As the majority of entrepreneurs in South Africa start out as solo entrepreneurs I thought it may be useful to consider what exactly it is that makes solo entrepreneurs successful. Its already well known hat effective market research the the creation of a well thought out business plan makes a real difference but so does the attitude and commitment of the entrepreneur. The point-of-view or perspective the solopreneur has on how to operate his/her business determines the speed at which he/she achieves the success he/she desires.
1. Marketing is more important than mastery.
Being a master of his craft, skill, or talent doesn't ensure
that the solopreneur will be successful in his business. He
can be the greatest at what he does, and if nobody knows about
him, he's quickly out of business. Yes, it's important that
he deliver a quality service. But it's even more important
that he consistently and appropriately promote his business.
2. Risk is always reducible.
Everyone faces risk -- in life and in business. And risk is
always reducible. The solopreneur may find that at times,
even after she's reduced the risk, it is still too costly.
Great! She just needs to find another path to the goal.
Tip: Make sure your clients know that you're also helping
them reduce risk -- it makes you more valuable.
3. There is usually an easier or better way.
No matter what strategy, process, or procedure is under
consideration, there is usually an easier or better way. The
solopreneur needs to think beyond the traditional ways of
solving a problem, creating a deliverable, or accomplishing
an outcome. Doing so will result in finding a new, better,
easier, faster, less expensive, or less risky way.
4. Delay is unacceptably expensive.
Today the windows of opportunities open more often and shut
more quickly than ever before. Delay lets those opportunities
pass by without the solopreneur or his client being able to
take advantage of them. When the soloprenuer reduces or
eliminates delay in her business, it can have the added
effects of reducing costs in projects, increasing her perceived
value to her clients, and giving her more opportunities for
5. Self-confidence can be arranged.
The solopreneur doesn't need to rely on himself to create
a sense of confidence. Nor does he need to wait until he has
attained a high degree of mastery in his services. Instead, he
can arrange for support structures and encouragement, and
can design situations that feed him the confidence he needs.
6. The answer is somewhere.
Does the solopreneur have the answer? Does her client have
the answer? Does a competitor have the answer? Is the answer
on the Internet? The point is that it doesn't really matter
where the answer is, but that there is an answer somewhere.
And it's up to the solopreneur and her client to find it.
Knowing that the answer is somewhere, but that she isn't the
only source for the answer, releases the solopreneur from
needing to be the "answer person." This, in turn, frees up
her energy for collaborating with her client in finding the
7. Problems don't exist.
Okay, this one might require a big shift in perspective.
Especially if the solopreneur thinks of himself as a problem
solver! Flip it over and what you have is an opportunity,
not a problem. An opportunity for the solopreneur to showcase
his magnificence. An opportunity to challenge his knowledge,
perceptions, and beliefs. An opportunity to really get
8. Everything is a project.
Regardless of what service the solopreneur provides to
her clients, she is a project manager. Running a business,
whether for one person or 500, is a series of projects.
Creating the business identity is a project. Creating the
web site is a project. Upgrading the company's technology
is a project. So is creating and implementing a marketing
plan. Successful soloprenuers use project management tools
and techniques to save time and keep the business on the
9. The client is always right, or just say "No!"
Enter the paradox. Successful solopreneurs don't "go
along to get along" with their clients. As the hired-gun
professional, the client wants the solopreneur's expertise
and needs the solopreneur's insights. Although the client
is always the final decision maker, she doesn't always
know what's best. The solopreneur needs to tell the client,
gently and gracefully, when she is going down the wrong
path, misusing her resources, or being unreasonable.
The solopreneur's Ideal Clients will love it when he
says "No!" in this way. His Clients from Hell won't, but
then these clients will receive the ultimate refusal from
the solopreneur -- not to work with them again.
10. It's all solvable, or it's not.
When the solopreneur approaches her business, clients,
and projects from the perspective that it's all solvable,
her options open up. Determining that it's not solvable,
for whatever reason, releases energy and resources for
more appropriate action.
11. Success requires mistakes -- lots of them!
The solopreneur won't stay in business long if he hides
his mistakes or blames them on others, the system, or
the processes. Our best growth and most important lessons
come from making mistakes and then correcting them.
By the way, most people avoid even the possibility of
failing (because they don't understand that failure is
a requirement for success)!
12. Creeping excellence beats perfection.
The solopreneur can't afford the luxury of being a
perfectionist -- and neither can many of her clients.
Instead, the soloprenure who is successful has adopted
the habit of creeping excellence, in which she ensures
that everything she does is just a bit better than
it was the last time, leaving everything better than
when she found it. Creeping excellence reduces the time
and costs racked up by perfectionism. Perfectionists
spend 80% of their time and resources perfecting the
last 20% of everything. Encourage the solopreneur to do
what she does best and hire others to do the cleanup.
13. Focus is power.
"If you chase two rabbits, both will escape."
Being a Jack-of-all-trades is a sure way to fail as
a solopreneur. The solopreneur can't market his
business to the entire world -- he doesn't have the
time, money, or energy for that. Encourage the
solopreneur to narrow it down to one market segment
of Ideal Clients for whom he provides one primary
service. That's not only doable, it's powerful!
