VIEWS: 112 PAGES: 85 CATEGORY: Management POSTED ON: 11/10/2012
It is very tough to trade for both existing and new small business. The guide helps you to focus on what is important for survival when you back is against the wall. Takes this advice and be empowered to turn your business round if it is not too late, or thinking of starting a new business then follow this advice to not be trapped as many others are because they do not focus on the real and core issues of a business.
24 Hour Survival Guide for Small Business Revised Version 2012 Gavin Tonks 24 Hour Survival Guide for Small Business Gavin Tonks Published by Gavin Tonks at Smashwords Copyright 2009 Gavin Tonks ISBN Number: 978-0-620-54661-4 Barcode: 6009691421396 Date: 03/03/2009 revised 25/09/2012 Words approx. 30605 Author: Gavin Tonks http://www.tradesecretsrsa.co.za Graphic Design: The Design Trap, http://www.designtrap.co.za Editor: Monica Van Aswegen, mailto:firstname.lastname@example.org This e-book is licensed for your personal enjoyment only. This e-book may not be re- sold or given away to other people. If you would like to share this e-book with another person, please purchase an additional copy for each person you share it with. If you are reading this book and did not purchase it for your own use, then you should purchase your own copy. Thank you for respecting the hard work of the author. *~*~* Contents Dedication Preface Introduction Chapter 1 Genesis: And in the Beginning was the Idea Chapter 2 Your Business Case: Developing Your Business Plan from the Business Case Chapter 3 The Strategy Plan: Reaching Your True Business Potential Chapter 4 Ask for Business: Show No Fear or Shyness Chapter 5 Attitude: Adjust Your Attitude – First Aid for Your Business Chapter 6 Opportunity: Cast Your Net Around Chapter 7 Use Your Network: Building Your Business relationships Chapter 8 Do Your Homework: Take a Look at the Playing Field Chapter 9 Weigh Your Options: Taking Long Hard Looks Chapter 10 Minimize Risk: Do Not Take Unnecessary Risks Chapter 11 Simple Solutions: Do Not Buy Marble If all you can afford is Mud Chapter 12 Cutting Costs: Cash is King Chapter 13 Sharing the Burden: Delegating Tasks Chapter 14 Consider Employees’ Input: Creating a Platform Chapter 15 Creditors: Negotiating with Creditors Chapter 16 Debtors: Negotiating with Debtors Chapter 17 Business Acne: The Preventable Business Infection Chapter 18 Business Depression: Trade Your Way Out Chapter 19 Stress: Coping and Staying Focused in Business Chapter 20 Business Self-esteem: Be Confident and Positive Chapter 21 Healthy Business: Toning up and Slimming down Chapter 22 Perseverance: Believe in Your Business Chapter 23 Never give up: Getting up One More Time Chapter 24 Survival: Image is not Important, Survival is Chapter 25 Surviving Today: How to make it into The New Month Conclusion About the Author *~*~* Dedication I dedicate this book to those who have chosen the high road and are taking control of their Entrepreneurial destiny. To Tharine, the graphic designer who strives each day towards successful business, may you inspire many to do just that! To Monica, whose passion is evident in structuring written words. *~*~* Preface The Entrepreneurial road is truly a hard road where you need to develop skills and attitudes coupled with experience, to tread where angels fear to go. Unlike those who are blessed with opportunity and an easy road, I have not only seen the weeds at the edge of the road but I have had detours, which took me into oncoming traffic lanes. Life is a lesson, so learn it. Take what life offers and enjoy every moment that nature gives. Start every day by getting up and being what you want to be - take no prisoners. Begin each day with a mantra of “how much successful business, am I going to do today? Let us become great entrepreneurial nations with creativity and determination, embracing integrity and humility as Nelson Mandela has done. If electricity, interest rates, rising costs, the petrol price and all the other negatives are driving you to despair in your business, then you need this quick survival guide. Good advice is timeless and many entrepreneurs fail because they are not equipped to succeed, it is a sad fact. Conditions in Business are tough – only the toughest survive! *~*~* Introduction These attributes and statements have not only given me strength in dark hours, but have proved to be reliable tools in assisting many small businesses I have mentored over the past twenty-five years. The information contained here is relevant to all small business. You will find some business cycles are tougher than others are and during these cycles the following steps will help you survive those tough times. To add to the book’s interest and for in-depth explanations of business terms, tutorials and concepts, link to Enterprise Support at http://www.enterprisesa.com. Here you will find additional articles and information including a business plan creator to assist you in developing an array of tools, which will assist you in your journey to success. Many of the site assets are free; you are just required to join. There are also many topics to research in your path to becoming a peak performing business entrepreneur through the enormous web resources available today. I hope you will enjoy reading this guide and that you will find it a useful springboard to a successful business. *~*~* 1 - Genesis: And in the beginning was the idea… Not every idea has the potential to develop into profitable business. We all too often confuse the words, “idea” and “business.” An idea is a thought process, a dream or a concept that is perceived in the conscious part of the brain as having some commercial worth. Ideas on their own in the business world typically have no value and even Richard Branson has