Small Business Survival 101

Principles for Fail Proofing Your Business

Tom Pease

• Publisher: Morgan James Publishing
• Year: 2013
• ISBN:
  9781614487913
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

How valuable would it be to you to have a book that may prevent you from going out of business? You don't have to wonder because you have it in Small Business Survival 101. Small business ownership excels at bringing out both the best and worst of business people. It is the fight of a lifetime and one you may win or eventually lose. Small Business Survival 101 will increase the odds of putting up that "W". Real entrepreneurship is frequently misunderstood. It is not so much about an idea or taking risks. It is about building a lasting business out of your passion. There really is no shortage of good ideas but there is a shortage of those who can make a lasting business from their passion or abilities. Small Business Survival 101 charts the two main avenues to entrepreneurial success: the "I Have An Idea" approach and the "Serve An Apprenticeship" method. Learn the critical differences between them. By reading Small Business Survival 101 be confident you will glean the critical components needed to build a lasting business and be able to spot advice that really isn't. You will learn how to build in repeat business and give it the necessary appeal to customers. For gallows humor enjoy "That Owner Frame Of Mind" and "Entrepreneurship By Santa Claus." Find out which chapter is the longest and why!

1

Touring Entrepreneur Land And Meriting Citizenship

To reach full entrepreneurship requires weapons-grade expertise from you. Would you hire you for such a mission? This chapter takes a hard look at what is needed of you for this role, where your ‘preneur path should lead, who you need to be to get there, and visits critical formative decisions start-ups make. Small Business Survival 101 shows you how to put expertise to use to build a business that lasts and how to progress to your entrepreneurship sweet spot.

I mentioned I like the Yiddish saying “It begins as it ends”. This chapter guides you to beginning right so that you end right—whatever that means for you—but I suggest it means staying in business. These principles not only apply to newly forming businesses but also those seeking expansion or diversification. Both of those processes are similar to forming new businesses that seek longevity.

There are two basic avenues to establishing your own business. One is the I-Have-An-Idea approach and the other is the Serve-An-Apprenticeship method. The former is really not a model but an irrational passion for your idea and that is about all you have. You hope to sell it to investors, hit it big and soon, or flip it for cash. It is usually not a long term strategy and budding business people in this category have limited expertise and act like it. The strength of the model is the idea itself. The second method, far more successful, approaches entrepreneurship as a profession and prepares accordingly. The strength of this plan resides in the owner’s expertise. This means having the experience, having the business education and soloing at the right time. This method is used by most lasting entrepreneurs although the Idea Method gets the headlines. We probe the two models but present apprenticeship as the way to go for longevity.

In either case their success depends upon you.

Whichever method you use it is only a passport to entry and by no means enough to gain permanent residency. Let’s look at how that is done.

Doctors go to medical school before hanging shingles proclaiming M.D. Lawyers go to law school and pilots to flight school. Electricians study under a master electrician before certification so not to electrocute anyone. Accountants pass a CPA exam before advising on taxes. Soldiers must complete boot camp before soldiering. Even hairdressers go to beauty school and must pass tests before licensed to cut hair publicly. Engineers spend five years learning to build things that do not collapse and kill people. These professionals have low failure rates, can give advice, perform services and charge for them because they have the bona fides for what they claim to be. They have it to give. You cannot give what you do not have!

Credentials answer customers’ questions of “Do you have it?” and “Are you real?” They garner the credibility that produces customer expectations of good results and get you business. If formed and forming entrepreneurs would follow the example of these professionals there would be fewer failures. What do many wantapreneurs do to prepare for their profession? Too often the answer is “not much.”

Here is the question concerning your role as president: would you consider yourself qualified if you were hiring YOU for the job?

In high school I was on the wrestling team. The football coach was the wrestling coach and did not know much wrestling but he was still called the coach. He kept us focused and in shape but we lost many matches because he was not a real wrestling coach, not expert. The next year we hired a recent collegiate wrestler as coach. He knew all the moves and what it took because he was a collegiate wrestler. In two years the same rag tags were state champions because of the considerable expertise this coach had to give which became the difference between our success and failure. We were a success because of his expertise. It was transformative because it was real. Both called themselves wrestling coaches but only one had it to give us and he did.

Wantapreneurs frequently do not have it to give to customers, employees, or their business, because there are no certifications to be an entrepreneur. None. Thus, the budding can be short on the necessary bona fides, winging it, learning on the job and trying to compete against those with the goods. In would not be uncommon that wantapreneurs represent themselves as competent, or at least think they are, in things they aren’t. The top reason cited for business failures is mismanagement, a broad way of saying owner incompetence or that you don’t have it. There are about 28 million small businesses, some 9,000 in my city counting solopreneurs, so it is not likely any marketplace does not already have the expertise. That is the ocean you enter to make your waves stand out.