Another place to apply the power of focus in in
stopping the multi-tasking. It takes 4 mintues to
return to the same level of concentration each time
a person is interrupted. Staying in the flow increases
productivity, efficiency, and creativity.
14. The goal's the thing, not the plan.
To what does the solopreneur commit? The plan or
the goal? If the solopreneur is getting the same
unacceptable results over and over, he is committed
to the plan. To change the results, get a new plan!
15. Independent employment is joyous!
What good is owning a business if it doesn't bring
the solopreneur pleasure? When work is joyous for
the solopreneur, her clients find her easier and
happier to work with. And that increases their
enjoyment in working with the solopreneur, which
enhances her chances for a long-term, profitable
relationship with them.
As many of the points above show, its not just the business plan, product or service and the industry that determines the success of the business but much depends on the entrepreneur and the attitude and drive that s/he is showing in working towards making that dream become a reality.
Posted by ben at 13:35
Posted by ben at 06:29
Entrepreneurial failure has long been a major barrier to talented and experienced individuals taking the leap from long time employee to business owner. The perceived risk may often simply be to big, with financial and family commitments considered, many a new idea is often suppressed even before it has the opportunity to see the light. Banks and small business investors today see the business plan as a major move forward in ensuring the risk is reduced as the entrepreneur gets to thin and work through the various issues prior to the business starting. Still entrepreneurs feel that more can be done to address this issue.
Young Business for South Africa (YBSA) is helping young entrepreneurs to confront their fear of failure. On 17 March 2011, YBSA is hosting a "Fail Fast, Fail Forward: How failure makes successful entrepreneurs" at the Gordon Institute of Business Science in Illovo, Johannesburg.
Telana Simpson, YBSA Director and entrepreneur, will be chairing a panel of experts gathered to dispel the myths around failing in entrepreneurship, and to start changing the mindsets of our young leaders towards failure.
Sitting on the panel are Yashivan Govender of FirstStep.me (Entrepreneur and author of the 'Fun Side of Being Serious'), Danny Tuckwood of MetaCo (professional Leadership & Entrepreneur Coach), Allon Raiz of Raizcorp (founder and CEO of Raizcorp, the only privately-held, unfunded, profitable business incubator on the African continent), Dr Marius Pretorius (Associate Professor of Strategy, Leadership and Turnaround at the University of Pretoria). The panel will discuss what attitudes would be more beneficial for encouraging entrepreneurs and those who support them, to develop business in our country.
The event is free to all YBSA members and R100 for non-members at the door (membership enquiries can be directed to firstname.lastname@example.org). Please note that booking is essential as the seats are limited.
Attitudes and Perceptions about Entrepreneurship
The Global Entrepreneurship Monitor (GEM) Global Report 2010 states that "if the economy in general has positive attitudes toward entrepreneurship, this will generate cultural support, financial resources, networking benefits and various other forms of assistance to current and potential entrepreneurs." Their investigation reveals that in South Africa, 29% of respondents have a fear of failure and only 16.7% have entrepreneurial intentions.
In the report South Africa and a further 23 other countries are classed as efficiency driven economies. When it came to indicators of attitude, GEM noted that in SA 40.9% of respondents' perceived opportunities in the entrepreneurial arena, and that South African's were 2.7% less fearful of failure than the un-weighted average. 77.5% of people surveyed thought entrepreneurship was a good career choice, yet only 16.7% of respondents had entrepreneurial intentions, 6.5% below the un-weighted average for this category.
With perceptions indicating that a high status is given to successful entrepreneurs and that there is a great emphasis placed on entrepreneurial endeavours in the media, why are our entrepreneurs still battling to find support?
Some of the most influential people of our time include; Richard Branson, Bill Gates and Donald Trump. They all failed to some degree before they got their formulas right and achieved the heights of success they enjoy today. Why is it in South Africa we are still battling to see failure in a positive light, as a learning device instead of something of which we should be ashamed?
Endeavour's white paper on "The State of Entrepreneurship in SA" in 2009, highlights the concern that there is a low tolerance for entrepreneurial failure in South Africa. "People disassociate themselves from them, banks shut them down and the press demonises them" (pg.11). Entrepreneurial failure is an experience that financers in other parts of the world look for in entrepreneurs that they consider funding. This culture in South Africa of not supporting entrepreneurs who have failed needs to be confronted if we are to create an environment conducive to fostering more entrepreneurial activity.
Posted by ben at 06:34
Its interesting to look at the motivation and inclination of entrepreneurs in South Africa. Entrepreneurs are those who are passionate and driven about the business plan that they intend to implement. Neither a shortage of business finance, not the opinion of others will stop them from what they know they can achieve. If you compare them with the rest of the population we will quickly find that entrepreneurs are go getters, not blaming anyone for their situation and not waiting for anyone else to improve it. These are people who take responsibility for their actions and futures. A great example of this was one of the finalists of the country's most prestigious empowerment awards program
Unique motivation has powered Design Communications Group CEO Zoë Molapisi into the finals - a burning desire to encourage South Africa's 'no capital, no connections' entrepreneurs.