publicly thanked all the people who have sent him good ideas. Ideas are ten a penny and not every idea is reinventing the wheel. McDonalds and Burger King did not invent a hamburger; they just found ways to make them faster and to sell more of them quicker than anyone before. Many people have ideas, some brilliant and others just plain stupid, like the guy who had a micro trading store and thought that his business would in two years be big enough to give a large retailer [doing millions of dollars of turnover] a serious run for their money, after a $50 000.00 financial injection [when one store costs more than a million dollars to set up]. So what’s your idea? Is it a new cell phone, an application or a website? Every person dreams of the perfect business that will assail them with wealth, yachts and Lear jets. Sadly many will not see those dreams come true as we deal with two distinct personalities: The salesman, he can sell anything. He sells the concept or the idea and gets you all going but there is no delivery. He is so busy selling that he has not considered all the iffy bits in his mind, like after sales service, delivery and all the other effort that is required of a successful business. A classic example is the Google phone which was sold on-line, but when people needed after sales service, they had no-where to go. Salespeople are a cog in a complex business environment and few salespeople make it on their own in business, despite the fact that having a sales personality is critical to being a well-rounded business person. The entrepreneur however, has a dream, a vision and passion. With his idea in hand he creates a plan to achieve his goal which is getting his product out there, selling it and getting the money back into his bank where it will hopefully stay. Every wave that knocks an entrepreneur down will see the true “die hard” getting up again, this time with the proper tools in hand. He knows that every obstacle can be overcome and if he wants it badly enough he will be successful. The true entrepreneur knows he can achieve his goal with well planned, achievable steps within the concept of his overall vision. He will eventually stand in the waves and turn them to his advantage. Many people with solid ideas, sold their houses, mortgaged everything they had, and believed with the determination of Job to make their idea a success. The other half believes their idea is “The One.” They are hoping some rich philanthroper will say: “I have waited my whole life, for this idea. Here is a huge wad of money. Now I will spend more and turn this into a huge profit. Because I am nice I will give you more since you are the generator of this idea and from the kindness of my heart I will let you earn more money because I have contributed nothing to its success.” Would you do it? So why do you think someone else would? A business must always make profit to sustain both you and the company since the business is created as the vehicle to drive the business that is derived from the idea. A business is an entity that drives commercial transactions and it exists to generate income. The business has a market, a plan and a method to ensure that people who like the business will support it with their financial transactions. These transactions generate turnover, if we are lucky “profit” and if you are seriously fortunate, wealth and some form of valuable asset. If you wish to sell, trade or generate income from your idea, it will require planning, a business case to show viability and a presentation. The presentation highlights information from the business case and how you think it will perform as a business. There are fundamental questions that must be asked with any idea: How many people will buy into the idea? What is the perceived transaction value and why would people pay for the idea? How many ideas can be sold a day? Can you manufacture enough of your ideas a day, to meet this demand? What will happen when other people see that your idea works? Can this idea generate sufficient profit to run a business? Finally, would you buy one of your own ideas and put down hard money for it? Conclusion Phase one of the entrepreneurial business journey is to make a list of ideas. From this list see which of the ideas could make a commercial business feasible. This information is collected and put together as a business case, which will show if the ideas have legs as a business. Evaluate the shortlisted ideas based on the business case information and identify which idea you would “buy into.” Once you have the one, commit all your resources to formulate a presentation that proves the feasibility and business case followed by a business plan. The planning here saves millions in money, heartache, stress and wasted resources. So look again at your list of potential ideas and write a couple of words for each in terms of what you think will sell. Spend some time in sales environments like malls, wholesalers and shops that sell products similar to your ideas and see what people are actually buying. Take specific shops and see how long the stock sits on the shelf before it moves. These steps are critical to the success of any business. Enterprisesa did a market research project on entrepreneurs who failed in business and the surprising fact was that many did not fail because of lack of money or resources - they failed because they did not know what they were doing. If your business plan can prove commercial success - consider the journey just begun. *~*~* 2 - Your Business Case: Developing your business plan from the Business Case I had a new client, who wanted to develop a business plan and his first question was “Will you write it for me?” and my immediate answer is “No!” His crestfallen look deserved answers… The idea and concept behind a plan to acquire