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Walk the Walk Archives - Finance-Ability®

Owning a Business is Like an Exotic Vacation – Part 2

By | Blog, Building Value | No Comments
Recently, I talked about getting some perspective and looking at building your business in a very different light.

I mentioned that it’s crucial to realize that things won’t always go to plan, and that this is part of what makes owning your business exciting (and scary at times). I even compared building a business to an exotic vacation. Sounds pretty far-fetched, right?

There are more similarities than you might think, and I believe that with the right mindset, either endeavor can be rewarding and bring you joy. You just need to get yourself in a frame of mind that allows you to see what the situation is trying to teach you.

FinanceAbilityVaca2

 

Using the examples from my last post, let’s compare the two (vacation and business):

  • Every vacation requires research, planning and budgeting – you can’t wait until you get there to reserve hotels, get train tickets, and ensure that you’ve got enough local currency. In business, you also have to choose a destination, decide which path you want to pursue to get to it, and understand how much it will cost. These processes are ongoing, so don’t think that once you’ve “arrived” at your destination, the journey is over!
  • You won’t have time to do everything, so you’ll need to choose your opportunities wisely – is it better to stand in line for 5 hours waiting to see the Mona Lisa, or could you see the entire Louvre in that time?In business, you’ll always have more things to accomplish than time to do so. It’s crucial to establish priorities based on what will help your business the most – even when you might really want to do something else.
  • The locals won’t necessarily speak your language, so you’ll have to find a way to communicate with them in order to survive.In business, you’ll have to change the way you think about “them” and “us” – no business can survive without relationships, and to build relationships, you have to find common ground. This will require you to step outside of your comfort zone (often!), to learn new things, and to try someone else’s perspective instead of your own. But when you’re able to create a connection (with clients, vendors, employees, and others), the benefit to your business will be amazing!
  • Fellow travelers can be both a blessing and a curse – it’s nice to see someone “like you”, but generally they’re all going to the same place!In business, it’s nice to be part of a known market (it usually means that there are lots of buyers), but it’s difficult to stand out in the crowd. Work hard to identify what YOUR business provides that is uniquely valuable to your clients, and then ensure that you maintain the highest quality on that. Even better, strike out on your own, and see if your unique value proposition can’t create its own market!
  • You have to keep a close eye on everything (bus schedules, your bags, your $$, locals and other tourists) once you get started.In business, establishing expectations (also called targets, metrics, KPIs, etc.) is critical to success. If you don’t have a clear goal and a plan for getting there, how do you know when it’s time adjust your course and what adjustments to make? Set realistic expectations, but get information about WHERE you are relative to those expectations often.
  • There’s a tendency to have high expectations at the beginning, but constant change can be wearying – you’ll have to remind yourself what your initial vision was from time to time.In business, a long-term vision can pull you through the toughest times. Be sure that you have the long-term in mind, and are able to visualize what you’re doing all the hard work for when things go pear-shaped.
  • Ultimately, it’s up to you to make the most of it – you get out what you put in!In business, hard work and dedication are expected. But remembering why you are working hard can help – so be sure that your vision will inspire you on those days when all you really want to do is sleep in!
  • My ideal vacation is nothing like your ideal vacation…The only way to really enjoy a vacation is to make sure that it fits the person traveling, regardless of where other people are going (or have been).Every business is unique, just like every person is unique. So what works for your business may or may not work for mine. Likewise, just because it didn’t work for someone else doesn’t mean it won’t work for me. Look at other people’s experiences as research, and then trust your gut when it comes to yours.
  • Lastly, if you stay open to new experiences, you meet some of the nicest people along the way, and discover that the detours could be the best part of the trip.In business, things will never go exactly the way you planned – so realize that unexpected doesn’t mean unwelcome. The major setback on a project could be the catalyst for a whole new line of products. Stay focused on your vision, and you’ll be better able to enjoy the twists and turns along the way.

So the next time that you’re facing a huge challenge, try reframing your frustration by comparing your situation to an exotic vacation. Imagine yourself stuck in a taxi on the way to a beautiful white-sand beach, or ordering what you thought was the vegetarian plate, and being served a fish with the head still on.

Yes, those are frustrating moments, but they’re also experiences that teach you not to take yourself so seriously, that help you refine your sense of when to stick with the plan and when to wing it. These experiences help you understand that true joy can be found in the small things, and that the most rewarding part of building a business (just like an exotic vacation) isn’t getting there, it’s enjoying the trip.

Want to Build Your Credibility with Investors? Just Do and Say.

By | Blog, Where's the money? | No Comments
In a previous post, I mentioned that credibility and building relationships are often the “it” factor in getting funded, since they both can reduce the perceptions of risk associated with your business. This is particularly true when dealing with banks and investors, who see plenty of requests each day, and need some way to choose among them.

You already understand intuitively why trust plays a role – you’re more likely to invest money with someone that you feel you can trust than with someone you’ve just met.

There are lots of articles about how to approach investors (find out their hobbies and claiming it as one of yours is a popular one lately), how to write the “perfect” business plan, and even what to wear when you meet them. While your business plan and how you present yourself have a role to play, I believe that following one simple rule will have a much bigger impact on building your credibility:

Do what you say, and say what you do.

It is definitely simple, but far from easy. Because it means that your word is your bond, that by agreeing to something, you are committing to follow through. And in a world where excuses abound and many public figures have made careers out of shading or even hiding the truth, this is a very difficult thing to do.

Why?

