SME advice

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A woman Knows - WCP 2014

What Do Women Know About Business……?

Quite a lot actually!

My offensively sexist headline was used as a “hook” to encourage you to think about gender equality in business.

Gender Equality WCP 2014

In my years in business very little management discussion has focused on the simple fact that our population is more or less and equal split between males and females. When gender is discussed it is usually in terms of targeting a product at either men or women – as an example I am told that in my son’s local supermarket in up-state New York they now sell pink rifles for the “girls”!

Where is he going with this? I hear you ask; well stay with me.

Each week I set aside two days, usually Tuesday and Thursday to meet with clients, prospective clients and the affiliate businesses we maintain relationships with. This week was different.

All but one of my meetings was with a female CEO or Manager; it wasn’t planned it just happened that way.

Interestingly SME’s lead the way in gender balance as over 32% of SME CEO’s are female compared to only 8% in the corporate world.

Now back to my week. It turned out to be both challenging and exciting as I quickly recognised that the “pattern” of the meetings was subtly different, the questions put to me were far more direct and probing and some of the feedback regarding our corporate direction and product offerings was more frank than usual. This was consistent across my two days of meetings and the only difference was the gender mix of the meetings.

I didn’t initially think anything of the changed “pattern” I merely enjoyed the buzz and excitement that flows from strong and intelligent discussion and was pleased with progress made. Towards the end of my string of meetings I realised this “pattern” had to be more that a coincidental meeting of minds with a series of very challenging intellects.

These very smart CEO’s were different. They were WOMEN!

Research from Dr Patrice Zsabo of The University of Manchester published in 2012 states that males and females do think and act differently in both social and professional settings.

The research suggested females demonstrated higher levels of both Social IQ and social empathy than men, they are conciliators by nature, good team members and more detailed, honest and open in their discussion with colleagues.

I recognised that I was benefiting from the subtly different ideas and views which flowed back and forth during the discussions with these very smart, savvy and professional women and I believe they felt the same. I quickly realised that collectively we were stronger, a more complete team.

 I didn’t agree with all that was put forward but I had cause to stop, think and question my positions and ideas and that very questioning provided me with a wider understanding of the issues.

Logically if 50 percent of the population is female and 50 percent male I am at a loss to understand why current management doesn’t reflect this.

Why as managers do we not venture out to seek the views of the opposite sex? Surely for optimum balance and a better understanding both sexes should be involved in discussing and determining the corporate direction.

I just don’t buy the “if we are professionals our sex doesn’t matter” It does. Management should reflect the society we live in, the clients and customers we do business with indeed it should reflect humanity.

It’s up to us male and female to make this happen and it’s easier as an SME to lead the change than it is for a corporation.

So let’s make a difference and take the SME balance to 50/50 we are already closer than our corporate counterparts.

Neil Steggall

The Barking Mad Blog

SME Advice with Bite!

http://wp.me/p401Wv-cM

www.wardourcapital.com

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Entrepreneurs

The Naked Entrepreneur!

“to thine own self be true……………”

Respect and Trust are both vitally important qualities which we look for in an entrepreneur, and I fear both are currently being discarded in the rush for blatant self promotion.

Do you remember when the UK’s Jamie Oliver first burst onto our TV screens as “The Naked Chef”? He was fully clothed but he had stripped away the unnecessary bullsh*t and mystery surrounding cooking. The world fell in love with Jamie a self-confessed dyslexic, a school drop-out from Essex – he was simply and wonderfully himself!

As I read on-line profiles I feel emasculated by the fact that every second person is now “an expert on….”; “an author of” or at the very least an “international public speaker”. Some of these are well known and how lucky we are to have such easy access to the skills and knowledge which they have gained over long and successful careers. Many others and dare I say the majority, are if not bogus, then plain humbug!

Strong words and yet transparency and authenticity are more than just corporate “buzz words” they are amongst the real attributes that B2B’s and consumers now expect from the companies and people they do business with.

People want honesty in business and expect SME’s and corporations to provide real transparency and authenticity. They also want to know and understand the real people behind the profiles, websites, logos, social media and print.