financial support is simple. If I had a pot of money and wanted to make some more by investing in someone else’s business, what questions and answers would I expect in order to back this person and their business? So imagine if someone was asking you for money, be realistic and put those questions down and then answer them. With you being the investor and wanting security for your hard earned money, it is not as simple as being told, “Just give me the money; I will perform as and when I feel like it”. The same reasoning is required when asking a company or person to place their confidence in you when investing their orders in your business. How often do you buy something and say, “Would I buy this if it was one of my ideas?” Probably never but if you will not buy the product you wish to sell to others, then how do you expect to sell to them if you have no faith in your product? The steps to formulating this plan is a series of questions and assumptions backed by simple calculations that proves there is a business case, before all the hard work of a business plan is begun. So I personally, would ask the following questions: For an investment - would I get paid back? For a sales and purchasing contract from my business - would they deliver the service and quality I expect for my investment? These two questions are crucial when doing any kind of business planning. For the Business case I would ask questions around the sustainability and practicality of creating a profitable business entity. Will this product/ idea sell? Where will I get my revenue? Where will I get my profit? How much do I need to start? Who do I need to start with? Who can help me start with samples and costing? How many ideas must be sold to break even? Is there a real and sustainable market? Who is my market – who will actually buy my product? If I translate my ideas into dollars and I need ten thousand dollars a month to cover my living expenses, can I sell fifty thousand units in twenty two days, as there are business costs and profits to consider for the business to survive? That is more than two thousand dollars per working day. Also bear in mind seasonal purchases and times when people have disposable income. It now becomes a daunting exercise as you need to find sales every single day. If you are able to sell across the country then it becomes easier but it has its problems and costs as well. The list must be inclusive and show realistically that you can move the units and get them to their destination cost effectively. Many people do not look at the numbers in simple terms before making decisions. I had a client who developed a nifty bottle carrier, which was a nice idea. He spent about US$3 000.00 in developing and manufacturing the product, only to find out that people saw it as a free-bee and not as a must have purchase. A few laser cut samples would have saved him lot of cost and disappointment. The other problem of course was numbers. The unit cost about US$0.20 to manufacture. So to make sustainable business and to pay salaries and wages he would need to sell hundreds of thousands of the units. The other problem was that once a household bought a unit or was given a few; there would eventually be a saturation point. The bottom line is the product was just a flash in the pan and his hopes of making some money would be better spent selling the idea to a bottling company, as a give-away promotional item. Conclusion You need to formulate a series of questions that will provide clarity in your mind; your investor’s and your client’s mind. What you are selling, the nature of your business and how much the actions of doing this business will cost, must be clear to all parties involved. There is no such thing as, “I started a business with nothing.” You need a place to work from, a means of communication and a way of getting to meetings or arranging the business. This all costs money. You may have another source of income but all business will cost money. If your business case looks solid, you can either build a business plan in order to attract an investor or you can show yourself the pathway to success. It amazes me how rational people completely loose reality for the golden pear of owning their own business. People avoid and are sometimes counselled to ignore a business plan. I however, recommend that you build a logical and sensible business case first as this gives you a better chance of success when you have a really good idea. A sound business just needs sustainability and returns on sales sufficient to pay costs. It is not rocket science but people want to borrow in excess of the needs of an average business as there is no will to drive sales, which is ultimately the life blood of any successful business. A productive business is able to grow and sustain itself and will not be caught in the spiral of robbing Peter to pay Paul. The business case will determine the type of sales you need to achieve in order to make the business sustainable. It is very hard to sell and make thousands of dollars a month so you need to build the business with the available capital generated in the beginning until you can meet the projections and goals you have set. I have started a very successful business with a client’s money. They trust and have no doubt about delivery. These deposits have fuelled the business without loans or debt of any form. People said Facebook started with nothing but surely they had to pay the cost for server power to start with. Remember, doing business always has its expenses. *~*~* 3 - The Strategy Plan: Reaching your true business potential How much of a plan do you need to be successful in business? Much is said about business plans and planning and many businesses studiously avoid using or even defining these tools, only to burn up and close down