"I'm honoured to be a finalist," said Zoë Molapisi. "The accolade is for personal achievement, but I won't be at the finals in my personal capacity. I will be there for all the start-up entrepreneurs who began with no capital and no connections and asked for no favours.
CEO of By Design Communications Zoe Molapisi
"It's important a strong message goes out that you don't need patronage and a handout to succeed in business. You can do it by hard work and perseverance; by holding your head up and never holding your hand out.
"It's satisfying to be recognised for that type of success and a great opportunity to give encouragement to self-starters, hard workers and go-getters that have very little else going for them."
Eight years ago, Zoë Molapisi launched her 'one-stop' communication group By Design as a one-woman start-up with no seed capital and no contracted clients. Today annual turnovers are fast approaching the R100 million mark and clients include major brands and institutions such as Coca-Cola, Telkom, Cell C and many blue chip clients across different sectors.
In addition to local communication and promotional projects, By Design organizes conferences and travel incentive programmes in several markets in sub-Saharan Africa and island territories in the Indian Ocean.
Expansion to South America is being explored.
"My message to tomorrow's entrepreneurs is simple," said By Design's founder. "You don't need government incentives. You don't need hand-holding by some official program. You don't need to be well connected.
"You need passion, commitment and the sort of commonsense that tells you to keep overheads low and service standards high. You can make it. I know ... because I did."
This is certainly a very important lesson for many who see their futures relying on others. When speaking to young people about their futures this is a key message I try to get across. Yes of course you need to connect with and work with others to get where you want to be but no one else is responsible for your future success other than yourself.
Posted by ben at 05:26
For many, pursuing their business plan and becoming a successful entrepreneur is a dream prevented from coming true by fear of risk, the uncertainty of irregular income and perhaps also a lack of business finance. Despite this many are so passionate about their ideas that decide to take the leap, often with rewards of self fulfillment, independence and the freedom to run the business in the way they may choose. But of course starting a new business is not always that straight forward and even the best known entrepreneurs out there have not achieved what they have without good business planning, plenty of hard work and a strong sense of commitment and flexibility in working towards their dream.
So what does this mean for you? What can we learn from those who have gone before us?
Here are some entrepreneurial skills that you can work at developing as you learn how to become an entrepreneur.
1. Create your new entrepreneurial mindset. Before you can become successful, you have to create a new mindset to achieve the things you want in your life. Examine your current mindset, and how that way of thinking has gotten you to where you're at right now. Be honest with yourself when looking over your current results, because this will give you an accurate measure of the choices that you have made over the years. Only then will you begin to see for yourself that it is time for you to work on your new mindset in order to start living the life you want to experience, regardless of your current circumstances. Once your new entrepreneurial mindset is in motion, you will start making very creative choices to move you faster to your desired goals. Find three to four successful entrepreneurs that have the lifestyle that you want, and ask them if you can interview them individually to understand the reasons why they are so successful at what they do in their current business as an entrepreneur. While you are listening to them, take notes, examine what they say to you about themselves and their success, and grasp what type of mindset they have now in their lives. This will propel your own success in so many different ways because you will be able to apply what you have learned to your own mindset.
Apply personal development in your daily life starting today. For example, read good self-help books like the one mentioned at the end of this article. Listen to self-improvement tapes, CDs, and as an extra bonus, attend a least one personal development seminar a year to help grow, maintain and keep your new entrepreneur mindset growing everyday. Your level of awareness will increase greatly with the new mindset that you are creating to go after the things you want in your life. Having an open mind as an entrepreneur will also help you make better decisions quickly, and become more creative.
2. Get out three blank sheets of white paper and a pen or pencil. Take out three blank sheets of white paper and a pen or pencil. You are going to write down your new mindset as an entrepreneur on your sheets of paper. Writing down what you want (and what you are going to achieve as an entrepreneur) is a very powerful activity that you are making a habit of now. Taking out your sheets of paper right now is a serious gesture that you are making to let your subconscious mind know you are a person of action. This step will help propel you on your new journey, the journey of taking the necessary steps needed to achieve your desired goals. These three blank sheets of paper represent your future. As an entrepreneur with a new mindset you can paint any picture you want to on the three sheets of paper, regardless of your current circumstances.
3. Write down all of your new ideas as an entrepreneur on the first sheet of paper. Label the first blank sheet of paper you have as number one. You have been spending some time changing the way you think, and creating a new entrepreneur mindset: Start writing down all of the new ideas that you have as an entrepreneur now. The entrepreneur ideas that you are writing down now are the ones that you have been thinking about in your mind that you want to create and achieve in your physical presence now. For example, if you have a burning desire in your heart to start your own daycare center, restaurant, hotel, or create a product for people to buy, then write down all of your ideas in every detail. Write down how big the daycare center is going to be, where it is going to be located, what color the building is going to be, how many children you will allow to be kept in your daycare, how many people you will staff, what type of services you will provide to the parents and children coming to the daycare. This is a perfect example of how you can start writing down all of your ideas as an entrepreneur on the sheet of paper now.