Be open when describing yourself or your business. If your business is in its first year and you are struggling to make ends meet say so! Potential customers will often give a new business “a go”. How often have you said “hey let’s try that new pizza place”? Don’t invent a “construct” designed to make you look older, bigger, better, busier.

Be yourself! Just started – Johns Plumbing, I want to help! It’s a compelling message.

Today “Corporate Image” is less about status, qualifications, large offices and expensive stationary and much more about the real people, real skills and real results. Over the past week I had three meetings in coffee shops with clients, each of which is highly successful and controls a multinational business. Only one of them has a permanent office, shared with his accountant. Today working from home with a telephone answered or a query dealt with by a virtual assistant can be sufficient. 

Most businesses and consumers today don’t want to hear how clever you are or how important you are or how impressive your office is; they want to know if you can do the job and deliver the result at a price they are prepared to pay.

So rather than building an impossibly impressive on-line profile, simply state the facts; you are warm, human, competent, trustworthy and able to deliver results! It’s about engaging, sharing your passions, and talking about your product or service as it relates to other people and situations.

Here are some ways to show your inner Naked Entrepreneur:

  • Be Genuine: Be you, yourself, the real you and be proud to show it. Strip away the unnecessary bullsh*t and mystery!

  • Share your passions: Show what, how and why you are excited, if you have a dream share it.

  • Share your corporate culture: It says a great deal about who you are and the values you and your team share.

  • Admit your imperfections & failures: We have all at some stage failed, stretched the truth, let people down or just plain stuffed up – I have done all and more. It’s human. How you recover, learn and move forward is the real factor by which you are judged.

  • Show your expertise: Include your skills, knowledge and if wanted, qualifications on your profiles but do so to inform not to impress.

  • Be subtle: Yes you are brilliant, yes your brand is huge and of course your staff and customers adore you but do you need to tell us quite so loudly or so frequently.

  • Understand Yourself: Know your strengths, weaknesses and your limitations. For example I am a dreadful waffler and not the world’s best operational manager but when sat down free of distractions I am a fair theorist, thinker and strategist!

A reputation for being “a good person, hard working and determined to deliver” is probably close to perfection and almost naked!

Do you ever wonder why those global gurus who travel the world to sell their message of how to grow rich and famous in 30 days don’t have to stay home and manage their investment portfolios which must by now be huge? I have always wondered.

I guess they care about us so much they are prepared to travel 48 weeks a year just to help.

By Neil Steggall

Failed Wastrel

The Barking Mad Blog

SME Advice with Bite!

http://wp.me/p401Wv-cm

www.wardourcapital.com

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SME's Going Under WCP2014

HELP! – I am out of cash & going down!

At which stage do you accept that without a cash injection your business is probably doomed? Looking at the ABS statistics they show that in any three year period around 42% of registered SME’s fail. So the answer is that we should look for and accept cash and or help a lot sooner!

It is very hard when investing the enormous time, energy and focus needed to start and build an SME, to then find the time (and to provide the mental distance needed), to properly analyse and re-assess your management and direction. Being naturally entrepreneurial, SME owners have a tendency to fight on, often to a very bitter end.

When I left the corporate world to start my first SME I got to the end of year one and realised I was emotionally drained, failing and down to my last eight weeks or so of cash. Everything I had was on the line and I had no answers.

Recognising that I was no longer thinking straight I bundled my worried wife and two noisy young children into the car and we headed off for a long (and very cheap) weekend by the beach. It was mid-winter and raining; you can imagine my despair.

Late in the afternoon of our second day I took a long walk along the beach, in the rain and asked myself three questions:-

  1. Is the business concept viable

  2. If its viable have you managed it well

  3. If you had sufficient resources available what would you do differently

My answers were 1) yes 2) fair 3) build a team to leverage revenues.

I returned to the shack motivated and excited for the first time in weeks and when back at work I went about raising the cash and partners needed. It was surprisingly easy and within a year we had a happy and booming business.

