Archive for category Starting out in business

Buy that business!

You have seen a business you want to buy… all good, you like what they do, you have the skills to do it, you want to know more, you get the financials and have a chat to the current owner. “Profits are up 5%on last year… The staff are not interested in taking long service leave… No bad debts… With a new person in charge, who knows what’s possible!”

Reason for selling? “Time to retire…” it all sounds so good, until you dig deeper, here are some tips on things to look for when evaluating a business to purchase.

  • Renting – Is the current price per month about to go up but no one is saying anything. That 5% profit on the previous year might dwindle fast
  • Profit – It’s up from last year… but how much was it to begin with? If it was only 2% before hand then it’s not much of a rise, unless the profit amount in dollar terms is quite high, that might be different. BUT what if the profit expressed in dollars is low? Let’s say it’s $10,000 per anum on average over the last 5 years, that’s probably not much, unless the owner is paying themselves a huge amount for some reason and then the profit could be low.
  • Cash at hand – Oh look, there’s cash in the bank, well the current owner may take that with them… perhaps ignore it as some form of bonus, but deduct it off the price you intend to pay
  • Valuation of the business – Get an accountant to have a look at the figures and have them point out any glaring anomalies. A good profit on paper, might just equate to covering the amount the owners should pay themselves, but have not been paying themselves wages. Therefore what looks good now might be a big disappointment
  • Assets – Are they really worth what is stated in the figures? Will you want to update some of the assets… It starts to get trick folks. Stock at hand, what if most of the stock is out of date or they are items people don’t want to buy any more. You might end up throwing this stock out, then there would be replacement cost for useful items.
  • Systems – All the simple processes and procedures that get used to make things easier, how do they run their database? Are there quality processes and or assessment methods in place to measure the quality of what you get, sell etc.
  • Staff – Grumpy, underpaid, wanting to get a new owner who is cashed up so they can take long service leave, cashed up so they can sue for breaches of Workplace Health and Safety issues, cashed up so they can trip up and claim compensation, the list could go on. Then you find out they have been on the wrong pay scale and are wanting pay rises. So you know all that but you figure you can turn them around and create a new culture of happy committed staff, chances are hell will freeze over first! Changing a dud cultire is like trying to turn a cruiseliner around it takes a lot of effort to do it, then by time you do it the territory you ended up at now looks totally different…. That’s right you are now facing the worng way. 🙁
  • Customers – You find them leaving the business in their droves, it turns out they loved the way the previous owner did things, now they are off to find a new supplier. The truth be known, they probably just didn’t like the new pricing you introduced, after all you wanted to up the profit margin

As you can see it can be a minefield, make sure you do your due diligence, be thorough and ask LOTS of questions. Once the deal is done, the last thing you want is BIG surprises.

Doing the hard yards to make a great start in business

Plenty of people have started in business and failed, some failed quickly, others took longer, a LOT longer…

Years of observation and working with business people has taught me a range of things, the main things are how they failed in business, in often not so spectacular ways and what to do about it.

The reasons are often simple.

Business success

It’s all in the planning

  • No plan – No structural or marketing strategy
  • Technical skills to do something but no business ‘personality’ or charisma to really sell, promote or build interest
  • Low knowledge of the purpose and function of business – Profit is one thing, providing a reason to do so is another…
  • Inability to look at the challenges and find ways to overcome them
  • Being busy and working long hours does not always mean you are being productive
  • Not enough start up capital, CASH to really give your project a go
  • Lack of operational systems for when things really get going so you can develop a valuable asset not just a business
  • Research – making and selling a gadget that is about to go off trend and fade is one thing, knowing it is fading is another…
  • Not knowing how much money you NEED to make each week to break even and then how much profit to make, then what to do with it

A seasoned business operator will look at this list and say, hey that’s just the start… and they are right. There is so much to business that this list is just a starting point.

But that’s it, it’s all about starting points. Even people in business after many years find there are new starting points, like when computers started showing up in businesses, a new starting point. A new piece of technology for a manufacturing process… same. And so it goes on.

If you want to start in business, make sure you do something about addressing the basics listed above, sure they can be daunting, sure you will be tested, but you wanted to take the risk, you wanted to make your mark so do it, but do it right.

Regards

Steve Gray

The Numbers Folks, Remember The Numbers…

I attended a business seminar yesterday, more good information, the room was filled with people already in business and a few wanting to get started.