4. Write your short-, middle- and long-term goals down on the second sheet of paper. A short-term goal is something you want to achieve in one day, one week or one month. A middle-term goal is something you want to achieve in ninety days to six months. A long-term goal is something you want to achieve in one year or more. Write down what you want to achieve as an entrepreneur on the second blank sheet of paper. List them in the categories stated above as short-, middle- and long-term goals. At the top of the paper, you can have your short-term goals, in the middle section of the paper, you can have your middle-term goals, and at the bottom of the paper you can have your long-term goals (if necessary use the back side of the sheet of paper). Be creative when writing down your goals because this is your life that you will be experiencing in the near future. This is one of the biggest reasons why 1% of our population is earning around 96% of all the money that’s being earned in our world today. They set goals, and they keep at them until they have seen them through into their physical manifestation.
5. Write down fifty things you want to experience in your life now on the third sheet of paper. Write down fifty things that you want to experience in your life now on the third blank sheet of paper. You can start really having some fun in this step by writing down fifty things that you want right now regardless of your current bank account, job, business or relationships in your life now. Those fifty things that you write down will help you to understand that you can have whatever you want in your life as an entrepreneur. However, you have to first know what you want in detail. For example, you might want a brand new house in the city that you are currently living in. If you write down that you want a brand new house, however, that is not what you really want, and it is not in enough detail for you to realize that you can have what you want now. If you write down that you want a brand new two-story house that has five bedrooms, and four bathrooms with a whirlpool Jacuzzi in the master bedroom upstairs, and brown hardwood floors all throughout the downstairs of the house, now you are really writing about wanting that house! You can see it clearly in your mind, and you will surely take the necessary actions when the time comes to buy that home (without violating the rights of others in achieving your goal). This will surely move you in the direction of taking the steps necessary to meet your goals. Many wealthy entrepreneurs get what they want every time because they write it down on paper first; then, they go after it in their daily life.
6. Integrate personal development into your daily lifestyle. Start applying personal development everyday in your daily life. With the new mindset you have now, you should continue to feed your mind everyday with personal development. For instance, you can take out three minutes in a day and meditate on goals or just clear your mind of everything for the moment. Read a good book on personal growth, listen to meditation music, have a conversation with a positive person and people or obtain a personal development program to help keep your mind on track in accomplishing your goals. The meaning of personal development can be found in the term "self-help," which means any practice whereby an individual or a group attempts self-guided improvement—economically, intellectually or emotionally. So you see this is some great stuff to add as a part of your daily life and it will certainly help move you in the right direction. Successful entrepreneurs apply personal development in their daily lives everyday. They work ninety percent on themselves, and ten percent on their businesses. So with that in mind, personal development is a must to achieve success as an entrepreneur.
7. Give yourself a command and follow it. Now that you have been thinking and writing about your goals, the things you want, and your ideas as an entrepreneur, give yourself a command on what you want to achieve first as an entrepreneur, and follow it until you see it through to the finish. Then you can move on to something else that you want to focus on and achieve. You will continue the same process over and over--whatever you decide you want to achieve, give yourself a command and follow it until it is achieved. This is part of achieving entrepreneur success.
8. Keep your new mindset positive by hanging around like-minded individuals. Hang around more like-minded individuals daily, monthly and yearly to keep a positive mindset. Hanging around individuals that have the same entrepreneurial concepts that you do will keep your mindset in a positive state, and on the right track to achieve your goals. You can hang around like-minded individuals by either listening to a group of individuals on the phone via conference calls, attending seminars, being part of an online forum of positive people like yourself, and keeping in contact with the positive like-minded people you have formed a relationship with on your journey in achieving your goals. The more positive like-minded people you associate with regularly, the more it will certainly keep moving you in the direction of becoming successful as an entrepreneur.
9. Take seven minutes out of everyday to visualize the end result of your goal in your mind. Take seven minutes out of your day to visualize the end result of your goal that you have decided to achieve within a specific time frame (as mentioned in step number three). For example, if you decided to own your own daycare center, then you could spend seven minutes in the day visualizing about every aspect of your daycare center as if you currently owned it in the present moment. You can also start off visualizing everything that you wrote about the daycare center in step number three. Then you can work your way to the end result of having the daycare center in your possession now. For instance, visualize the amounts of checks that you are receiving from your customers now that you have the daycare center, visualize different cars parked at your daycare center parking lot, visualize the joint ventures that you have created with other daycare center owners in your area in providing better services in your city. Before successful entrepreneurs became successful, they first visualized the end result of their goal, and continued to dwell on that end result a few minutes of everyday until it became a part of their experience in life.
10. Put four positive affirmation statements on a sticky note around your home, office, and work area in times when you need to be encouraged as you move forward with your new idea. Place your affirmation statements in a specific area in your home, office, and work area to help continue your encouragement in accomplishing your new ideas. Affirmations should always be written as positive statements in the present tense. Placing four affirmation statements on a sticky note around an area that you visit most often will further your actions toward your goal because your affirmations will began to work as supportive thoughts, and a placeholder for a more positive mindset in your daily life. Your affirmation statements should always be written in present tense such as, "I own a daycare center in South Africa," or you can write, "I am a daycare center owner in South Africa." Keep your affirmation statements short, positive, and to the point of what it is that you want to see manifested as an entrepreneur in your life now. You will definitely be putting yourself in the 1% bracket of our population that gets everything they want out of life.