Lucky bastard! I hear you whisper. Not really. In a now long career in and around SME’s I have realised a few truths about human nature:-

  1. By and large people want to help you

  2. There are more investors looking to invest than there are good ideas

  3. If your business is a good idea and you are honest, fair and hardworking you will find funding

  4. Investors are usually older, experienced, have suffered and recovered from failure – they understand your position

  5. By understanding your position and taking positive action you earn respect from your stakeholders.

So when do you put up the red flag and shout for help?

Assuming your business concept is viable and you are offering a product or service your customers want then consider the following danger signs:-

  1. Your business is growing, you are profitable and yet you are always short of cash. This happens in growing companies as to service higher sales you need more stock, labour, materials etc and your debtors ledger expands as sales grow. This all eats cash.

  2. You have more potential customers than you can handle and you are falling behind on paperwork and starting to knock back new business. At this stage you need to employ and or outsource more resources but how do you do this when cash is so tight?

  3. You know you could win larger more lucrative contracts and strengthen your business if you had more people, plant and equipment.

  4. Your debtors are slow payers and it is impacting on your ability to meet your payments as and when they fall due.

  5. The bank offers you an overdraft but only if you provide the family home as security.

If you are experiencing any one of the above your business is at risk, if you are experiencing any two you are in trouble and should seek help quickly.

In our company we see so many businesses fail which are fundamentally sound and indeed held so much growth potential.

When we analyse them we invariable find a point beyond which they had insufficient cash to maintain the business. Corners start getting cut, staff numbers are reduced, marketing budgets cut, bills go unpaid, staff morale falls, the staff start leaving and eventually an administrator or other court appointed official is installed

Possibly as many as 90% of the failed businesses (assuming no underlying fraud etc.) we look at could have been saved had appropriate action been taken early enough.

So what should you do if you are at risk?

First of all have an open and frank discussion with your advisors including your accountant and lawyer. Walk them through your business plan and figures and explain your concerns and the amount of investment you think you need to achieve a turnaround. Not only will they offer advice but they may well know of potential investors.

Look on line for SME Turnaround Specialists – a good specialist company should have all of the in-house skills you need and access to numerous investors. You may be able to negotiate an hourly rate or a fee based upon their success or a combination of both. A preparedness to complete some or all of the work on a success fee tells you a lot about their level of confidence!

What will I have to give away to attract an investor? Less than you think. A savvy investor will want to see you remain motivated and happy so as to help build a return on investment. If you are both fair, reasonable and above all offer each other respect you should enjoy a profitable relationship which sees the business turnaround.

Once you have an investor on board start to build a team of business mentors. Many SME’s have an advisory board of a couple of specialists who meet as a regular board would and help you analyse and guide the business forward.

Neil Steggall

The Barking Mad Blog

SME Advice with Bite!

Article Shortlink:  http://wp.me/p401Wv-cb

www.wardourcapital.com

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Presenting WCP 2014 Stick Drawing

Speak Clearly and Communicate

How well do you convey your messages? Is it a question you examine or do you concentrate on the content of your speech?

We spend plenty of time thinking about what we say in business, but not necessarily how we say it.

When it comes to professional settings the way we speak including tone, pitch, and volume is every bit as important as content and dramatically affects how our message is received and how people perceive us.

It’s hard to recognize our own verbal errors so if regular presentations and occasional public speaking are starting to occur in your career it could be worth practicing speech in front of a specialist or a mentor to ensure you are hitting the right notes.

Pitching your voice and presentation at the right level is quite easy and becomes natural with experience and as you become less nervous. The important word here is NATURAL. The natural vocal sound is pleasing to hear, easy to follow and quietly authoritative.

Most of us can become good and interesting speakers with just a little skill and practice. Here are a few pointers on how to improve your presentations.

Speaking too quickly

Understandably when you are new to public speaking you are going to be nervous and rapid speech is a very common effect of nerves. Rapid speech not only makes the speaker hard to follow, it distracts the listener and undermines the strength and authority of your message.

Susan Finch, a New York based voice and speech coach who works with business professionals, says hasty speakers often end up “mumbling, rushing, and swallowing” their words. To address this, she instructs clients to take a breath before they begin speaking and again before each major point. That simple action creates a natural break in speech and helps the person to slow down.

