We all know now that making it past 2 years when you start a business is tough, and gets tougher as the years go by. The three main reasons for not making it are lack of market need, lack of money and not the right team (outcompeted came close fourth). So what can we do at the very beginning to make our odds as good as possible?
Let’s start with an example of a small business that’s been burbling along making surgical masks for a few years. Market need is there, then suddenly a game changing event happens (you know the one) and sales goes through the roof. This is a gamechanger for them and they managed to translate this into profit and grow further, eventually becoming the go-to for surgical masks. But what did it take to realise this and what are the dangers down the line?
It wasn’t only a bit of luck, they had structured their business with best practice and when an unknown event came along were able to make decisions fast and scale quickly, because the fundamentals were in place and they could see clearly what decisions to make.
What was actually happening behind the scenes was a constant evaluation of the business, not just working in it, but working on it. Putting systems and processes in place that eveyone can follow, managing any failings for improvement, making micro adjustments from customer feedback, and most importantly, controlling their finances. The result from this action of small continuous improvements is a company, service and product that over time becomes vastly better to when it was initially formed.
Liken the whole thing to growing a plant from seed. You plant the seed, water it, some sunshine but nothing happens for ages. Then a few weeks later its head pops out and we say, wow look at that, it’s just starting to grow. But in reality the hard work of rooting has been occurring for some time beneath the surface where no-one sees. As the plant grows the roots have to get deeper. This balancing act is going on all the time and is especially important to understand because without deep roots the plant would become unstable as it grows, and without water…it would die.
In the video we see a side view of a plant and its root system. The plant is working hard to establish its roots before it breaks the earth. In a start up it is essential to not only have a top down view, extracting yourself from the business occasionally to see what needs doing, but to take a side view.
In the side view we can find our systems, processes, our financials and all the other stuff which is often overlooked by busy entrepeneurs who simpyl want to make sales (understandle, I get it).
But it’s all too easy to get on with the bit we’re great at, the bit we wanted to start the business for, say importing Australian wine. Yes you have ambitious plans to sell ten million pounds worth but have you got the foundations built, the replicable systems, easy to understand processes, an identifiable culture, strong accounting practices, clearly defined marketing, etc.
Building a multi-million pound company isn’t something you can do in a weekend or a few hours one afternoon. Harnessing a vision is certainly vital to success, yet you need to build a stable platform slowly, the root system that creates stability, so you can hang everything off it and know it’s secure to grow from.
Quite often some of these areas will be outsourced because of course that’s not your “area”. Whilst this is expected, because you can’t know it all, as a start-up you have to know some of it all. Otherwise the whole side view of what’s working and what’s not will never be seen by you, the decision maker. The eventual result is an unbalanced company which may fail, even when faced with fantastical sales.
So what to do?
Well we need to make time. Time to look under the bonnet of what we’ve created, or beneath the earth as in our plant metaphor. I know you’re busy but this is important. Like really important.
As a start-up cash is king, it enables you to grow safely and quickly if a big sale comes in, so lets’ start there as one of the roots because it should be the biggest one. It supports your sales growth and ensures your staff & suppliers are paid on time – you need both.
By regularly analysing your cash in and out, your margins, your costs, you will be on top of informed decisions. Will slow money in be a problem if fast money out? What percentage of customers pay on time? What does that tell you? What of your sales are more profitable than others? Do your less profitable customers pay you late? What’s the consequence? Do you have wildly varying degrees of profit? If so, what’s the reason? What would landing that big contract you’ve been chasing mean if the customer wants to pay me later than everyone else? etc.
The list of questions can go on and on, but just the very fact of finding the time to analyse and ask these questions will empower your decisions. You need to decide exactly what questions are appropriate and of course a coach can help you with this, but equally you can get to grips with it too. Over time your knowledge will grow and the process will become quicker and easier.
This surveillance and tweaking of different aspects of your business does indeed take up time and energy, but as a start-up you will know that the first years are hard, very hard. That is why many do not succeed, because the hard stuff is often things we’re unfamiliar with and hence don’t get done, either properly or at all. And if we only concentrate on our ‘job’ and not our business, the business becomes at risk and you won’t even know until its too late.
So it’s better to be informed of what’s happening in all your business so you can make decisions your business needs to thrive. It’s hard to find the time, yes, but trust me, your business will benefit in the long run. And the long run is the point right?!