the beginning will get you into the discipline of saving on a regular basis. You’ve got to start somewhere. Small amounts accumulated each month will eventually amount to something sizeable if you look over a period of a year. Do everything you can to build up a cash reserve in your small business so that when the time comes to protect your business, improve your small business or expand it, you have the necessary financial resources to do so.
The founder of Liquid Paper, Bette Graham, came up with an idea while watching painters decorate Christmas windows at the bank where she worked as a secretary. She worked five more years while sending her new product from her home. A common myth about entrepreneurs is that they are willing to take any sort of risk no matter how big it is. But looking at some of the stories of entrepreneurs you tend to find that when they accepted a certain amount of risk, they look for ways to reduce or minimise the risk. Another example in a recent report from a US newspaper was the example of the entrepreneur who came up with the pantyhose, Spanx, who didn’t resign from her job for two years. This entrepreneur became the youngest self-made woman ever on the Forbes billionaire list.
Entrepreneurs who can afford the luxury of time and those who want to get their product right before they introduce it onto the market look at ways to reduce risk. The founder of the bagless vacuum cleaner (James Dyson) came up with many prototypes and took several years before he was satisfied that he had something that could be a winning product. He didn’t just go with his first idea. He knew he was up against big competition and a public who would be unfamiliar with such a new concept. The prototyping stage may be the area where a certain product needs the most attention to reduce risk.
Product testing is another area where risk can be minimised over time. The two examples of women entrepreneurs shows how long they took to test their products in the marketplace before they gave up their jobs and pursued their entrepreneurial dream full-time. During this period of testing they were able to ascertain demand, iron out the bugs and learn from real, live customers what they liked and didn’t like about the new products. Jumping into a crowded marketplace with a product that is an unknown entity is a highly risky proposition. Surely, it makes sense to test, test and test again before you can say whether your product or service will be able to stand up against competitive products and services.
Smart entrepreneurs don’t just give up their day jobs and leap into their entrepreneurial dream without making financial plans for themselves and their families. A business mentor or an adviser says that up to 80% of entrepreneurs that she has mentored said the had saved enough money to support their families for a year. She also mentions that two thirds of founders in a survey put out less than $10,000 on their ideas. The myth of the entrepreneurial dream is that entrepreneurs will bet their entire life savings on their new idea. This is erroneous thinking. Accurate analysis of entrepreneurial behaviour shows that there is a fine balance between taking a risk on a new product, service or venture and reducing or minimising the risk.
If you are concerned about the risk in your new business idea, put your name down at no obligation for my forthcoming book “Breakthrough Ideas”. One of the approaches and themes throughout this book is helping those who come up with new ideas to maximise their opportunity in their products or services and minimise, as far as possible, their risk. Even though I have used practical experience and extensive research to show you how to manage a risky proposition, I still recommended that you seek professional advice tailored to your exact circumstances to cover tax and legal implications and any other risks associated with in trying to get your promising business idea off the ground. This book will show you how to do your homework regardless of your idea and encourages you to surround yourself with trusted advisers who can give you a helping hand.
One Christmas morning not too long ago I was walking after church with my children in Kalk Bay when I came across an old friend who I had fished with on the wooden commercial fishing boats when I was growing up. He looked in a bad way. One leg of his denim jeans was ripped. He had a gash on his big toe. His face said it all: he had a dreadful night alone on Christmas Eve.
I shook hands with my old fisherman friend and wished him Merry Christmas. We spoke briefly about fishing. There was a promise that someday we’d fish again on one of the commercial boats that go out from Kalk Bay hunting for yellowtail and snoek. Continue reading “How much pain can you take before you act on your cash flow?”