Image courtesy of Jannon028 freedigitalphotos.net

Image courtesy of Janoon028 freedigitalphotos.net

In the heap of material presented one thing really stood out. In the generally passive group, one thing got them to sit back and say ooh… and not in a good way.

The presenter posed some figures, “If you want to earn this much money you have to charge this much per hour…” then the slide revealed how much per hour for various amounts per year. “Ouch” came the response from a person near me…

The Presenter went on to say “Oh by the way this is just your wage we are talking about here, not thinking about the amount you need to cover your business operating costs…” OUCH! the Participants squirmed in their seats on that one.

Do the sums yourself sometime and make sure you leave out the days when you have sick days, weekends, holidays and so forth. You will soon come up with the right amount of  days you need to divide the  hours by.

The big challenge, although it was not mentioned at the event, is the threshold people are used to and how simple concepts like this can throw a persons perception out of the ball park. If you are used to charging $25 per hour, but find you need to be charging more like $250 per hour, then things need to change (yes a mind shift needs to take place).

I guess some people will say “Who would pay that much for anyones service, let alone for my services?” welcome to reality people, being in business is loaded with these sorts of challenges.

 

Regards Steve Gray

The “easy in” business

Downward graph

Image courtesy of David Castillo from freedigitalphotos.net

When you start looking at business options trying to decide which sort you want to start, you may just come across what I call the “easy in” business. Sometimes you hear about these through friends and family, or via a web search or one of those ads that says “work from home and make BIG $$”.

In being ‘sold’ one of these busineses you get told that it would cost a lot to start a ‘normal’ business so how about one that is easy to get into becuase it’s VERY cost effective, and what if it provided all the tools to make it work. Too good to be true right, yep it probably is.

The funny thing is if you want to start a business (depending on what it is) you probably have little idea of what it will cost, so to make one start what would you have to spend to make it happen? First step is research and ask lots of questions. Once that’s done and all the logic is in place you might think little of spending $40,000 to get started. So when someone comes along and says “For a little over $3,000 you can get stared online and start earning NOW!” So why would you spend a fortune when you can spend a fraction and be started now…

Answer: The ‘normal’ business required lots of research, you have an emotional ‘tie in’, you are probably chasing your life long dream, your passion… and finding out ways to make it a reality. The “easy in” type just needs some cash and away you go, but the ‘tie in’ is different.

Note that on setting up a business and failing, you would feel a little ‘miffed’ at losing the cash you put in. If  you lose $40,000 you probably learn to ‘sweep that under the carpet’ and right it off to learning the hard way (It can be too embarassing to make too much noise about it). Yet often the people who have lost ‘just over $3,000’ will bellyache about it to all and sundry, why? Because they have somone to blame other than themselves. Someone to be the scapegoat, someone to whom they can say “I trusted that person and look what hapened, I knew there was something fishy going on, yep it’s a pyramid scheme alright…” The difference is all in the emotional connection.

The term ‘Pyramid Scheme’ gets thrown about a lot and in actual fact all businesses are pyramid schemes, the person at the top of the pyramid earns the most, but has the furtherest to fall if it collapses. The challenge is having a pyramid supported by products rather than just promises of the chance to make it rich fast.

Where to from here? Note that all business comes with emotional baggage and it’s up to you to figure out which way to go, logically doing your due diligence on it is vital to ensure you go in with both eye’s open and not just a blinkered approach to what looks good at the time.

The easy list for the easy crowd

I like lists, seven steps to do this, ten steps to do that… I have created a bunch of them for folks to peruse over the years.

The challenge is though they are only starting points and the ‘well heeled’ reader will be able to read between the lines and know that to get results you need to do more than read the bullet point info.

Image courtesy of Noomah http://www.freedigitalphotos.net/

Image courtesy of Noomhh http://www.freedigitalphotos.net/

If the list says “Get good at marketing” that means some information gathering, on methods, process, strategies. The fact that someone put it into a simple list with a bunch of nice sub heading means little until action is taken.