Being Australian; or “up talk”

Australians are known for “lifting” the final vowels of a sentence, the best way of understanding this is to watch British comedy and see how they poke fun at us. This issue in speech is known as up talk; ending a statement on an upward pitch so that it sounds like a question even when it’s not.

According to Sydney speech coach Sandra Harris, this issue is more common in women. Speakers struggling with up talk should record themselves and then make an effort to keep their pitch from rising at the end of a sentence.

The Monotone

Nothing turns an audience off like a dull and boring presenter and the worst speaking mistake is to use a dull, monotone voice. We want to hear in the voice a relaxed enthusiasm and a pleasant assertiveness, keep your audience interested by projecting your excitement and passion for your subject.

That doesn’t mean going over the top with high and low pitches, but rather allowing for some degree of variation in the tone and colour of your phrasing. And the easiest way to achieve that effect is to breathe and relax, try to place a smile into your voice.

Duh, um, fillers

These, um, filler words are ubiquitous in everyday speech. “Like,” “um,” “er” and others are used routinely in casual conversations and often go unnoticed. But they really stand out when used in professional settings.

John West, head of the speech division at New York Speech Coaching, refers to words like these as “vocalized pauses.” People typically toss these sounds into speech because they fear that allowing for a pause will lose their listeners. On the contrary, West says it’s the speakers who use excessive “ums” and “uhs” that tend to lose their audience the fastest, and that a well-placed pause can pique listeners’ attention.

Whispering quietly

Speaking at the correct volume and with strong voice projection is important. Sandra Kazan, a New York based vocal coach, says the ability to project depends on each individuals voice. For example, high-pitched voices naturally project better and further than lower pitched ones.

“A nasal voice will carry, will probably not have very much problem projecting, but it is a very annoying voice to listen to for any amount of time,” she explains. As with pace, experts say the best fix for volume is to breathe well. Projection problems tend to occur when people tighten up, constricting their vocal chords and preventing a smooth flow of air.

Trailing off

In general speech we have a tendency to get quieter at the end of a sentence, to “trail off”. A commonly recognised speech pattern is to trail off toward the end of phrases, clauses, and sentences. This means important words can easily get lost or messages can appear incomplete. You need to keep your voice supported, level and your message carrying all the way to the end of the point you are making.

At the end of the day be it in a meeting or a conference people want to hear your comments, words, ideas and knowledge. Give just that, hone your presentation but most importantly be you. Breathe deeply and regularly, pace yourself and impart your message. You will not only become an interesting speaker but you will enjoy the process.

Neil Steggall

The Barking Mad Blog

SME Advice with Bite!

http://wp.me/p401Wv-bH

www.wardourcapital.com

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Startups Wardour

5 Tips for a SUCCESSFUL Start-up

Starting a new business is an exciting and challenging task, one in which success brings a variety of rewards and yet failure can be a painful and damaging experience. Despite this there are 2.0 million SME’s in Australia and new start-ups opening every day.

This is the entrepreneurial drive at work, the human need to try new things and to stretch and grow. The SME is the economic life force and breeding ground of business. Of the many small start-ups some will go on to become multinational corporations, this isn’t everyone’s choice, or objective and statistically most start-ups will fail within the first three years of operation

Understandably starting a new business is full of challenges and I am often asked how I went about starting my first business and what tips I can offer. Starting a business for most entrepreneurs means a huge amount of sacrifice, hard work, risk and belief in your concept.

My first business came about via a combination of accident, hope and “nearness” to opportunity but if I was to start again I would take these points into consideration:-

1.       Think carefully about the business you choose:

Last week at a conference I was asked the question “what business would you choose if you were starting again?” A very good question and yet one I felt confident in answering. I would choose:-

  1. A high volume established industry with proven customer demand
  2. An industry with a relatively low cost of entry
  3. A location very close to an established business in the same industry
  4. I would price my product at the market price or slightly higher
  5. And this is the WINNER I would out-service and outperform the competition in terms of customer satisfaction.

