If you’re reading this today, you’re probably thinking about starting a small business or know someone who is. Maybe you’ve already started a business and have run into some snags that got you thinking about giving up on your dream and going back to work for someone else. Your ex-boss, maybe?
Well, you’ve come to the right place! I wrote “The Success Factor” and started my own company, ei Funding, Inc., for you and people like you, who really want to make a go of owning your own business but aren’t exactly sure how to go about doing it.
More than anything else, you’re afraid of failure. Let me assure you, right here, right now — that’s completely normal. Actually, it’s quite good that you’re scared, a little nervous and wondering how you’re going to pull this off. But don’t worry! Those are all normal feelings and are just part of the personal and professional evolution of becoming the owner of your own business.
Conventional wisdom says businesses fail because they run out of cash. But a lack of cash is more of an effect than a cause, and I can prove it with a little unconventional thinking. In business, cash is the lifeblood of any operation. No matter if it’s a service, manufacturing, investments, hotel — you name it — cash is the most basic component of a business operation.
And while failed businesses may run out of cash, the cause of those failures was not the absence of cash, but rather a flaw in the business model, poor execution, a cash blockage (like those caused by insufficient access to financing or working capital) or conversely, cash ruptures caused by slow-paying customers, poor collections or plain-and-simple bad cash management — meaning your business (for whatever reasons) spends more money than it takes in.
So there it is, your first bit of unconventional wisdom — and we’re just getting warmed up! Businesses don’t fail because they lack cash, they lack cash because they have failed.
During the course of my writings and consulting with small businesses, I address some of the most common reasons why businesses fail, many of which boil down to an over-reliance on conventional thinking. But the purpose of this article is not to focus on failure — but the opposite: business success. As you read on, we’ll introduce you to a few of the concepts and actions that you need to follow and focus on, which are critical to ensuring your business’s success.
Here are a few of the platforms (or success factors for small businesses, as I refer to them) we’ll be discussing as part of your journey through Unconventional Wisdom on the road to Small Business Success.
What Success Factors Are Important to Small Business Owners?
Success Factor #1 – Challenge Conventional Thinking
Being your own boss sounds great until you realize all of the weight that falls on the boss’s shoulders. As an example: A business owner may not necessarily engage in the physical labor of manufacturing, but all of the other decisions, ranging from deciding what to sell, how much to make to meet your projected sales (this refers to Inventory), how to cost your manufactured product or the complexities of cash management. These are all your responsibilities to bear. So to paraphrase a charming and very witty author I know (ehhmmm): “In order to maximize success, you need to learn to think unconventionally.” Sound familiar?
Success Factor #2 – Failed Business Model
What will you make? Who are your customers? How will you reach them? How will you get paid? How many people do you need to hire? Who are your competitors?
It’s important to answer questions like these (and others) in writing, to give your business a structure through the formulation of a well-thought-out and articulated Business Model. At the end of the day, one of the most important items related to the Business Model discussion is: How do you plan to make money?
This is a great discussion topic that you, your business partners and anyone else who is part of your trusted circle must spend ample time hashing out and rehashing in order to answer the most fundamental question to any business owner’s success: how will you make money at this?
Success Factor #3 – Bad Timeline
Entrepreneurs are notoriously bad at estimating how much cash they’ll need to get the company up and running, and how to time expenses to preserve cash and minimize upfront costs.
Another very important principle of Unconventional Wisdom is that “timing is everything” and so is your Timeline when we’re discussing the expenditures associated with your start-up business! At the time of start-up, you’ll need to establish goals and build a finished timeline with your business model and product service offering closely tied to when you can expect to start your revenue flow. Doing this ensures your start-up expenditures don’t grossly outstrip the early revenue streams and put you in a hole you may never be able to dig yourself out of.
Success Factor #4 – Failure to Outsource
Successful entrepreneurs focus their energy on those things that will get the company operational and make money as soon as possible. Owners who try to do everything themselves waste precious time on tactical minutiae — which in plain English means they’re spending their time doing stuff that: a) they’re not good at, b) someone else can do much better than they can, or c) that someone can do much better and much cheaper than they can — this is kind of a combination of a) and b).
So, coming back to Outsourcing: in today’s do-it-yourself (“DIY”) society, Conventional Wisdom compels you to think you can do everything yourself. But aha! Unconventional wisdom admonishes not to do anything yourself that you can hire someone else to do faster, better or cheaper, while essentially, as the old Greyhound bus slogan goes “Leave the driving to us” while you, the brilliant business owner, focus your time, money and energy doing those things that got you into the business to start with! Now that’s what I call clever business thinking.
Success Factor #5 – Ineffective Marketing
Successful business owners know their target audience and the best way to reach them. They also understand the value of unconventional channels, such as referrals, online marketing, social media and other digital resources. You need to understand the thinking of your ideal customer, where and how to find them and how to market in a way that attracts customers you want while repelling those you don’t want. These are great topics and are the source of interesting and fascinating discussions you should have with partners and your closest business associates frequently. Because in today’s world, these parameters change so quickly, they need to be revisited often.
Success Factor #6 – Cash Drought
Waiting on customers to pay whenever they feel like it is, like, so 20th century. So, to make your little piggy bank happy, your small business needs payment acceleration, through accounts receivable factoring, or purchase order financing. These are two of the most important types of Alternative Financing, and as Unconventional Wisdom dictates, should be part of your financial and cash-flow strategy from day one of your small business.
Your Path to Business Success with ei Funding
In the course of our conversations with your business associates, trusted business partners, coaches or mentors, you’ll learn to challenge conventional wisdom at every turn. By further exploring the topics outlined above, you should be able to build a flexible framework to help you effectively navigate through uncertainty and achieve your small business goals.
If you need additional help, please feel free to contact me and I’ll be happy to share some of my best business advice or “success factors of a business”, as they have proven to be successful for me in my own business and have been replicated by some of the most successful business owners I know.
To learn more about how business owners can scale and drive more growth through tools like Factoring and other important considerations, visit our blog for articles on related topics, or contact us directly.