Someone asked me the other day if I could only give one sentence of advice to a business owner what would it be. It’s a tough one but the answer I gave was “Don’t undercapitalise and don’t apply quick fixes to your issues”.
Many business owners do both so I figured why not expand on this sentence this month. The biggest problem with undercapitalising as I see it is that business owners start to place arbitrary (and often unrealistic) targets in place. For example, a business owner might say “I have $30,000 left in the bank so by the 8th of September I need 10 new clients on board”. While targets are important this one may have no basis in realty. What happens if the 10 clients are not on board? It’s important to have a plan so that you can access capital for your business in cases where your goals are not met.
Start-up businesses are often advised to have 6-12 months running expenses on hand to fund new ventures. We would say that existing businesses who are planning new expansions, products, markets etc. should think the same. In business, nothing ever happens as quickly as you would like and the fact that your bank balance is going in the wrong direction does not change that.
On the second part of my one liner, I believe quick fixes are your enemy. As business owners, we get tempted to apply quick fixes when we’re running low on money and when we’ve ‘hit a brick wall’ i.e. what we’re trying to achieve has gotten too hard. In talking to business owners every hour of every day we’ve learned to listen for the language that people who are attracted to quick fixes use. It’s in the way they start a sentence; here are some examples: “All I need is to raise about $200,000 in private equity”; “I just need to find a top notch sales person”; “I only need to get about 30 more clients”.
The problem with these sentences are that the person has completely underestimated the difficulty of the problem so they can’t have committed to the solution. Only when you know how hard something is going to be to achieve can you commit to achieving it. Raising capital, finding top notch sales people and getting 30 clients are not easy things to do. Because this person thinks “all they need to do is….” they are prime candidates to give up easily when it doesn’t happen immediately. Three months later they’ll be saying ‘there’s no money out there’, ‘it’s hard to get good people’ and ‘advertising doesn’t work’. When they start to form these opinions, they’ll be reluctant to look for capital, hire people or advertise thereby putting their business in a pretty bad position.
Throughout the Your Business Success program there are key messages that we try to put across time and time again. For the next month, try to examine the language you use when you describe your issues and the solutions to those issues. It’s not easy but it can be a great insight into why those issues are present.