11. Sign your name to the sheets of papers with your new ideas, goals, and the things you want in your life as an entrepreneur. Put your signature on the end of the sheets of paper where you have written down all of your new ideas, goals and the things you want to experience in your life as an entrepreneur. By doing this step, it will promote a sense of seriousness within yourself, that you mean business in accomplishing your ideas, goals and what you want. You also will feel that you have already completed your aspirations by signing your documents of personal achievement. Your signature represents a decided heart and a new mindset. Eric Rodriguez
12. Make a decision to yourself that you will never give up on your new ideas and goals until you see them manifest in your life. Do yourself a huge favor right now and go ahead make the decision to never give up on your new ideas, and goals until you see them manifested in your life as an entrepreneur. Many unsuccessful entrepreneurs in today’s society give up on their goals and ideas at the first sign of temporary defeat. There is no such thing as failure, only temporary defeat in life, period. When a successful entrepreneur has a temporary defeat, he remains calm, relaxed, and confident in his quest to achieve his goal because he understands that every temporary defeat is backed by a great or equal number of successes in his life. That’s why many successful entrepreneurs always get what they want in life; they never give up on what they want.
13. Take action on your new ideas and goals as an entrepreneur. You have been taking action all throughout this article in the steps listed above, so now it is time for you to take the necessary action to make it happen. This step is the meat and potatoes or the salad and yogurt (if you are watching what you eat, you get the picture). Take action everyday on your new ideas and goals as an entrepreneur. You deserve the best that life has to offer, so the only gap between knowing what to do and doing it, is action. Take action everyday regardless of your current circumstances in life. As an entrepreneur with a new mindset, you are the leader, and it's time for you to start living successfully as an entrepreneur in today’s world.
These ideas may not all be straight forward and perhaps not what you see as important to secure business success but the key issue here is that we have to learn from both the best and worse who have gone before us to ensure our own changes of success increases.
Posted by ben at 07:25
For any small business the availability of cash and a healthy cash flow in the business is probably one of the most important elements. As the business owner, its crucial that you manage both the money going out and of course the money coming into the business. To often as entrepreneurs we are just so thankful to be making sales that we will happily be giving both discount and credit to those kind enough to be purchasing out products or services. If you are selling products, you may as well be asking people to take your money and hope they are in the position to give it back at some point in te future. Of course their are also a number of other key cash flow practices necessary in small firms to ensure first of all existence and hopefully later growth. We will be looking at the issues involved in this in te rest of the article.
What is cash?
Cash flow is the measure of your ability to pay your bills on a regular basis. It depends on the timing and amounts of money flowing into and out of the business each week and month. Good cash flow means that the pattern of income and spending in a business allows it to have cash available to pay bills on time.
Your available cash includes:
• coins and notes
• money in current accounts and short-term deposits
• any unused bank overdraft facility
• foreign currency and deposits that can be quickly converted to your currency
It does not include:
• long-term deposits (if these cannot be withdrawn)
• money owed by customers
Difference between cash and profit
It is important not to confuse cash balances with profit. Profit is the difference between the total amount your business earns and all of its costs, usually assessed over a year or other trading period. You may be able to forecast a good profit for the year, yet still face times when you are strapped for cash.
The importance of cash
To make a profit, most businesses have to produce and deliver goods or services to their customers before being paid. Unfortunately, no matter how profitable the contract, if you don't have enough money to pay your staff and suppliers before receiving payment from your customers, you'll be unable to deliver your side of the bargain or receive any profit.
To trade effectively and be able to grow your business, you need to build up cash balances by ensuring that the timing of cash movements puts you in a positive cashflow situation overall.
But bear in mind that having a lot of cash in your bank does not necessarily make good business sense. If you do not need to use it immediately, put spare cash into an account where it will earn a higher rate of interest, or use it as capital for short-term investments.
Cash inflows and cash outflows
Ideally, during the business cycle, you will have more money flowing in than flowing out. This will allow you to build up cash balances with which to plug cashflow gaps, seek expansion and reassure lenders and investors about the health of your business.
You should note that income and expenditure cashflows rarely occur together, with inflows often lagging behind. Your aim must be to speed up the inflows and slow down the outflows.
• Payment for goods or services from your customers.
• Receipt of a bank loan.
• Interest on savings and investments.
• Shareholder investments.
• Increased bank overdrafts or loans.
• Purchase of stock, raw materials or tools.
• Wages, rents and daily operating expenses.
• Purchase of fixed assets - PCs, machinery, office furniture, etc.
• Loan repayments.
• Dividend payments.
• Income tax, corporation tax, VAT and other taxes.
• Reduced overdraft facilities.
Many of your regular cash outflows, such as salaries, loan repayments and tax, have to be made on fixed dates. You must always be in a position to meet these payments in order to avoid large fines or a disgruntled workforce.
