Starting business – Early Market Traction

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Market traction is a measure of demonstrated profit, revenue, customers, pilot customers, or users, and their rates of change.  In other words, it is cold hard proof that the market for your product is real.  This measure of reality gives you the business owner, the bank and other investors, considerable assurance that you know your market and that your financial projections are sound.

Starting up a business is a risky investment, just like any other.  However, it is not a passive investment.  Therefore as the owner, you are likely to have your entire life and livelihood locked into your business for many years.  So you want your live-in investment to pay off handsomely.

It follows that you should be seeking a premium return on your investment of time, money and expertise. If you have any second round investors involved (after first round family and friends), they will certainly be seeking a high return on investment (ROI).

Without market traction, the decision to invest requires one hell of a leap of faith by any experienced investor.  Put your self in their shoes.  All they have is your Business Plan underpinned only by an unproven set of assumptions.  This sends the investment risk through the roof.

Without a statement of proof from the marketplace in the form of traction, investors will then focus sharply on your product and your team of people.  Doubt will exist in their minds because investors know that good teams always have good traction and good products.  So if your team hasn’t, it begs the question – why not?

By securing customers early, you and any potential investors are reassured that there is demand for your technology, product or service offering in the market.  This substantially reduces the investment risk because you have already provided evidence that your product is in demand and that you and your team is up to the job.

So the conclusion is that a high projected ROI will not of itself produce market traction.  However, the reverse is true.  Early market traction is very likely to produce a high ROI for you and your investors.

Until next time

Gary

Starting business – It’s a wide knowledge area

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At its most basic level, being in business requires only a few customers and an ability to sell at a higher price than you buy.  Even if you have nothing more than these fundamental money making skills, there is still a wealth of other skills required to build a business.

Starting out, it helps to know your industry well and the rules and regulations that govern it.  In many industries, failure to comply with the myriad of government rules could get you banned from the industry, heavily fined or serving a prison sentence.

Even before you make your first sale, the Australian Government also imposes a compulsory administrative and taxation reporting regime on all businesses, large and small.  This makes bookkeepers and accountants very valuable resources from the outset.

Although bookkeeping and accounting concepts are tricky to grasp, a rudimentary knowledge makes a conversation with your financial advisers a lot easier.

As your business grows, you need more people because you can’t do everything yourself.  People need training, supervision and guidance.  When your business evolves to something more than you only, a degree of organisation and few systems become necessary.  Employing people also introduces a new layer of administration and compliance.

At some point, you will need to exercise some leadership to imprint your own culture and do some planning from time to time.  An expanding business also needs financial control and management. There have been many examples of businesses going broke because of their inability to fund rapid expansion.

Whilst you may not do the financial tasks personally, it helps a lot to understand the basic concepts. For example, the ability to read an ‘Income Statement’ and a ‘Balance Sheet’ opens up a new world of understanding and opportunity.

Developing a basic understanding of cost control concepts like product costing, budgeting, cash flow, and break even point will also make management of your business a lot easier.

Until next time!

Gary

Business planning – You need people

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This is the most compelling case ever for preparing a Business Plan.  At some point in the evolution of your business, your success will mean that you are standing alone holding a tiger by the tail.  You need help (that is nowhere to be found) but if you let go you are screwed.  You pray for a person with a solution.

By definition, your business will become bigger than you.  It’s only a matter of when.  As much as you wanted to do your own thing, by yourself, in your own time, without annoyance from anyone, you actually kissed off that plan the day you started being good at what you do and giving some half decent service to your customers.

People tell other people and before you know it, a trickle of business becomes a torrent and suddenly you can’t cope alone with the increased demand. So much for your vision of being a business hermit!

Of course, there are two sure fire ways you can kill off your business from here.  Firstly, you can start turning good paying customers away so that you keep your business at a level you can handle.  That will quickly poison the well, because bad news always travels faster than good news, and there is no news worse than rejection.

Secondly, you can hire the wrong people to help – desperation hiring!  This accounts for a lot of business failure just when things were looking up.  Why?  You will be frantically busy and have a problem to solve.  So there is a huge temptation to hire someone who is available and can start Monday, rather than someone who fits the ‘skill’ bill and is good at what they do.

You can change this dynamic by making your business so attractive that all the good people want to work there.  Create your business plan and put the highlights on your website (newly created) ‘Careers’ page.  It is the first step in becoming a magnet for good employees.  And you thought marketing was only about attracting customers!

Until next time!

Gary

The entrepreneurial spirit – Knowledge is power

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Knowledge and people are the drivers of opportunity.  They are intertwined.  Without knowledge and a reasonable contact network, the well of opportunity simply dries up and it becomes hard to survive in business.  Starting up your own business without at least a basic level of business education is to seriously limit your effectiveness to function, operate and grow. 

The problem with a lack of knowledge is that “you don’t know what you don’t know”.  From the knowledge is power perspective, that’s a serious weakness.  In other words, you are simply unaware of the large chunk of knowledge that you don’t have personally.  Because you are unaware, you have no inkling that it exists or that it could be vital to your business.  That’s dangerous!

