Why is my business stalling?
If you were to receive a substantial capital investment into your business would you engage outside expertise to help further develop and improve your business? There are few business leaders I know who would seriously answer no to this question, which if you really think it through is very odd.
Why is it odd? Because if you need help after receiving a substantial capital investment you needed it even more before that receipt!
The conundrum is the reluctance of small to mid-cap businesses to spend money on the sound professional advice which they need. Within larger organisations external advice is sourced as a matter of course; marketing, strategic, structural, legal and accounting advice is outsourced on a regular basis.
A recent Forbes article stated:-
98% of Small-Caps or Start-Ups seeking equity investment fail to attract it
Over 95% of Small-Caps or Start-Ups fail to proffer a business or investment plan suitable to allow a measured investment decision or to attract funding.
These statistics hurt because for a relatively small investment these businesses could have been funded.
As an example at WCP we are frequently sent IM’s or funding requests from entrepreneurs seeking to fund growth or a start-up and after reading through pages of technical and product detail we seriously have to ask: “what exactly does your business do and how are revenues generated?”
The idea may be sound but the presentation is poor. I and many others like me simply do not have the time to invest in learning what potential might lay behind a poor document. As a consequence I miss out on making good investments and the entrepreneur misses out on a capital raising.
A very high percentage, 90%+ of new client enquiries we receive at WCP are from businesses which have generally:-
Left their approach to us too late
Lack a sufficient skill base or framework to meet their business goals
Run perilously short of working capital
Failed to develop a professional support structure
Most of these businesses are sound, most of the entrepreneurs are intelligent, most can be helped but why did they not seek professional external advice from day one?
After asking the question many times over the past 25 years there are two main answers given:
There are so many shonky “consultants” we were sceptical
We did not think we could carry the expenditure
Both easily addressed! Take the last question first; you simply cannot afford to build your business in the dark, budget for professional assistance and let that assistance enhance your revenues. As to the first question do your research, how long has the consultancy been in business, will it provide testimonials, what are its core competencies, which team member will handle your business and how good a fit is that person?
Good professional advice should be a self-funding proposition. Seeking advice and engaging a consultant is not an admission of failure it is the corporate equivalent of using your doctor, dentist, tailor or hairdresser – you use them to stay on top!
The Barking Mad Blog
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5 Tips for Business SUCCESS!
1. Business Development Is Not Increasing Sales
Managing the development of your business has a lot in common with conducting an orchestra. It’s a case of encouraging and leading the various differing components of your business forward, in harmony, to the same point at the same time to produce an extraordinary effect. You need to develop your unique product or service to meet the highest level of customer expectations and you must do so at a price representing fair value and at a cost which generates a fair profit.
2. Understanding profit does not equal cash
Profitable businesses fail every day. Many small business owners chase growth and revenues forgetting the basic facts of cash management. Profit equals Revenue – Costs but until you have received payment you are in a cash negative position. Ideally you would ensure that you have sufficient cash reserves to meet three to six months of costs. In the early days of a business keep fixed expenses as low as possible, use a virtual office and work from home if possible, keep full time staff to a minimum, pay cash or do without non-essential plant and equipment. This helps if you have a quiet month or even two.
3. Intuition Versus Fact
Don’t build a business around a product or service you like or you would buy. Undertake sound quantitative research to determine what your prospective customers want and buy then see if you can develop an even better product or service at a price they are prepared to pay. Don’t be tempted to compete on price alone. If company A has been making its product for many years and you realise you could source and sell that product at a good profit for less that’s a good value proposition to you not your customer. The market is less willing to change supply on price alone but if you can offer a better value/service proposition where they get a better product and improved customer service you will have a much greater chance of success.
4. Business & Financial Planning
There is an old saying “if you don’t know what you want you will probably never get it” and that’s certainly the case in business. A well thought through and documented business plan outlining your core objectives, market analysis, product development, marketing strategies and detailed financial budgets is essential. This is an area where you should consider the use of a mentor or an external consultant to help you get it right. Your financial plan should include linked budgets for P&L, Cash Flow and Balance Sheets. A beautifully bound business plan kept on a shelf is a waste of space it has to be a living breathing document understood and read regularly, reported against monthly and the strategies varied as needed to meet your actual versus budgeted position.
5. Respect all Stakeholders
A successful entrepreneur understands that the stakeholders in a business are not just the shareholders. The stakeholders include employees, suppliers, customers, shareholders and advisors and they are vital to the success of failure of your business. Spend time with each stakeholder, respect them, listen to their ideas, take their ideas, discuss your plans and your position with them. Take them on your journey as partners. Keep them honestly and openly informed and they will join your team and give you their full support. Again many businesses fail because they don’t earn the respect and support of their stakeholders. Building a successful company is hard, it requires a lot of commitment and courage as well as a little luck and of course having a great product and team. Watching your idea become a product and a product generate revenue that becomes a successful company makes it all worthwhile. Working with your stakeholders and mentors, following and constantly updating your plans and finances will go a long way to ensuring success.
The Barking Mad Blog
SME Advice with Bite!