To improve everyday cashflow you can:
• ask your customers to pay sooner -
• chase debts promptly and firmly -
• use factoring -
• ask for extended credit terms with suppliers -
• order less stock but more often - see our guides on
• lease rather than buy equipment -
• improve profitability -
You can also improve cashflow by increasing borrowing, or putting more money into the business. This is suitable for coping with short-term downturns or to fund growth in line with your business plan, but shouldn't form the basis of your cash strategy.
The principles of cashflow forecasting
Cashflow forecasting enables you to predict peaks and troughs in your cash balance. It helps you to plan borrowing and tells you how much surplus cash you're likely to have at a given time. Many banks require forecasts before considering a loan.
Elements of a cashflow forecast
The cashflow forecast identifies the sources and amounts of cash coming into your business and the destinations and amounts of cash going out over a given period. There are normally two columns listing forecast and actual amounts respectively.
The forecast is usually done for a year or quarter in advance and divided into weeks or months. In extremely difficult cashflow situations a daily cashflow forecast might be helpful. It is best to pick periods during which most of your fixed costs - such as salaries - go out. The forecast lists:
• excess of receipts over payments - with negative figures shown in brackets
• opening bank balance
• closing bank balance
Note that all forecast figures must relate to sums that are due to be collected and paid out, not invoices actually sent and received. The forecast is a live entity. It will need adjusting in line with long-term changes to actual performance or market trends.
Accounting software will help you prepare your cashflow forecast, allowing you to update your projections if there's a change in market trends or your business fortunes. Planning for seasonal peaks and troughs is simplified and you can also make 'what if' calculations. Most banks require profit and balance sheet forecasts as well as cashflow. Many accounting packages will assist with preparing these documents.
Manage income and expenditure
Effective cashflow management is as critical to business survival as providing services or products. Below are some of the key methods to help reduce the time gap between expenditure and receipt of income.
• Define a credit policy that clearly sets out your standard payment terms.
• Issue invoices promptly and regularly chase outstanding payments. Use an aged debtor list to keep track of invoices that are overdue and monitor your performance in getting paid.
• Consider exercising your right to charge penalty interest for late payment.
• Consider offering discounts for prompt payment.
• Negotiate deposits or staged payments for large contracts. It's in your customers' interests that you don't go out of business trying to meet their demands.
• Consider using a third party to buy your invoices in return for a percentage of the total.
• Supplier management
Ask for extended credit terms. Giving your suppliers incentives such as large or regular orders may help, but make sure you have a market for the orders you're placing.
Cashflow problems and how to avoid them
No matter how effective your negotiations with customers and suppliers, poor business practices can put your cashflow at risk.
Look out for:
• Poor credit controls - failure to run credit checks on your customers is risky, especially if your debt collection strategy is inefficient.
• Failure to fulfil your order - if you don't deliver on time, or to specification, you won't get paid. Implement systems to measure production efficiency and the quantity and quality of stock you hold and produce.
• Ineffective marketing - if your sales are stagnating or falling, revisit your marketing plan.
• Inefficient ordering service - make it easy for your customers to do business with you. Where possible, accept orders over the telephone, email or internet. Ensure catalogues and order forms are clear and easy to use.
• Poor management accounting - keep an eye on key accounting ratios that will alert you to an impending cashflow crisis or prevent you from taking orders you can't handle.
• Inadequate supplier management - your suppliers may be overcharging, or taking too long to deliver.
• Poor control of gross profits or overhead costs - assess where you can cut costs.
Consider outsourcing non-core activities such as payroll services. Review your utilities contracts to see whether it is possible to reduce costs by switching tariff or supplier.
Using your cashflow forecast as a business tool
A cashflow forecast can be an invaluable business tool if it is used effectively. Bear in mind that it is dynamic - you will need to change and adjust it frequently depending on business activity, payment patterns and supplier demands.
It's helpful to set up a regular review of the forecast, changing the figures in light of your sales, purchases and staff costs. Legislation, interest rates and tax changes will also impact on the forecast.
Having a regular review of your cashflow forecast will enable you to:
• see when problems are likely to occur and sort them out in advance
• identify any potential cash shortfalls and take appropriate action
• ensure you have sufficient cashflow before you take on any major financial commitment
Using a cashflow forecast to avoid overtrading
Having an accurate cashflow forecast will help ensure that you can achieve steady growth without overtrading. You will know when you have sufficient assets to take on additional business - and, just as importantly, when you need to consolidate.
It is important that you incorporate warning signals into your cashflow forecast. For example, if predicted cash levels come close to your overdraft limits, this should sound an alarm and trigger action to bring cash back to an acceptable level.
Ideally, you should always have a contingency plan, such as retaining a minimum amount of cash in the business, perhaps in an interest-earning account. This 'rainy day' money can be used to meet short-term cash shortages.
Refinements to a simple cashflow forecast
There is no single best way to set out a cashflow forecast. However, some refinements to the most basic ways of setting out the information will give you a more sophisticated view of your business' situation.
You could, for example, separate cashflow for business operations from funding cashflow. This gives a clearer picture of the actual performance of your business and is a format that many accountants prefer.