It also means that you must rely on other people to tell you what is important.  For a variety of reasons people push their own agendas.  Advisers tend to stay within the safety of their own areas or specialty, and teachers teach what they know best.  So it makes sense to have a basic understanding of an issue yourself, take advice and make up your own mind.

As much as people want to march to the beat of their own drum, it is hard to go it alone when starting up your own business.  Business success is easier with a team effort.  It is impossible to know everything.  You can be the smartest person on the planet but still not survive in business, but at least a business education will give you some idea of the things you need to know or be aware of.

The ideal combination is to have a flair for making money, and to have some basic business knowledge.  From there you can find the resources you need and surround yourself with smart people whose specialist knowledge you can access.  You don’t necessarily have to employ people to achieve this.  It is part of the entrepreneurial spirit and a talent in itself to know where to find required knowledge and expertise. 

For more expert tips on the entrepreneurial spirit and starting up your own business, visit http://www.garyweigh.com

 Wishing you positive Ki in business

Gary Weigh

Online Aiki Business Coach

Why do Business Planning?

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The primary job of a business owner is to manage and run a business. Managing is a lot more than telling people what to do.  It means planning, research, executing strategies, making effective use of available resources and protecting the business.

It is not always the case that a business outcome turns out exactly as planned.  Hence the concept of risk!  Put simply, a business is a risky investment like any other.

Being an entrepreneur involves risk taking.  But that doesn’t mean taking unnecessary risks (e.g. speculative risk).  Part of the business planning process should be about minimizing risk.

If you are investing your life savings, borrowing other people’s money, and putting your family’s stability at risk, it is your responsibility as a startup small business owner to not take stupid risks.

Of course there are unavoidable risks involved in a new business venture. These are calculated risks.  The business planning process may not guarantee success but it certainly decreases the chances of failure.

Your business plan also provides all of the stakeholders in your business, including partners, financiers and employees, with a succinct and unambiguous reference of your intentions and strategies.

Until next time!

Gary

What is entrepreneurship?

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When people think ‘entrepreneur’, many think inventing or dreaming up a new idea.  That’s not entrepreneurship, that’s creativity!  Sure, someone has to come up with the good ideas, but there have been countless good ideas in the world that have gone nowhere.

Entrepreneurship is about getting new business rolling and that means action and implementation.  Unless a new business starts up and becomes profitable, there is no increase in competitive advantage, there are no new jobs, no additional tax revenue available, and no contribution to GDP or the standard of living.

Getting products and services to market is the only thing that matters in the end.  And this can only be achieved by people collaborating and cooperating commercially with each other.  So connections are vital.  Finding people who access the right business channels is an entrepreneurial art in itself.

Commercial innovation is another entrepreneurial art.  This means working with existing technology and know-how and creating new applications.  As Andrew Hargadon, Senior Fellow at the Kansas City based Ewing Marion Kauffman Foundation says, “Most innovative leaps come from the collective creativity and entrepreneurial spirit of many businesses actively learning-by-doing and learning-by-using”.

Arguably the real entrepreneurs are the well connected private investors of the world.  These people are experienced business promoters who have access to both money and quality business connections.  Although they fund less than 5% of proposals put to them, they can identify ‘diamonds in the mud’ and get innovation to market.

Until next time!

Gary

Calling Australia’s entrepreneurs

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Everyone expects to have a job in this country but relatively few people outside of government are prepared to create them.  Inspired performance, business growth and high paying jobs don’t come from rescuing, propping up and bailing out failing businesses. They come from entrepreneurship, new business start-ups and meeting demand profitably.

The government’s GFC response aims to be a short term kick-start cash stimulus and capital works activity that is rolled out in times of economic crisis.  It’s all useful stuff but does little more than preserve existing jobs until new jobs appear in a resurgence of private entrepreneurship.

Serious financial problems are created for any government attempting to undertake such economic stimulus for a prolonged period of time.  The result is exhausted surpluses, vastly increased national debt and a shortage of revenue, which is can lead to raising taxes and removing concessions.

Thus, Australia will not be in a great financial position to enable entrepreneurship and support subsequent private sector recovery.  An environment of high taxes, high debt and rising education costs is not exactly the lush forest of opportunity from which our future business builders are likely to emerge.

Australia needs new business builders. We need educated risk takers, and there is no rule that says our future entrepreneurs must be born here.  There is also no rule that says they have to be young or male.

Some of the most talented people with the highest IQ’s and enviable experience are females who never quite get the right opportunity, or they are senior Australians who are cast out of the workforce after age 50 to make way for the younger generation.

Ultimately, Australia’s lifestyle and high standard of living is tied to the competitive advantage created by the relative few.  So wherever you are, whatever you are doing, your time is here.  If you want to make a difference and you don’t want to die wondering what might have been, get in touch.

I will do whatever I can to guide you and help you.

Until next time!

Gary