Only you can make yourself a successful owner. Success comes from knowing what you are doing and from a business model that can last. It will not come from less meaty things like people feeding your ego or the quote of the day or getting some funding. Help yourself by getting all training first! Ben Franklin: “An investment in education pays the best dividend.” Amen.

There are plenty of so-called business owners that fail becoming statistics from working flimsy plans with not enough bearing on the reality of their skills. Take an honest inventory of yourself. There are leadership methods to learn, numbers to understand, strategies to use, ratios to calculate, financials to interpret, customers to win, sales to be made, problems to solve, and changes to deal with. Learn these because our competitive markets won’t reward, unprepared and, yes, unqualified business owners. It simply spits them out. Economist Herb Stein said it: “What cannot go on won’t.”

Start-up strategy is not just for start-ups, either. Established businesses looking to expand or diversify by taking on a new product or geography go through similar processes.

Opening a business without the needed expertise is walking the plank no matter how strong the encouragement, but it goes on frequently. Work on weaknesses before you open to reduce failures. Unfortunately, as I said, there are no requirements to certify business competency, which contributes to the lack of it, and tempts neophytes to dive in before its time. You can get a tax number, pay a fee for a license and declare yourself president of a company. But this makes you only a wantapreneur or maybe somebody snorting business cocaine. It is as nonsensical as saying, “I am hopping this plane I’ve never flown and fly my family to Disneyland.”

Crazy, crazy.

Perhaps it is all because of the mental state, understandable as it is, of striving entrepreneurs summarized by John Greenleaf Whittier in Maud Muller: “For all the sad words of tongue or pen, the saddest are these: It might have been.” Our strivers don’t want this to be said of them nor leave anything on the table, both admirable ambitions in the pursuit of any goal.

Entrepreneurs, and I use this word for those that deserve it meaning those having a functioning business, must know more than many professionals to be successful. Yet, again, nothing is required. Many are winging it. Maybe winging it with flair. Maybe winging it and not looking like you are, but still winging it. This does not work any better for forming a business than a high-schooler trying to pass the PhD. A business license ought to license competence but it only shows you paid a fee. Maybe this ease-of-entry is free enterprise at is best but it can be a path to a nightmare. Licensing requirements demonstrating expertise in accounting, marketing, contracting, employing, leading, selling and financing would reduce failures.

My wife is a mental health counselor (thank goodness for me) and must pass in-service training courses yearly to renew her license since she deals with the serious matter of mental health. Having the right to operate a business should have educational requirements for everyone’s well being too.

The scandalously high failure statistics, which damage the economy, landlords, creditors, capital, jobs, accounts receivable and just self-esteem, cry out for more preparation, which is what apprenticing provides. Only three industries guarantee a future: French fries, toilet paper, and women’s cosmetics. The rest fight it out! Take heart that you will likely be an overnight success but that 365 other nights will precede that day. There may also be nightmares.

Can you interpret a financial statement? Can you distinguish between cash flow and profit? Can you compute your current ratio? Do you know how many times you turn inventory? Are you keeping an AR aging? Are you aware of the many taxes that have nothing to do with profit? Do you know what it takes to borrow money? Can you lead? Can you sell? Are you fit? Those are just a few primer questions for you.

“You can’t give what you don’t have.”

Let’s begin this with a brain check. Let’s ensure we are reading ourselves correctly, as well as business conditions and political climate. These three spheres influence our thoughts, actions, decisions, and attitudes and we don’t want mis-reads yielding us erroneous dispositions. We want to be as smart as possible and avoid doing stupid stuff.

To be a good golfer, shoot your lowest scores and win you need a complete set of clubs to conquer the course. If you knowingly leave putter and driver at the clubhouse and head out to play anyway you would be just plain stupid. If you left them and did not know you were then that would be carelessness. No matter which reason either results in you not playing your best and that is on you. There are too many entrepreneurs playing without a full set either which is why they fail. We can learn something from Abe Lincoln about preparedness when he said: “If I am going to spend six hours cutting down a tree I spend the first two sharpening my ax.” You will get a description of the business clubs needed to survive and prosper by reading this book, which will make you smarter. If you won’t do them then you are increasing failure chances.

The margin for error in small business is small and you can reduce that margin by staying spec’d up in your industry. To not do so, to run on emotion, to not be up to speed, to live in denial or listen to the wrong people, is being stupid. Being stupid costs money, maybe all you have.

Owing a business is a fairly serious matter and the failures show more straight talk about why this happens is needed which is what we do in this book. Sometimes when I do that people may say I am being negative. I do not much worry about triggering emotions as long as I am being accurate.