In our fast moving world of You Tube video grabs and quick answers in other media, we need to make sure we are paying attention and making sure we are in a position to take action. You notice the article, you think the headline is a solid clue to solving a challenge you have (ten ways to boost profits) so you want to jump in. If you are like me you mentally go through the list and ‘tick off’ the things you do or have done already, then glance at the other five points and go ‘yeah but’…

Armed with ‘excusitis’ you move on and come up with a bunch of reasons to not be able to do those five hard things “Any way they will take money and I don’t have any at the moment…”

You then flip through the media to find more lists and options to see if you get an answer which ways what you want it to say.

Which brings me back to the ‘well heeled reader’ the one that ‘reads between the lines’, knows there will be more to the tasks than some key points and then takes action to fill in the gaps created by the list. Knowledge in action is called wisdom, so wise up, and use the list as a starting point to taking action, not just a quick panacea you can discount anytime soon.

Does Your Business Kick?

Perhaps it doesn’t kick in the way you want it to. Perhaps it kicks you, hard, in ways that hurt. When what you really want is a business that kicks goals and provides enough interest so you want to keep turning up and making the whole enterprise work better.

With lots of causes for it to kick badly let’s look at some ways for it to work better.  I could discuss having an inspiring vision, using brilliant innovation, outstanding leadership the creation of a stunning work environment and finish off with building a solid foundation of values, all good points but do they make your business kick?

What If I then said work on the management side of the business to develop policies and procedures to make the business more effective, or the marketing or the procedures… all of which are good things. Yet your business does not run right.

You then turn to what you have on offer, are you trying to sell things which people don’t want, or perhaps, your service causes customers to kick you!

Maybe it’s a new business you are trying to kick start and you find getting investors or any form of interest in the project from prospective partners is difficult.

Then you start to consider what could be left on the list and figure that possibly the only thing left is you. Could it be that your personality, communication style, or attitude could be having an effect on your business? Yes.

Out of all of the options provided clearly your business has a number of ways it might not be kicking in the way you want it to. Your challenge then becomes finding which one/s are to blame and then ensuring you take action to cause good results, rather than bad results kicking you.

Business Failure 101…

It’s been a while since I looked at what makes a business fail but today I felt really inspired to explore the issue, some research gave me a few clues as to what I should focus on.

I hate seeing things fail, especially businesses, it’s a waste of time and money (except for the learning for the business person to be…)

Here are some key points to explore, especially if you have an idea and are looking at starting up, here are some fail points.

  • Business idea and research – You had an idea, but how much research did or didn’t you do before making a start? FAIL, not enough research into, who wants what you have to offer, what are their buying habits, demographics etc and can I supply to them in a way that suits them? Did you factor in a decent profit margin? Is the idea sustainable? Have other business of this type tried and failed before? You get the idea…
  • Marketing, yes you need it! – Do you have the time and expertise to do it? Do you have the cash to be able to pay someone to do it if you don’t have the time etc? Marketing can cover everything from signs to promotions to sales and LOTS of things in between. It needs to be looked into early and carefully to make sure you do enough of the right things to make your business idea a raging success.
  • What are you worth? – Strange question, especially in the start up phase… But what you pay  you to do what you do is vital to you being able to carry on with confidence in the business, knowing you are being paid what you are worth.
  • Start up $$ – Do you have enough? Do you have investors? Do you have support from others willing to put in to your idea if things need propping up in the short term? Many start ups fail dismally because of a lack of capital to get the ball rolling. How will you pitch your idea to a prospective investor, what’s in it for them?
  • How long? – How long before you succeed or fail? Many businesses fail by not sticking with a great business idea long enough, giving up JUST before seeing success. Some just keep on going by the ‘skin of their teeth’ hoping things will improve. Set yourself some goals, perhaps starting with a time frame to meet your various other goals.
  • Who can help you? – Marketing advice and ideas, management ideas and advice, operational procedures, advice and ideas… the list goes on. Surround yourself with people you can trust to assist you with all this and more.
  • Look at the gap/s – What you know and what you want to do is different. Will you be able to minimise this or not? E.g. marketing, you might be great at technician in the business and be able to ‘fix things’ for example, but if people don’t know you exist then you have a gap that needs to be filled. Look solidly at all these things and make sure you are really confident you can fill these gaps.

Starting to wonder about the whole business start up phase? Thinking that business should not be this hard? Well at least you are thinking. Now get to work and make these thing happen so you can minimse the chances of failure. Otherwise you could just stand on a street corner and throw a few thousand $$ away, because that’s how it might feel if you fail with your business idea in a few months or so.

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