2.       Market your business well – Marketing is your cash engine

If you have taken my advice and set up your business virtually next door to an existing similar business you already have potential customers passing your door so how do you convert them. You need a plan of attack:-

I.             Check out your competition and look at weak points in their product offering, customer service, display, staff training, customer handling etc. Then do the reverse and observe their strengths.

II.            Build your strategy around out servicing your competition; choose customer service and customer satisfaction as your point of difference. A company we have worked with “Chilligin” is a successful on-line and pop-up retailer of fashion accessories, scarves, handbags etc. Chilligin’s founder and director Nikki Gilhome decided from day one to offer Chilligin customers great products, at affordable prices and to package every item whether ordered on line or in store beautifully. “I wanted the customer to have a lovely surprise when they open their home delivery, or for in store customers something to look forward to when they return home” says Nikki. Small details such as carefully designing wrapping paper, stickers and ribbons, tags etc turn the ordinary into an occasion.  Effectively the customer gets a double hit of pleasure first the purchase decision and later a beautiful package to unwrap.

III.           Train your sales staff to meet and greet customers with genuine warmth, use quiet times to rehearse the perfect approach.

IV.          Wherever possible over deliver on customer expectations, the more a customer enjoys doing business with you the more they will return

3.       Employ the best staff: 

When starting a business we need to be careful of costs but a really good staff member is a key asset and a valuable part of your strategy. Don’t cut costs here.

Chose staff who share your vision, who want to grow, who will absorb your training and guidance. Respect and reward them. Encouragement and respect are amazing rewards, how do your competitors reward staff? There are many ways to reward beyond the pure financial and most people I know would rather work for a little less in a great environment than for more in an uncomfortable environment.

4.       Review Progress and Question – Can we do better?

If your business strategy is to outperform your competition by offering better service and customer satisfaction you must work hard at it to keep at the top of your game. Constantly check your competition, both locally and via the internet, overseas. Read everything you can find for new ideas, engage with your customers, listen and learn. Constantly review every single aspect of your business questioning how you can improve the customer proposal, to satisfy and engage more closely.

Your stock and services must always be current and adjusted as closely as possible to your customer needs. Use stock analysis tools so that you know which items are moving and which are slow. Respond very quickly to avoid wastage, move quickly to special out and move any slow stock. Slow stock is dead money and loosing you sales. Buy more of the fast moving items and consider expanding that part of your range with more options.

Change your web presence or store displays daily to build and maintain customer interest. Collect email addresses via direct questions as you input receipt data, small competitions, draws etc. Communicate directly with your customers, be innovative, informative and “the place to go”.

5.       Think carefully about finance & assistance:

Most businesses will involve you assuming responsibility for some level of debt, make sure you understand the obligations here and your responsibilities. Debt isn’t just a loan, it includes your supplier credit, your rental or lease obligations etc.

It’s important to know which type of financing is right for your business and always try to hold three to six months cash in reserve. Are you willing to give away equity in exchange for cash? Are you looking just for an investor or also for a mentor? Is your business plan solid enough to secure a bank loan?

All important questions to consider and remember with an investor you often gain an experienced mentor as well. If I was starting out again today I would look for an experienced investor who could guide and mentor me over any other form of external funding.

 

 

We are fortunate to live in an age when so much information, knowledge and experience is available for those who want to search for it. Eric Schmidt, executive chairman of Google, said: “There’s a new way to do marketing, and it’s to do it with numbers. People do marketing to bring in revenue, to have an impact, and with these new systems you can measure this. The technology the internet brings means you should be able to measure almost everything.”

If you are thinking of a start-up read and absorb, plan and then follow through and your chances of success are high.

Neil Steggall

The Barking Mad Blog

SME Advice with Bite!

http://wp.me/p401Wv-au

 

Banks

Are Banks Funding SME’s?

 

A good deal has been written recently regarding the attitude to SME lending by the major banks. On the one hand we have SME owners frustrated by their inability to attract bank funding and on the other we have the banks advertising and talking up their preparedness to fund SME’s.

Why do we have this disconnect of views?

