Category Archives: 101 Wednesday Biz Challenge

Accounting

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Accounting

Your accounting resource will be one of the most important vendor relationships in your business. An accountant often provides day-to-day tactical support via bookkeeping resources (or referrals to same). In addition, your accountant is a critical strategic resource for tax planning, networking and referrals into their network of professional services providers such as legal, consulting, business brokers, banking, etc.

Consequently, it is very important to have a solid, mutually beneficial relationship with your accountant.

Start by asking other business owners for referrals. Ask people who run businesses that you aspire to emulate for a referral. That immediately puts you into a network of professional and business suppliers that will match your business as you grow. If you start by asking business owners at the size and scale you are now, you can end up with an accounting resource that cannot scale with you as you grow and whose network is not well matched for your aspirations.

Next, talk with at least five potential accountants by phone and meet personally with at least three. Do not settle for anything less than a good to perfect fit with your accountant. In particular, it is critically important that you share common values related to integrity, honesty and trust.

Your accounting and bookkeeping resources can literally make or break your business, so choose them wisely and with due time, effort and consideration.

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Sales

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“Nothing happens until somebody sells something” – Zig Ziglar

It’s a fundamental rule of business that sales drive everything. If you don’t have any sales, then you don’t have a business—pure and simple. You might have a charity or a hobby, but if you don’t have sales that drive sustainable profitability, you don’t have a business.

“Sales” is what happens when a customer’s perceived needs match your value proposition.

Your value proposition is more than just the specific product and/or service and its price that most people consider when they think about sales.

Your value proposition includes:

  • Brand
  • Time
  • Benefits
  • Features
  • Capabilities
  • Price

Of all of these factors, your brand carries the heaviest load. It stands for your reliability, trustworthiness, and, very importantly, aspirational value. For instance, what’s the difference between a Timex and a Rolex? Both tell time. Only one tells an aspirational story.

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Starting a Business in a Tough Economy

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Your biggest business challenge this week: the economy

Answer:

The economy falls into the category of business factors called “macro external forcing functions.” Macro external forcing functions are things outside of your control that affect your business. They almost always affect other businesses around you and typically also affect the personal lives of the people in your community. Depending on the factor, they can also affect your state, region, nation or the entire world.

The key phrase in all of that is: “things outside of your control that affect your business.”

By definition, an external forcing function is one that is outside of your business and outside of your control.

It’s important to keep that in mind, as, at least for me, the most frustrating thing about having my business affected in this way is that I feel powerless to do anything about it. When we’re running a business, we usually want to at least have some level of belief that we’re mostly in control of our own destiny. A macro external forcing function, whether it’s the weather, new regulations, the unemployment rate or a commercial credit crisis, reminds us that we are often not in control of our own fate.

What can you do?

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Getting Wedding Photography Customers with a Limited Marketing Budget

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Getting customers for wedding photography when I have no money for advertising/promotion.

Answer:

This answer is in two parts. Doug provides overall business recommendations and Stephanie provides specific marketing ideas and tactics.

Doug’s answer:

Full disclosure: My first real job was as a commercial photographer when I was 16. I didn’t shoot weddings, although I helped out on a few and did a few for friends. We both still shoot, albeit as non-pros.

For the purposes of this discussion I will assume you’ve got all the gear you need or can rent it for the gig if you don’t. I will also assume that you’ve got all the required technical skills to produce top quality images suitable for this market.

Shooting is a creative medium and wedding photography is both ultimately exclusive and a complete commodity. The people selling high-end wedding photography have developed a brand and market position that enables a high price point and exclusivity. At the other end of the spectrum there are people getting married every single weekend who can’t afford a shooter and instead rely on friends and family.

In that paragraph is contained one possible path for you.

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Owning My Own Restaurant

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Owning my own restaurant.

Answer:

As you’ve probably heard a million times by now: “80% of new restaurants fail.”

The people in the restaurant industry dispute that number, but it is a solidly entrenched urban legend at this point, so it will be challenging for them to turn it around.

Numbers vary widely about new business rates of success in general, and restaurants are no exception. Even so, most sources of data about new business rates of success/failure do show restaurants to be less successful as new business ventures than other types of startups.

Why is that?

When you dig into the numbers you find out that most people who start failed restaurants had no previous restaurant business experience and many had no prior entrepreneurial experience.

I can relate to those numbers because Stephanie and I have often had the, “If we had a restaurant, we’d…” discussion ourselves. Note that we have zero, nada, nil, none, zero restaurant experience, yet we’ve seriously entertained the idea–and we know better than to do so.

One of our kids is a gourmet chef. Even he is wary of starting his own restaurant because he knows very little about the “front of house” operations aspects of the business model. He’s an industry veteran and even he’s leery of launching a restaurant. There’s a lesson there.

So, the first prerequisite to owing your own restaurant is to go work in the restaurant industry. Work in the back of the house and the front of the house. Get some management experience. Get some experience hiring and firing. Get lots of experience on the financial side of things. Learn where the costs are and where the profits are. Learn about different markets at different price points at different day parts. Learn about location, location, location. Learn about permits and licenses and inspections and regulations. Learn about marketing and sales and promotion. Learn about procurement and suppliers and deliveries. Learn about buildings and codes and real estate and leases and zoning. Learn about loans and investors and financing. Learn about LLCs, corporations and partnerships. Learn about your strengths, weaknesses and passions.