Cashflow from operations
Includes inflows such as:
• cash sales
• receipts from credit sales in earlier periods
• interest on savings
Includes outflows such as:
• payments to suppliers
• hire purchase and lease payments
• expenses - rent, rates, insurance, utilities, telephone, etc
• taxes and National Insurance contributions
• interest on loans and bank charges
Includes inflows such as:
• loans from banks
• increase in share capital
Includes outflows such as:
• dividends paid
• loans repaid
With these two types of cashflow separated you can gauge how self-sufficient the day-to-day working of your business is. A net outflow in operational cashflow is usually an indicator of problems that need to be addressed quickly.
Posted by ben at 15:15
Often overlooked in both the minds and business plan of an entrepreneur, sales is what will bring revenue into your business. For that reason it seems odd that you will invest time, money and effort into a business for which you have not planned to sales process and strategy. If you look at the more successful businesses out there today, one thing will be clear, sales will be at the forefront of what they do.
Prior to starting the business marketing research will focus on what type of product/price/delivery combination will result in the most sales. During the growth stages of your business once again, projected sales and the strategies involved in increasing this in such a way that the business will grow will be at the heart of the choices made in the business. Yes of course product/service quality is important and yes of course your clients need to become return buyers by treating them right and giving them the support they need, but at the end of the day, sales will define if the business survives and grows.
At my first company, we had four or five sales reps who’d been around since the early days. They intuitively knew how to position the company and how to sell the products; they didn’t need (and we didn’t have) sales materials or pricing strategies.
We then increased the sales staff to about 10, and even hired an manager of global sales and marketing. Because he was a big-company sales exec, he was very critical of some of the missing tools at my company. He pushed for more standardization of pricing, marketing collaterals, sales processes, etc.
He told me, “There’s no standardized way for me to on board new people. There’s no way for us to easily roll out changes to pricing, positioning relative to competitors or new sales tools. We need standardized tools to arm our sales teams with the information they need to effectively do their jobs, and we need to better aim them at the right opportunities.”
I was stuck in startup culture, and he was stuck in big-company culture. There was a chasm between us that couldn’t be bridged. But he was right about one thing: We needed to change as we grew. I think this happens at a lot of startups. Like my company did, startups get stuck in this middle ground where process and tools become more important.
This is the first in a three-part series in which I’m going to talk about some of the scaling issues startups face. In this first post, we’ll talk about aiming your sales staff at the opportunities most likely to pay off.
Review every deal in your sales pipeline.
Very early-stage startup people are used to rigorous prioritisation, and they need to apply this same approach with the sales deal pipeline. I did this through regular pipeline reviews.
In order for a deal to be forecast in the current quarter, the sales team had to have done four things:
* Identified a champion on the team
* Identified a budget holder with money to spend
* Presented the customer with an ROI (return on investment) calculation of the benefit of using our product
* Determined the customer was in an active review of choosing a supplier of document and collaboration services (the product we offered).
By having the salesperson walk me through each deal, I could often tell when he couldn’t defend having the deal be listed as an “A deal” (and thus have a high forecast percentage). When I got busy and only had time to review spreadsheets or output from Sales force.com, it was impossible for me to know which deals were “real.” The reason, I learned, is that many salespeople take meetings with customers who are willing to meet them and give all the right messages. But many of these people they’re meeting with are NINAs (no influence, no authority), and thus, aren’t qualified.
Qualify, qualify, qualify your sales leads.
Inexperienced salespeople spend too much time with people who are nice to them and talk a good game about being interested in their products, but don’t have the budgets. I learned this the hard way. Either we’d have deals that seemed stuck (for example, they were in the “closing within three months” pipeline for nine months), or we’d have sales reps who constantly kept adding new deals and taking out the old “sure deals” that never closed.
The most experienced sales reps were the ones who knew the three most important things to do with a sales lead were to qualify, qualify, qualify. Lead quality matters, because the most scarce resource for a sales rep is time, and no matter how much you want to sell your products, you can’t push them on a customer who isn’t ready to buy. They might have other initiatives, budget constraints or just need more time to evaluate your space. As the best sales leaders will tell you, “you have to align a company’s sales cycle with a prospect’s buying cycle.”
Aim for the A deals.
After the sales rep walks through the deal, management has to step in and help with aiming. As the company grows, this task can be shared between the Sales manager, Marketing manager and the business owner/manager. Part of this is standardizing the assignment of territories, industries and accounts, but part is focusing efforts on the most likely sales.
“A” deals — those that have a realistic shot of closing in the next three months — should get much of the sales person’s time (say 66-75 percent). “B” deals, forecast to close in 3–12 months, should get the remainder of sales reps’ time. Each sales rep needs to build their pipeline with these, and many bigger deals take time. However, the key to scaling is that “C” deals — deals that are unlikely to close within 12 months — get no time from sales. Marketing should own those.
Let marketing nurture the C deals.
Marketing has two roles in managing pipelines. First, they need to fill the top end of the funnel with new “qualified” leads (e.g. converted from “suspects” to prospects). Second, they need to manage C deals. Today’s C deals are obviously tomorrow’s As and Bs.