It is clear that since late 2008 and the commencement of the GFC, banks have been more wary of lending. The financial crisis – caused largely by risky lending and banking mismanagement – combined with subsequent higher liquidity and capital requirements have made for a far more risk adverse approach.

However, banks are lending and they are increasingly keen to do so. They are lending less than they used to and looking for tighter security, but the idea that they won’t lend to anyone is simply not true, but you must submit a well-reasoned, structured, quality application.

This myth is not only hurting the banks, but it is hurting SME’s. A problem is that we hear so many negative stories of loan applications dragging out for weeks before amounting to nothing and of bank BDM’s being excited by your application only to have it knocked back by credit that many established businesses with sound bankable propositions are not even applying  for funding

Other SME’s will get a rejection from one bank and assume they fall into the ‘do not lend’ category, and give up – whereas in a more positive  climate, they might keep trying. This is slowing business growth and therefore the growth of Australia’s economy.

Why is everyone saying that ‘banks aren’t lending to SME’s’?

To answer the question we need to understand the lending process and rationale applied by the banks. Decisions are no longer made by your local manager who in days gone by would have known you, your business and the state of the local economy in which you operate. Lending decisions are now centralised and subject to stringent internal rules, guidelines and matrix ratings.

It is possible in this centralised and semi-automated system of credit approval to fail simple because you can’t “tick” a given box. So let’s look at some of the actions you can take to improve your chances of success:

Credit History:

In tough times banks require a near perfect credit history with no defaults, judgements or slow payments showing on your credit history. The reporting agencies make mistakes and many suppliers make mistakes so it pays to request a copy of your credit file from the main agencies such as Veda or Dunn & Bradstreet and check that it is accurate.

Recently our Credit Manager brought a large monthly trading account application to me for approval, the applicant trades nationally and is at the upper end of the SME definition. On the credit file were two very small sums of money showing as outstanding for over two years to a major utility company. Had I been a computer I would have rejected the application but as a reasoning person I could accept that such small sums were inconsequential against the annual revenues of the applicant. A quick conversation with the applicants CFO satisfied me and the application was approved.

For a relatively modest annual fee the reporting agencies will provide you with email notification of any changes to your credit file and provide a fully detailed up to file each year.

Portfolio Risk:

Most banks from time to time place a limit on the amount of funds they will advance into a certain business sector or avoid some sectors all together. In late 2010 we had a client with a strong business case and sound backing who wanted to acquire assets in the wine industry. At that time none of the major banks would lend to any “non existing” wine industry clients. Don’t be afraid to question the banks BDM as to their attitude to your sector and if the BDM doesn’t know ask them to find out.

Business Plans, Budgets & History:

Being able to table a well-constructed funding application supported by a current business plan, detailed budgets including P&L, Balance Sheet and Cash Flow will help enormously and if you have maintained accurate records of plans and performance over the past three years even better.

The plans and records don’t just show how your business has performed and how it may perform in the future they speak volumes about you as a thinker and manager.

It’s relatively easy for you to know how you stand from a profit and cash position on a monthly basis and you may question the time and investment required in maintaining such detail but believe me it will pay you dividends time and again to do so.

Management Team:

Provide information about your management team. This will be a key consideration for any lender. You need to show you have a team that can develop the product, market and sell it, and just as importantly, manage the finances. If you have gaps in your team, try and fill them get one in place before you apply.

Interest Rate Cover & Security:

The banks will calculate how many times cover your current net profit will give to the total amount of interest payable and they will want that cover to be 2.5 – 3.5 times as a minimum. For additional security the banks will look at your stock and debtors and advance funds against that security, again they will be conservative and depending on the age and condition of stock may lend 60% of cost and up to 80% of debtors. The bank will also look to take a charge over the various assets of your business.

As a general policy you should, wherever possible, avoid giving personal guarantees or security over your family home and always seek professional advice before executing any loan documentation.

Amortisation & Exit:

An often over looked point which the banks will be very interested in is how quickly can you repay or amortise the loan and how you plan to do it.

The banks don’t want open ended facilities and they want to know you have more than one option to repay, irrespective of anecdotal reputation banks do not enjoy having to collect on defaults.