without reaching their true potential. If you are really serious about your business then you must have a plan. You would not think of climbing a mountain without a plan so why make the biggest decision to own and run your business without a plan? No business is really successful without a plan. It may not be written down, but it is the discipline from which you will achieve success, wealth and sustainability. In business this is called a “strategy plan”. The strategy plan and the business case are all information resources that form the building blocks to creating a successful business plan. What is a Strategy Plan? A strategy plan and the research you do, can be compared to the map you would make or refer to, if say you were looking for an address in a strange city or country. I sincerely hope you would not fly into a country and try to find a place without some sort of plan and budget. So why do so many people think they are able to run a business this way when they go into business for themselves? The strategy plan is the map you draw, so that everyone involved in the business, knows what page the business is on. It is a guide and the instructions detailed in this plan allow each member of the business to function within its framework, from serving customers to sustained profitability. The plan is a tried and tested management tool created for problem solving and market planning. The guide sets out clearly who you should be targeting for business and how to achieve these targets. Some key focus areas for instance, would be: How much stock should I have? Who is my client and how do I reach them? What language should the business speak to suppliers and customers alike? How much capital investment can I afford? These strategies developed from key strategy questions must be backed up by facts like: How many people is the business able to sell to? Is there sufficient interest in the market for my products, and how do I know this? Can I produce enough to satisfy market demand? Do I really need capital or can I grow the business from profitable sales? Obviously if there are other relevant questions you need to add them to the list. This Plan would be supported by answering a number of further questions that define the strategy of what your vision of the business is likely to be like: What is my business vision for this business and how does the vision relate to say finance, stock, employees and customer relations? What is it that we do best or better than any one of our competitors and where do we excel within our current business? What is our real or core business? Do we sell products or a service that generates the profit the business should or does exist on? Where is our value proposition - why do customers support this business and not another business? What kind of image does the business need to reflect to trade and does it reflect the standards it has adopted to be relevant to our customers? What is the message we give to our clients once they have done business with us? Who should my customers be, and why? How much can the business grow and where should the business be in 5 years’ time? How much can we realistically get from the current market of our business in rands/ dollars or units? How many products must we have in stock to enable us to sell and deliver/ invoice to be profitable and sustainable? What value do we give in return for the business we get from our customers, suppliers and distributors? These questions help us to formulate a plan in order to allocate the resources of the company. The allocation of resources could be employees for instance, so relevant questions we would ask are: How many people do we need, and when do we employ them? What skills are required of these people? Other resources in marketing would define how we would beat and avoid competition. Every business has competition and you need to be the best at your game to hold and grow your slice of the business pie. How do you achieve this? Can you put into words what it is you are doing that achieves this business? In order to determine the business path, the business needs to know a lot about itself and this self-analysis is encapsulated in the "strategy plan". This plan requires thought and innovation to survive difficult times and the demands of puberty [yes puberty, especially in new business experiencing growing pains] on the business. Evaluating the business In order to evaluate a business you need to look at various aspects of the business. The primary aspect of course is ascertaining information on the company’s potential or actual cash flow. Determine the current cash flow before this exercise, and thereafter estimate the growth and impact on future cash flow. A solid question for instance would be how to spend the money the business generates. I have found that many companies spend much more than what they generate. If a business generates a lower income then what is the priority that must be paid in order to keep the business going? What costs must be cut to ensure cash flow? In business there are nice to haves, must haves, and then the make do with what is at hand to generate business. If you have used the bus and you want a car for the business but you do not have the money, why should someone lend you money to buy a car, if at this point in time you honestly cannot afford it without debt? However if your business generates sufficient free capital then the car could be a good buy as long as you are able to survive and meet the cost demands of fuel, licensing and insurance which obviously costs much more than riding on a bus does. Evaluate the situation the business was in previously, the position it is in now and its future potential. Even if the business is not trading and the income is zero, then you need to ascertain how you will make the