So the best-run companies have marketing running activities, such as the following, to nurture their C deals.
* Newsletters. One of the goals of newsletters is to keep your company and its products in the consciousness of your suspects or future buyers. C deals go in the newsletter bucket and should be identified as C-deal newsletter companies. The information you send them should be different from the newsletters you send to existing customers, for example.
* Customer events. It’s far easier to get potential customers interested in your products when they hear actual customers talking about your products and how they are using them. Suspects and prospects are often in search of success stories from their peers to hear how they’re improving internal operations. So one of the smartest things we did at Sales force.com was run “city tours,” in which we had our existing customers talk about how they were using our products and had our product management teams talking about future innovation and development. Customer events are a great way to market to your C deals to keep them informed and try to raise their interest levels
* PR. Some companies are excellent at PR, and others don’t put much effort into it at all. I think PR is an incredibly important activity for technology companies, but most companies aren’t very good at it. (I wrote a post recently about how to better manage journalist relations.) The reason many companies don’t put enough effort into PR is that PR doesn’t have an immediate translation into sales. It’s mostly a “C deal” activity.
* Analyst relations. In many technology fields, analysts are hugely influential in determining enterprise budgets. I sometimes find it funny, since 73.6 percent of all statistics are made up, but the truth is, many analysts are great and help customers frame the decisions they need to reach. Spending time with analysts and getting into their “innovator quadrants” will help you manage your C deals and pull them forward to Bs and As. This is obviously a marketing and CEO activity.
Posted by ben at 07:10
It all starts with a great idea and in may ways that is the crux of it, the idea really is just a start. I'm often surprised as to the amount of new entrepreneurs being extremely precious over their ideas. Yes of course there may be merit in this if you have come up with a new technology or invention but nine times out of ten the idea is out there. The key element of business success is not so much the idea or the business plan, but the various processes, the people and the commitment that goes into the business becoming a success. Give the same idea to 10 people and only one or two will make a success out of it. If you have a look at the way Richard Branson and his Virgin group of companies have created success then its mostly the way that they took existing ideas and added value to it.
Your business may be based on a hobby or skill, but to make it a success you need a market big enough to support it. Research potential markets thoroughly from the very beginning.
In addition, joining business forums will help you network and grow your customer base. Social networking sites, for example, are becoming an increasingly popular means of reaching out to new markets in order to find new clients.
It might sound obvious, but it is important to know what it is that you offer. There will be countless competitors around the globe eager to service your customers. You should also be thinking about positioning yourself in and around their territory. What is your unique selling point? What can you offer to make your business more attractive than your competitors? Put yourself in the shoes of a potential customer - why should your target audience buy from you? To grow smoothly and stand out from the crowd, you need to know what makes you different from the rest.
Base your prices on what people are prepared to pay, not your costs. Add value to what you provide wherever possible. Remember that, while everyone likes a bargain and customers want as much ‘bang for their buck’ as possible, few people associate bargain basement prices or free offerings with value. Equally, they are unlikely to want to buy in bulk at exorbitant prices.
Knowing the price your competitors charge and bettering them is key to you retaining existing customers, as well as attracting new ones. Charging more than what your market can afford will only mean what you provide will be harder to sell.
Taking your product or service to market is never a one-off task. In order to secure and successfully grow sales and orders you must continually approach potential customers without alienating them.
A famous quote has it that advertising “works 50% of the time - the trick is to work out which 50%”. It is crucial to adopt a strategic approach to advertising. Think of your target markets: which publications do they read? What television and radio programmes do they consume? Think laterally - where do they socialise? Who do they talk to? Work out the answers to these key questions – and of course decide on your budget – before planning an advertising campaign.
With PR, there is always the possibility of achieving publicity in local and even national newspapers and trade magazines. However, this is dependent on you having a good story. Understand what journalists (even business journalists) want. Don’t try and pass off a thinly concealed or obvious product promotion for your business as a story. Reporters are a savvy bunch. Your press release will be deleted or binned and you will quickly get a bad name.
Ask yourself: what is the real-world problem being solved or made better thanks to you and your company? What are the political, commercial and economic threats or barriers that get in the way?
The benefit of proactive PR over direct advertising is cost. It can be much less expensive, even if you employ a PR agency or consultant. The downside is that you do need to make more of an effort to be relevant. As well as general news stories, you can also consider writing expert columns. These may not be of interest to the print media at a time when paginations are well down, but there are many websites that will readily take well-written and credible articles.
With the emergence of the internet as a major force in new media, having a website is one of the cheapest, most cost effective ways to grow and promote your business. Even if you cannot afford a fancy website, a single page with your contact details is better than nothing. To repeat, social media and online networking are increasingly being seen as invaluable ingredients in the ‘marketing mix.
Your drive, commitment and determination to succeed as an entrepreneur is in many ways 90% of what will make or break your business. Find something that inspires you and make you come alive, assign the necessary commitment, drive and energy to it, understand your clients needs and what will make them buy and you will find that half the race is won already. Enjoy!
Posted by ben at 10:19
Posted by ben at 14:19