What are your business start-up goals?

Why do you want to start a business?  Many people want to start a business for all the wrong reasons.  See the previous posts on that topic.  Let’s change the topic slightly.  What do you hope to accomplish in starting a business.  In other words, what are your business start-up goals?

  

Are you starting a business just so you can get money for stuff?  Extra income for:  cars, boats, houses, travel, hobbies?  What about college education for your kids, medical expenses or retirement?  These are all good goals, but will your new business actually allow you to get there?  And what about time frames?  Over what period of time do you expect to reach these goals?  Does starting a business REALLY help you achieve your goals?

  

Spend some time thinking about your goals.  Why do you want to start a business?  What do you hope to get out of it?  Many would-be entrepreneurs thought that by starting a business they wouldn’t have to work for the ‘man’ any longer.  What they found was they traded one ‘man’ for another.  The new boss is probably much harder to work for and requires significantly longer hours and a much higher quality of work than the old ‘man’ required.

  

Think about your motivation for wanting to start a business.  Discuss your thoughts with your spouse and family.  Make sure that everyone is on the same page and that page isn’t a fairy tale.  Talk with a business coach or mentor to get a reality check on your plans and goals.  If you do the proper planning up front, the end result may be exactly what you wanted.  But a lack of planning may put you worse off than when you started.

Rocket City Sitters - WBCNA Start-Up of the Year

Rocket City Sitters win again!  

At the Huntsville/Madison County Chamber of Commerce Small Business Awards ceremony on September 1st, Rocket City Sitters won the Women's Business Center of North Alabama Start-up of the Year award.

Last summer my friends at Rocket City Sitters won the Madison Chamber of Commerce Start-up of the Year.  I blogged about it here.  RCS was started by Adrienne Stephens, Nick Weseman and Erica Weseman.  They are a fine example of the kind of small business that drives the American economy. 

RCS provides short-terms childcare in the Huntsville-Madison county area.  They hire only trustworthy sitters who are certified to provide quality care for your kids.  They also work with organizations such as churches and businesses and events like a wedding or reunion.  No more need to stay home on a Friday night because you can't find a sitter.  Contact Rocket City Sitters today to schedule a sitter by phone at 256-272-1727.

‘Intellectual Disarmament?’

Jim Albaugh, President and CEO of Boeing Commercial Airplanes, warned the National Aeronautics Association on July 13th in an address that the nation risked intellectual disarmament in the aerospace industry if participating companies couldn’t continue to attract engineering talent.  He noted that with the end of programs like the space shuttle and slashed budgets, engineering talent would continue to diminish.  To make matters worse, much of the current engineering talent is approaching retirement age in the next couple of years.  “I fear we are in danger of falling into a downward, self-perpetuating spiral.  Without enough capable scientists, engineers and technologists, our nation won’t be able to maintain its position as the world’s aerospace and technology leader,” Albaugh told the group.”

  

He went on to say that watching the final shuttle landing on July 8th was “one of the most devastating days of my professional career, thinking that for the first time since 1962, we no longer have access to space…just another country hitchhiking a ride to low Earth orbit” on a Russian spacecraft.  It’s actually gotten much worse since Albaugh’s speech; the Russian space program is on hold until further notice following the failure of the Progress M-12M on August 24th.  The unmanned resupply freighter failed to reach orbital velocity and crashed to the ground shortly after launch.

  

So here we are in the fall of 2011 and not only does the United States have no manned space program, neither does anyone else.  It’s been 50 years since we could say that.  While that is tragic in and of itself, it speaks to the problem that aerospace industry has in attracting new talent.  Informal discussions with current and former NASA employees uncover a large number who have never seen a program come to fruition.  That is, these employees have worked on one program after another which was cancelled and never built.  Can you imagine spending your entire career working on programs that were cancelled?  Can you imagine never seeing one of your projects completed?  What a demoralizing prospect.  

  

This sort of start and stop has become second nature at NASA.  It has become a hot potato being tossed from project to project as the political whims of Washington D.C. politicians change every other year.  Is it any wonder that the best and brightest scientists and engineers choose other careers?  Not since the von Braun days of Apollo have we had a national excitement about our space program.  In those days, the best and brightest were drawn by edge of the envelope work to space centers at Marshall, Johnson and Kennedy, knowing that the fate of human lives and national prestige were on the line.  That’s the sort of environment that draws the best talent.

  

I fear, like Jim Albaugh, that we will be unable to attract excellent talent to the aerospace industry in the future.  But, I also fear that the world-class talent that is there now will leave for other industries, other opportunities, other jobs.  And in these days, any job is a good job.  And once they are gone, I’m afraid we’ll never be able to replace them.   

Days Beyond Terms

Business Days Beyond Terms reported by Experian Business Information Services for the second quarter of 2011 show some interesting results.  Like the bankruptcy rates discussed in the last post, the most interesting being that the largest companies had the worst payment rates.