debt requirements in each four week trading cycle. It is wonderful to throw figures onto a page but in reality it is very hard to generate sales and profits especially for a business coming out of the starting blocks. Imagine how many people you need to see if you want to sell a new product where people must first be convinced to buy it. How do you find the right people who will buy your product? If pamphlets only generate a 2 % sales lead then imagine how much money you will require and to what measures you will have to go to ensure that people see the those pamphlets. It is not easy and that is why so many people like to sell to retailers but this still entails its own challenges. Evaluation of especially financial information leads to understanding the dynamics of the business and what “makes it tick” in order to succeed. Evaluations of other issues are also important. You cannot sell ice cream if you do not have a deep freeze, for example. The business needs to evaluate what, how and where the problems and financial considerations are to ensure the business’s sustainability. Real issues regarding the cash flow and how to oil the wheels of the business are critical. For instance, you cannot borrow money for wages as this money is almost impossible to recover. There is no guarantee of success because you have paid people; you need cash in the business in order to run it. The Target A target is something you aspire to or something you need to achieve in order to keep the business running. You really do need to define the goals or targets in terms of turnover and resources. It is amazing how you can achieve something you set out to do, especially if you know your business “life” depends on it. The Path The path is the road you will follow to achieve targets and success. Your vision will determine the big picture and it is also imperative that you define the steps and paths required to achieve what you are setting out to do. You may wish to do work or sell something to the president for instance but if you do not know with whom to speak or what business opportunity exists within the office, then this is an unrealistic goal. Planning will put you in touch with the correct person – make sure you have a pitch ready as part of your sales strategy. This will assist you in achieving your goal of selling to the president. The plan By the time you reach this point you should at least have a plan in mind. Let us consider the following, if you wish to do business by tendering: You now have the information and a tender opportunity you believe you could execute and you want it badly enough to tender or pitch your business product or service: What resources do you need to meet the requirements of this tender? Do you need business cards or do you need to buy the tender document? Remember, it costs money to tender as you need, paper, ink, printing and maybe a graphic designer. What happens if you do not achieve the goal of being awarded this tender? Where has the money come from to cover the costs and can the business afford the expenses? What are the risks involved of not getting the business? Are these risks acceptable and will you ultimately have available resources to afford them? Many businesses then sit back and wait expectantly to be awarded the tender and they stop doing business which is senseless. My associates and I won a tender from a company but their tender process was so bad that they actually failed to give us the tools to commence. Another client we were awarded a tender from, did not deliver on the number of persons we needed to interview and as a result they decided to change the costing structure which meant that we could not stay within the contract they wished to change. It became an expensive legal affair where the client had to pay our legal costs and expenses. So do not think that tenders are a successful business stream unless it is part of your day to day business and not part of project based business. I normally insist on a percentage in up-front payment and would rather walk away as tenders are fraught with legal obligations. Since tenders are complicated legal contracts, they require a clear understanding and path to increase your rate of success. It truly is a shot in the dark and the time lines are continually out, especially with project based tenders where it usually takes months to implement and sign off. The company or business vision Vision is seeing the future, aspiring towards that dream and really believing in that goal or vision. The vision must be realistic, and it should encompass where the business will be in three to five years’ time. The basis for a vision is not to satisfy investors or bankers - it is a determination of how serious you are in business. The business must define the vision and set a mission statement with a hierarchy of goals and objectives. The vision means what are you looking to do? Think of vision and your eyes seeing what the business will be like, for instance in a big glass building and craft the words around this picture so it makes sense. What do you see the business becoming and why? As an example of a vision statement I have copied Microsoft’s international one: Our Global Diversity & Inclusion Vision Statement: To be led by a globally diverse workforce that consistently delivers outstanding business results, understands the various cultural demands of a global marketplace, is passionate about technology and the promise it holds to tap human potential, and thrives in a corporate culture where inclusive behaviours are valued. Although the business vision must be realistic and must describe what you wish to achieve, do not write something that you think will fool an investor as the only person it will harm is yourself. To claim to be the fifth largest supplier in your industry is