Well, for starters, there is the “before” and “after” aspect of this maxim. In order to be able to take the credit afterwards, you had to know (and say) what you were going to do beforehand. Which requires plenty of planning, forethought, and the ability to describe those plans and vision to someone else in a coherent way. And that doesn’t happen overnight, so there is also lots of hard work involved.

Don’t promise what you can’t deliver, and you’ll make your life a lot easier when it’s time to say what you did.

Secondly, you have to use this maxim in every situation, not just when it’s convenient. Delivering a project on time and on budget makes everyone happy, so it’s easy to talk about that.  But what about when you’ve missed a deadline, and don’t know how you’ll make it up. Or when you’ve unintentionally divulged confidential information. Or when you’ve decided not to pay a supplier because you’re out of cash. Or any of the other things that can (and do) go wrong when you’re running your own business.

When things go wrong, make it right. Do what you said you would.

But wait, you say – we’re talking about business here. Isn’t there supposed to be a certain amount of embellishment, to put things in a positive light? If I talk about my mistakes, won’t the other guy get the investment (or the client or whatever I’m competing for)? I can’t be all Pollyannaish when everyone else is spinning the truth like Run DMC!

It’s certainly possible that someone else with a better “story” will win today, but if your goal is to build a business that has real value, you not only have to develop excellent products and services, you have to develop a reputation for excellence – personally AND for your company. And using this approach will be a huge step towards developing that reputation.

Besides helping you obtain funding and maintain a great relationship with your investors, following this rule has other benefits for you and your company, including:

Better communication with clients = more opportunities for new business

Open, honest communication with clients will not only build credibility, it will make it easier for your clients to tell you about other problems that they are having, which in turn allows you to develop more solutions to those problems.

Better communication with employees = less turnover and more committed employees

Keeping your word with your employees creates a genuine relationship, so it’s easier to talk about what went right AND what went wrong. And when you give honest feedback, you also get honest feedback, which means that employees are more likely to tell you what they really want – it may be something besides a new office or free coffee in the break room!

Better communication in general = an “it” factor that makes you unique

Given the rarity of this attitude in today’s world, this simple factor can give you a very important competitive advantage – you’ll be one of the only companies doing it! And, as a method for getting business, or attracting the right employees, or developing a mutually beneficial relationship with your suppliers, this “it” factor is another way to stand out from the competition.

Do you already live by this (or a similar) maxim? Tell me why (or why not) this could be a game-changer for you in the comments – I’d love to hear your thoughts!

Your Budget is Meaningless – –

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Unless you understand where the numbers come from.

I’m betting this means that many of you either don’t have a budget, or have a budget created by someone else that you only look at when you absolutely have to – meaning when some finance person (accountant, banker, etc.) tells you to. Since we are approaching the beginning of the year, there’s probably someone telling you that “it’s that time again!”

It’s no secret that many business owners (small and large) dislike finance and finance people. They’ve got no sense of humor, they dress funny, and they speak a different language. Even when they work for you – raise your hand if I just described your accountant.

And it’s true that some finance people don’t have a clue about how finance relates to your business – they just follow the rules/formula/one-size-fits-all approach and it either works or it doesn’t.

So you might be tempted to just leave the budgeting to the finance people and wash your hands of the whole thing. After all, who needs a budget and regular reporting anyway? Banks, maybe. Eventually investors, but once you get that big, you won’t have to worry about it at all, right?

WRONG.

Creating and reviewing your budget regularly are one of the most beneficial things you can do for your business. And you, the owner, are the ONLY one to do it – although it’s perfectly okay to include others (like sales and production managers, and your internal finance staff once you have them) in the fun.

Why? Because in order to really understand what’s happening in your company and how you can create value (for yourself, your employees, and any investors you might eventually take on), you have to fully comprehend where the money comes from – aka sales – and how much it costs to get in the door – aka expenses.

Creating your budget requires you to understand how your product gets made, how it gets sent to customers, and how/when/where/why those customers buy it. It helps you rate the importance of any one element, like a particular customer or a supplier. And, it helps you understand the most likely place that things can go wrong (hint – it’s usually where you have trouble getting a good estimate of cost, or units sold, or something similar). And reviewing your budget regularly shows you whether things are working the way you expected them to.

Not surprisingly, all of this is very important knowledge for an owner – whether it’s related to finance or not. In fact, I think that the least important result of any budgeting process is the budget itself. That’s why your budget is meaningless – if it’s just numbers.

For example, if you budget $1,000 in sales in January, but you’re not sure exactly how those sales will come about, what actions can you take if you only sell $900? If your sales budget is based on having 5 clients that each buy $200 worth of product ($1,000), and you only have 4 clients who purchased $225 each ($900), you have learned something important about your customers – each one spends more than you thought. So missing the budget is actually a good thing, because it helps you understand your clients, and perhaps take advantage of an opportunity in the market.

Now wouldn’t you have felt silly if you’d chewed out your sales reps for missing their target?

Likewise, if you expected to sell $1,000 to 5 clients, but instead you sold $1,100 to a single client, is this cause for rejoicing or bad news? It’s a great month, but it is a risky way to run your business. You’d better be looking for additional clients, pronto, otherwise if/when this one disappears, so does ALL your business. Be kind of silly to buy that sales rep a beer and tell him to quit looking for new clients, right?

Ultimately, a budget without a process behind it is just a set of numbers. The value of your budget comes from the education you get each time you create it and the feedback you get each time you review it.

Big companies pay big money to set up intricate management systems with all sorts of bells and whistles that tell them how they’re performing (these are often called KPIs or Key Performance Indicators). You can do the same without all the expense – all you need is to make your budget work for you!

Do you use a budget? Does it work for you? Tell me why or why not in the comments!