While the publicly released data doesn't give the actual numbers for company size, the full report does disclose figures for industry groups.  For company size, Days Beyond Terms is represented by categories of colors from tan (least bad) to dark red (worst).  I'll represent them with numbers from least bad (1) to worst (5).  For the period ending June 2011, the figures are as follows:

Company Size DBT

1 - 4 1

5 - 9 1

10 - 19 2

20 - 49 3

50 - 99 3

100 - 249 2

250 - 499 2

500 - 999 3

1,000+ 4

Frankly, I'm at a loss to explain this.  Like the discussion about bankruptcy rates, I'm not surprised that the larger companies are having difficulties, but what's different about them versus the small companies?  Anyone have an explanation for this?

Now let's look at industries.  I'll just summarize the top worst offending industries.  These may surprise some of you.

Industry Avg. DBT % $ Delinquent % $ 91+

Construction 12.1 22.8 17.4

Business Services   9.2 12.7   9.0

Finance   8.9 11.2   7.8

Agriculture   8.8 10.5   8.0

Communications   8.1 19.3  11.7

Business Failure Rates

Business bankruptcies reported by Experian Business Information Services for the second quarter of 2011 show some interesting results.  The most interesting being that the largest companies had the biggest failure rate.

While the publicly released data doesn't give the actual number of bankruptcies, they are represented by categories of colors from tan (least bad) to dark red (worst).  I'll represent them with numbers from least bad (1) to worst (5).  For the period ending June 2011, the breakdown in bankruptcies by business size, in terms of number of employees, is as follows:

Company Size Bankruptcies

1 - 4 4

5 - 9 4

10 - 19 4

20 - 49 3

50 - 99 3

100 - 249 4

250 - 499 4

500 - 999 4

1,000+ 5

It's not surprising that the smallest companies had a high bankruptcy rate.  But it does seem surprising to me that the largest companies had the highest rate.  Anyone have an explanation for this?

I think it shows that the medium sized companies are not doing as well as the huge companies. That Microsoft and Google and Apple's of the world have cash reserves larger some some countries is well documented.  Those are gigantic companies.  But what about the medium sized companies with 1,000 - 5,000 employees?  I think this is where the problem is occurring.  These companies don't have cash reserves in the billions and also don't have good access to credit.  Thanks to TARP and a general overreaction in the financial sector to poor decisions made in the past, banks just aren't lending much money these days.  Those that want to lend are either restrained because their ratios are out of whack or have so tightened up their underwriting standards that it's difficult for all but the best companies to qualify.

Here in Alabama, we're right in the middle of the pack as far as averages are concerned.  What is it that makes a state like Florida good and Texas bad?  That's a question for another day.

Why do you want to start a business?

Starting a new business is a scary and risky proposition.  Starting a new business can be extremely time consuming and may require participation from your family or your absence from family events.  Starting a business may require you to use your life’s savings or borrow money from the bank for which you’ll be personally responsible.  So why do you want to do this?

  

For some people, it’s just a no brainer.  They HAVE to start their own business.  They’ve been working for ‘the man’ for too long or are just tired of seeing a business run into the ground.  For others, they have an idea that just needs to get out.  If not them, who?

  

For still others, they want to start a business out of necessity.  That is, they don’t have a job and have no good prospects for finding one anytime soon.  They see starting a business as a necessary evil.

  

If you plan to make your fortune in a few months and start living the good life, think again.  Most new business owners make little or no income for the first few years in business.  In fact, many times, your employees will make more than you until your business is well established and financially stable.  You need to clearly understand your motivation for starting a business and then decide if starting a business will help you achieve your goals.  

Selling into a non-market

Do you understand who your customers are and what they want?  I think many small businesses don’t really understand this.  They think more about their product and how to sell something that they want to produce, rather than what the market wants to buy.  

  

Hugh MacLeod, author/blogger/artist one of my favorite entrepreneurs (gapingvoid.com) calls these businesses the Middle Seat Guys.  He likens businesses that sell stuff that their customers don’t want to airlines who sell middle seats.  Hardly any airline passenger wants the middle seat.  In fact, with rare exception, if you were given a choice between the aisle, middle or window seat, the middle seat will go unclaimed every time.  Hugh wonders why the airlines still offer a middle seat when they know their customers don’t want them. 

   

The ideal situation for a small business person is to find a niche within their market segment to operate.  Look at the market and the competition and figure out what the customer wants.  What are the trends in the market that aren’t being addressed?  The way we do business in almost every market is changing.  What areas of business do your competition or market leaders fail to adequately serve?

  

Yeah, this is hard.  But if you can find a niche where there is actual demand and there aren’t 100 other companies in the market already trying to serve, then maybe you’ve found a place for your company.