Learn all of those things and then you’ll be in a position to have a much better chance at success in the restaurant business.

It may sound daunting, but you can get there. If you’ve already been working in the restaurant business, you’re already down the path. If you haven’t, you could learn all of that in three to five years if you really want it.

Get that industry knowledge first, and while you’re doing that part, spend some evenings taking some business management or entrepreneurial classes to be ready to do it on your own.

The track record of people who say “I want to own my own restaurant” is dismal. You can either end up like most who try to start one with little to no knowledge of the industry or you can invest some time and energy to get to know the business, as well as build a network, before you start. The former choice offers immediate gratification. The latter offers lots of hard work and dedication with a much greater chance of sustainable success.

It’s your choice.

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Finding a Business That Will Work

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Finding a business that will work

Answer:

I’ve personally had a few businesses that didn’t work. I had some that worked and then stopped working. I had some that never worked at all.

What I learned from those experiences was:

  1. Just because a business works now doesn’t mean it will work forever. All of the factors that make a business viable: market, customers, products / services, brand, value proposition, available resources, external forcing functions, etc., all change all the time. A business’ viability is actually a lot more tenuous that we think when we’re at the controls and everything seems to be working. What we don’t realize is that any of the key factors that makes the business viable can disappear or radically change overnight. That’s why businesses that survive long-term typically reinvent themselves every five to seven years. They have to reinvent themselves in order to adapt to the ever-changing conditions.
  2. Just because an idea sounds great, seems great and makes a fantastic diagram on a bar napkin does not make it a viable business. Every business that didn’t work at all for me was an idea I had that I was convinced was a “can’t miss” opportunity. Every one of them missed. What I didn’t do, that you must do, is start by identifying an unmet need in the marketplace and then meet that need. That’s the definition of a business: Filling an unmet need in the market in a sustainably profitable manner. The piece I missed was the “unmet need” part. I was convinced my ideas were so awesome that need wasn’t required. I was wrong.

So, my advice to you about finding a business that will work is:

  1. Identify an unmet need in the market.
  2. Test to see if you can meet that need in a sustainably profitable manner.
  3. Do so.
  4. Never, even for one millisecond, assume that just because the business is sustainable today that it will be tomorrow.
  5. Enjoy the ride!

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Startup Funding

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To have enough money to start; I have a small amount

Answer:

The absolute best source of money is customers.

The more time you spend with your customers the more you will understand their needs and what they will pay for. If you provide a product or service people want to buy, you have instant cash flow and a proven business model.

A proven business model that has cash flow, and maybe even profits, is a lot easier to fund than an unproven idea.

If you don’t have enough existing capital to provide the initial product or service, then invest in market research—talking to and surveying customers—to document and prove market demand.

Proven market demand with survey results, web site tracking data, signed letters of intent or provisional purchase orders is a lot easier to fund than an unproven idea.

Some basics on funding:

If you don’t take in any external money and retain 100% of the company it’s called “bootstrapping.” Bootstrapping is a very viable option for many business models.

The biggest downside to bootstrapping is that it is extremely challenging to win a big market opportunity unless you take in external money.

The reality of bootstrapping is that it is very hard to build a business through profits alone, even in the best of times.

Most businesses need to take in external funding at some point in their life.

There are two basic types of external funding:

  • Non-Dilutive
  • Dilutive

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Work at home – full time parent

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I’m a full-time mother at home and very much wanted to start my own business at home were I can support my daughter and still be there. 

Answer:

Starting a business while parenting a young child. One very important factor to evaluate when considering starting a business is your personal life chapter. Starting and growing a business requires a tremendous amount of passion, commitment, time and energy. It is, truly, not for the faint of heart or for those who cannot commit most of their time and energy to the endeavor in the beginning phases. Getting a business up and running can easily consume the vast majority of your waking hours for months and months, if not years and years. Balancing that reality with the time and energy demands of a young child is a formula that often adds up to doing neither thing well. It’s very easy to neglegt both the business and the child in an effort to spread yourself between each. Both a young child and a young business are needy, self-centered creatures that are essentially black holes for your personal time and energy: they will take whatever you’ve got and more. While both children and businesses can be tremendously rewarding, they both require sustained investments of high levels of focus, time and energy to be have positive outcomes.

In addition to the time and energy  demands of starting a business there is the economic reality. In 2009 the median income for a woman working full time in the U.S. was $36,278 (source: U.S. Census Bureau http://www.census.gov/newsroom/releases/archives/income_wealth/cb10-144.html ). The economic reality of starting a business, especially one that you could run alone from your home while simultaneously caring for a young child, is that you would be very, very hard pressed to generate $36,278 in after-tax profit even after a year or two of operation. For the overwhelming majority of businesses it takes time to get to a point of profitability. In many cases, it can be months or years before you see your first penny of profit. Evaluate the ideas you have for a home-based business and do some basic economic calculations: Sales – cost of goods sold – cost of operations – cost of sales & maketing (advertising, etc.) – financing costs (interest on credit cards or loans) = profit. Do you have any ideas that can realistically come close to $36,278 annually? Can they come close to that while simultaneously raising a young child?

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