Thursday, January 28, 2010

Starting a Business - 5 Tips to Ignore

I coach a bunch of new entrepreneurs every month and read loads of information that others publish and discuss about starting a business.  I am constantly amazed at some of the bad advice that well-meaning people will give a new or potential business owner.  I've put together a list of tips to business owners that I think you should just ignore.  You may have others to add to the list.

“If you were the boss, you’d do things differently.”
Perhaps, but did you ever think about why your boss does things the way he does them.  Often, the priorities of the business and the owner clash with the priorities of an individual employee.  While you may think that his decisions are unwise, they may make perfect sense in the overall corporate mission.  When you are the boss, and especially when you are the owner, you think about the overall organization goals, not just the specific situation in a particular job.

“If she can be successful, you can too.”
Well, maybe.  Unless you have the same skills as her and an idea that’s just as good and a plan that’s just a well executed, then maybe not. What other people do is largely irrelevant in your world.

“You can always go back to your old job.”
Can you really?  Most people really can’t physically go back to where they were before, in the same job or situation.  While you were gone,you were replaced and they’ve moved on. Even more importantly, you don’t have the same mental state about working for somebody else as you did prior to starting your own business.  It’s best to stay where you are as you start your business and then quit after your new venture is successful.

“You’ve been successful in your career; you’ll do great running your own business.”
The skills required to perform well in a job do not necessarily translate to another job.  If your job is managing the accounts payable for a professional baseball team,that doesn’t mean you can play second base. Job skills tend to be compartmentalized within a company.  The skills required to manage the accounts payable are not the same skills required to manage the marketing communications department or the quality control department. Running a small business requires you to perform well at ALL the job functions until you grow the company large enough to hire employees to handle the different functions.

“Don’t worry about the cash, just sell, sell, sell.”
In the small business environment, cash is king.  If you’re having cash flow difficulties, then growing the sales will likely exacerbate the problem.  Long-term, businesses need profits and cash flow to survive.  However, in the short-term, you can survive without profits as long as cash flow is good, but you can’t survive without cash.  The minute you run out of cash, you’re out of business.

And a bonus:
“Don’t worry, if you fail, you can just walk away.”
This is extremely unlikely. Small businesses can rarely do business on their own.  That is, they need the financial backing of the owner to get started.  If you do business with a bank or major vendors, they’ll likely require the owner to personally guarantee any loan or account until the business has established its own creditworthiness.  In addition,you’ll probably be investing your own money to help get the business started.  Sure, you can walk away from the business, but your investment will be gone and the debts will likely follow you personally.

Tuesday, January 12, 2010

Creating Business Financial Statements

Are you a new business owner or prospective entrepreneur?  One of the most intimidating functions for non-accountants is creating, reading and dealing with business financial statements.  But, it's also one of the most important. 

If you're one of those non-financial managers who don't understand how to create and read a business income statement and cash flow report, my new webinar Understanding My Financials: A Beginner's Guide To Business Financial Statements is for you.  It's a FREE web based seminar open to the public.
- Why 'profit' and 'cash' aren't the same thing
- How to read the top 2 small business financial forms; income statement & cash flow report
- Questions to ask yourself with your statements in front of you
- Where to go to get free help

- Business owners who don't understand financials
- Non-financial managers
- New entrepreneurs or those thinking of starting a business
- Students who want 'real world' financial instruction

The webinar starts at 11 AM CST and will last about one hour.  it's sponsored by WHNT News 19 in Huntsville and will be available either live or on rebroadcast.

Click HERE to register.  Hope to 'see' you on thursday.