Hopefully you will be able to demonstrate an ability to amortise the loan over a reasonable period whilst still leaving sufficient cash flow to cover your interest ratios.

In summary the lending market is constantly changing and hard to keep up with. For this reason it’s often  worth engaging one of the companies that specialise in SMS funding as they will have strong relationships with a variety of lenders, understand each banks current requirements and how best to structure and present your application to provide the best prospect of success.

Neil Steggall

The Barking Mad Blog

SME Advice with bite!

http://wp.me/p401Wv-9q

SME's Out of Cash - WCP 2013

SME’s: Starving for Cash

Just how much cash does a start-up need?

In my experience the simple answer is “a lot more than you think”. The lack of cash to fund SME growth is the single biggest cause of SME failures and yet it need not be so.

With a proper understanding of business dynamics and risk, cautious budgeting and the regular monitoring of your performance against your budgets you are already a long way along the path to securing your future.

So How Much Cash Does an SME Start-up Need?

THE FIRST STEP

Be totally honest with yourself when assessing your business plans, don’t plan on what you hope will happen, don’t even plan on what you think will happen. Plan on what you know you can achieve and then allow for the unexpected.

Over the span of a long career I would estimate that 80% of the start-up budgets I have seen, over estimate sales and cash flow, whilst under estimating costs and cash burn.

This will possibly frighten you but you should have sufficient cash on hand at the start of your business to cover at least six months of total costs and operating expenses and you should maintain this cover throughout the growth of your business.

If your business concept is realistic and your business plan and budgets well thought through you will almost certainly succeed but be very realistic when budgeting.

THE SECOND STEP

When writing your business plan and establishing budgets calculate the cash needed in year 1 to meet your three key areas of expense; Cost of Entry – or Capital Expenditure (CAPEX); – Cost of Goods Sold – (COGS) and finally Operating Expenses – (OPEX).

If after careful consideration and budgeting the sum is higher than you thought, see what if anything can be scaled back, without losing sight of your concept and what cash is really going to be needed to deliver the objectives.

Do not despair if the cash needed is more than you thought or indeed more than you have available. The cash needed is the cash needed so plan for it.

In respect of Revenues employ caution in the quantum of sales you project. A mistake here will cost you dearly and don’t expect your customers to pay you on time. Most “good” debtors pay in 30 days but it is usually 30 days from the end of the month in which you invoice and if they are savvy buyers they will order in the first week of the month thus getting almost 60 days to pay.

THE THIRD STEP

The business plan and budgets are written and after due and diligent consideration you feel you are short of cash “Stay Calm and Engage Stakeholders”.

The stakeholders in your business include you, your family, your investors, your staff, suppliers and customers.

If your business plan is sound and well-articulated and explained, each of these stakeholders will support you. Your family will probably support you best by understanding long hours worked and tiredness at home.

Your investor in making the decision to back you and your idea has the most to gain by supporting and helping you meet goals. The investor is probably experienced and can be a great mentor and sounding board for you so use the relationship and value it.

Your customers and suppliers both stand to gain through your business success so engage them, show them your plans and discuss the terms on which you need to trade. Treat them with respect and they will return the favour in heaps.

SUMMARY

We are yet to answer the big question: Just how much cash does a SME start-up need? It’s a bit like the question; how long is a piece of string and the answer is the same……it’s as long as it is, or it needs as much cash as it needs.

Don’t be worried by this, in almost 30 years of SME experience I have always had access to more investor cash than I have had to good ideas and people to back.

If you have confidence in yourself and your plan and need an investor, speak with local accountants, financial planners and lawyers, they will almost certainly know someone looking to invest funds in a sound idea.

Most importantly if you think you need $8.00 ask for $10.00 it’s much easier to return funds with a little interest than to ask for more. Again if you think your first years profit is going to be $10.00 write it up as $8.00 and come in ahead of budget. Everyone loves a winner and success spreads!

Follow these simple steps and you should be set for a successful future with loyal stakeholders willing to follow you into your next bigger venture.

Neil Steggall

The Barking Mad Blog

SME Advice with bite!

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