a statement you can aspire to. However, in order to achieve this vision let us say your turnover needs to be US$1, 200 000.00 in five years’ time, then you will need US$80 000.00 unencumbered working capital, to begin the journey. Where then will this money come from and how will the business accumulate it? Can you afford to borrow it and on what terms? Did you consider that you may have to sell a portion of the company to get this money? Implementation of the processes Once you have formulated what you want to do then you need to have a plan on the “how”. Take the train to Pretoria and go directly to the companies’ registration office, take a bookkeeping course and buy filing cabinets. Any concept must be followed by action. It is important to understand that without action there can never be a business. So after all the thinking, dreaming and planning, also ensure that you have a solid action plan to actually achieve these goals. I have some young new clients who are very competent in putting all the nice flowery stuff together but they have forgotten the fundamental necessity of going out and selling something as only with this accomplished, can you verify all the plans and concepts you are working on. Finally, feedback, control, monitoring and evaluation When developing strategies, you must analyse the business organization and the environment in which it trades. You need to know in what state the company is now and where it could possibly be in the future. You may need to get a loan of Ten thousand dollars or you may need a company registration number. In the Rize Mnanzi, a South African television reality show for small business with a large unencumbered US$100 000.00 cash prize, the front runner contestant lost their rung because they had no plan and had not formulated the strategies in order to match the competition requirements of being a current registered company. If you do not consider the constraints of your business environment and other real issues, how do you propose to be successful? Understanding the need to write down your plans, strategies and vision for the company and to also execute them, is core to running a successful business. The issues that will affect the company when it grows in the future require planning that can be answered through documents. These may include how you will invoice the clients, delivering invoices, collecting cheques or payments – all these may be issues that require resolution. The analysis of the business must look at as many factors as possible, both within the company and outside and will include the dreaded strengths, weaknesses, opportunities and threats. As part of the analysis, there are areas you need to drill down into and questions you need to ask in order to assess the current or future business situation: Who are your business competitors? Who are your markets and customers? Human resources and the people you may need to run your business. Who are your Suppliers and what service do they provide? What is the state of the economy, the yearly trading and the feast and famine business cycles? Any compliance issues ranging from registrations, training or certification your business may require. Technologies you need or must interact with. Some customers insist you work with their software for instance - can you comply? Focus relates to customers, marketing and sales plans. What do you focus on in your business? Did you ask your client for business? How much business can your clients realistically give you? Goals, objectives and targets must be planned and achieved in order to have success and sustainability. One of the core goals when drafting a strategy plan is to develop it in such a way that it is easily translatable into action plans. The defining and writing down of actions and processes to be taken to attain these goals are of utmost importance. Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. That is why a business review or preparation of a strategy plan is a virtual necessity since it serves as a framework for decision making. So the purpose of the strategy plan is to keep everyone on the same page and to help you achieve targets and to monitor the performance of the business. The drafting of a strategy plan may not be a recipe for success, but without it a business is much more likely to fail. Let us say that the strategy plan reveals that realistically the industry generates a turnover of US$100 000 in sales. The current market is controlled by five suppliers. For three of these suppliers this business is only a portion of their combined business interests and not their core business practice but they do control 55% of the market share. The plan determines that with hard selling you should take 20% of this business, worth a budgeted turnover of US$20 000,00 but it will realistically take three years to do this and the budget to market and capture these new clients is US$5000.00. The potential business growth is another 20% which none of the business are currently looking at as they are happy with their turnover but if they do wish to grow this business, then a further US$15 000.00 will be needed. These are just dummy figures to give you an idea of the type of information that a strategy plan should encompass. A strategy plan is a process which covers the vision, mission, objectives, values, strategies and goals of the business. The Mission The nature of a business is expressed as the mission. In other words, what are the activities of the business? Does it design and develop products, clean floors or offer a service? Only say we are in business to make money if you have a contract to print money. Again you need to be realistic since it is your business - it will feed you and provide for your retirement and be a
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