Let’s be smart about interpreting conditions small businesses find themselves in today and suggest their right view. The Great Recession has been an economic Viet Nam and downsized the whole economy. A chunk of buying power left the building. The game is now hardball and softball is no longer played. But this has been going on for years and should be factored in by now. It could be the New Normal but it is where we have been, meaning its effect is now diluted. This climate has produced certain invalid excuse making by some.

You hear “if government quits strangling small business with regulations and red tape they could prosper.” That just does not go on in most small businesses. If an owner sets out to make ten sales calls or a company conducts a marketing blitz there is no government agent tailing him with forms or issuing a citation for failure to make a sale. There are enough pro small business government programs like loans, tax holidays, first year write offs, time payment for taxes, various bankruptcy chapters, that help a small business. Remember too, there are not even regulations to meet to start a business so that could not be less restrictive.

Get Smart

There really can be no excuse-making for a small business owner’s lack of understanding of business essentials anyway. Excuses make you feel better but won’t make the business better. Getting smart will. For example, if a loan is declined it is because you didn’t deserve one and must improve your understanding of creditworthiness and interpreting your financial blood work. If you get beat up by the competition that is too bad because competition is our way. You have to become the competition that the competition complains about. If you think you are hurt because you are a minority think again. The marketplace does not care. The point is it just all depends upon YOU. It depends upon how smart you are and about how much smarter you can be.

Ann Landers liked to say “Fifty per cent of doctors are in the bottom half of their class.” This is true of entrepreneurs, too. There are business owners in the top 10% and those in the bottom 10%. Increase your business intelligence by improving competency in your field. You can’t give your business what you don’t have. Make it your mission to get what’s missing. Your future depends upon it. Remember what my wrestling coach gave our team because that is the same stuff you want to give your business if you want it to win.

To get smart about operating a small business or entrepreneurship is not easy. There are not actual curriculums and you get most of that from years attending Setback University. In college you can cobble together courses in accounting, marketing, salesmanship, management, and finance. That gets you book knowledge but you won’t see needed courses like “Working Your Ass Off” or “Getting The Most From The Least” or “Containing Fear, Uncertainty and Doubt” or “Creating Positive Cash Flow”. To get actual experience intern at a small business and ask the owner to show you the business’s inner workings and share his thoughts as he handles the good, the bad and the ugly. That may be the best education.

Educators themselves need better education or the teaching requirements and barring anyone without a Masters degree from teaching should be changed. I have 32 years running my business but cannot be faculty because I lack the Masters. Yet, someone who has never worked could get his bachelor degree, then an MBA, and teach business without ever working in one. This does not make much sense nor is it smart. The lack of business teachers who owned businesses gives rise to self-appointed business gurus, some close to imposters. Non-profit and quasi-government groups put the mantle on to teach entrepreneurship. But what non-profit should teach profit? It is not hard to see why small business failures are so high.

Serve An Apprenticeship

Since there are no requirements to begin a business the smart thing is acting like there are courses to master and requirements to meet. Start by apprenticing where you work. What you do now is hopefully similar to your entrepreneurial plans. Observe the marketing guy, the finance guy, the production manager and the boss. Ask questions. Note marketing strategies and tactics that work and those that don’t. Go to seminars if your company will send you. Stretch yourself with work in another department to see how it suits you and what you can learn. Audit appropriate classes at your university. Find a mentor entrepreneur who will save the superficial rah rah and answer hard questions honestly.

Business ownership is best worked into intelligently as an apprenticeship until the experience is there. At a minimum, have the professional expertise, courses in accounting and marketing, and know sales to eliminate these failure factors. Opening your own deal means you start at the top as CEO even if it is just you and a few. To my knowledge, there is no such position as a CEO trainee. CEO’s are expected to know business and what they are doing which takes education and experience, not just ideas they are crazy about. You are expected to know the best processes, to be expert in what your business does, how to manage it and how to grow it.

I apprenticed by selling office equipment for five years. I called on large accounts and small ones. I lost accounts and gained accounts. I had good months and bad. I learned to compete. I experienced the uncertainty common to salespeople known as FUD-Fear, Uncertainty and Doubt, and I learned to deal with it. I went to sales schools. All of this was great training for going on my own. I had enough industry knowledge and sales experience to make a good start...

Table of contents

• Cover Page
• Title
• Copyright
• Contents
• Acknowledgements
• Preface
• Chapter 1: Touring Entrepreneur Land and Meriting Citizenship
• Chapter 2: It Must Be Easy
• Chapter 3: Someone Can Sell
• Chapter 4: Characteristics Of The Best Businesses To Be In
• Chapter 5: No Change … No Change
• Chapter 6: The Leader Gets It Right
• Chapter 7: Know Your Numbers
• Chapter 8: Have An Exit Plan
• Afterword
• Men Untied Over Ties
• Your New Vocabulary
• Summary of Top Reasons Businesses Fail
• About The Author