Entries tagged with “cashflow”.
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Posted by Mitchell York under Uncategorized
If you are thinking of leaving your corporate job to start a business, nothing is more important than having Reserves. I am talking about a great big virtual warehouse filled with tangible and intangible items. If you don’t have them when you start your business, your engine will soon fail. If you run out along the way, you’ll be stalled on the side of the road in the blazing hot west Texas desert sun with no water, like that guy in No Country for Old Men. “Agua, agua!” And you know what happened to him. So here’s a list of what you’ll need to pack for your journey.
(Note to readers: I am addressing Baby Boomers –by and large, people with families, mortgages, and age. if you’re 25, some of this may be interesting but you are young and invincible so you can ignore my warnings.)
1. Plenty of cash. (Not that cash did Josh Brolin much good in No Country for Old Men, which I can’t stop thinking about.) So many businesses have failed because they run out of cash. It’s heartbreaking to see. Within my own franchise, and all other franchises, many people leave the business not because they didn’t believe it would be a winner eventually, but they could not afford to get to Eventually. How can you avoid running out of cash? The best way is not to start the business. And that’s a better outcome than starting it, spending all you have, and risking being left with nothing. If you are not absolutely positive you have, or can easily lay your hands on, enough dough to get through not one year, but several (I’d say five) under adverse conditions, please, please, please keep your job or find one you like better, but don’t start a business. Don’t break your family’s hearts by taking a chance on losing your house and your retirement. Speaking of retirement, I am vehemently against people tapping into their IRAs and 401(k)s for money to start businesses. That is retirement money! I don’t give a #(%(@ about the Dennis Hopper commercial.
2. Plenty of family support. At your Reserves Central virtual warehouse, you will want to have an entire section with at least 100 tractor-trailer bays to load in all the family support you will need to be an entrepreneur. I have seen marriages break up because both spouses weren’t firmly behind the idea of starting a business. One spouse indulges the other because it’s easier at the time than saying, “No freakin‘ way are you spending our money to open a healing-crystals store!” Your significant other has to be in for the whole ride. That means if he has to get up at 3AM to make the donuts on a snowy February morning because you’re sick, he’s okay with that.
3. A team and network you trust. Finding a great CPA isn’t something you do after you start the business. (Hint: the guy who does your taxes today probably isn’t the guy you need.) You find the CPA six months before you start the business. Same thing goes for attorney, business coach, virtual assistant, and any other critical members of your startup team. You reach out into the local business community through the chamber of commerce, Kiwanis, and other groups before you start the business, not after. You join BNI before, not after. This is a case of “do what I say”, not “do what I did.” I didn’t do any of those things before starting my business–i just hurled myself into the flames. While I have many amusing stories to tell my future grandchildren of near-catastrophic injury (physical, emotional, financial) they were mostly all avoidable. Too bad this blog wasn’t around for me seven years ago! Stay tuned for more Reserve ideas in future posts. And let me know what you think should be on the list.
Posted by Mitchell York under Uncategorized
If you’re an executive who has become an entrepreneur in the last few years, you will relate to this post. If you are thinking of giving up your pinstripe suit, you’ll want to read this closely.
Once you become an entrepreneur your relationship with money changes dramatically. Back in my executive days I had a very impersonal relationship with money. My paychecks and commission checks were direct-deposited. I never opened the stubs the company handed out twice a month, and never checked to see if my commissions were accurate. They were large numbers, and that was nice. Every two weeks for the paycheck, every month for the commission check. Predictable. Never changing.
Fast-forward. I am in business. No paycheck. No commission check. Bank balance going down instead of up as I spend wildly on–I mean, invest in–my new business. At first I spend as if my paychecks and commission checks will somehow keep coming even though I am no longer employed. Just out of momentum.
After a while a funny thing happened. I started to notice how very beautiful $20 bills are, especially when there are a bunch of them all together in a nice pile. What craftsmanship, what art! Why, that’s Andrew Jackson on the front. A great president, got a bit of a bum wrap after the war. I started to think I’d like to hold on to my Andys a while longer. Andy, what do ya say we cook dinner tonight instead of going out? Name your dish. Beef stew? I make a great beef stew! What wine do you want to go with that, Andy? What’s that you say? A $7 bottle is often as good as a $14 bottle? Can’t be…well, if you say so. HEY! You know, this ain’t bad! Say Andy, the kids’ spring vacation is coming up. We usually go to Club Med. Say what? You never heard of Club Med? Maybe we should do what? Stay at home and play games together and do other things close to home to bond as a family? Wow, that’s a 19th century idea, but I guess I can give it a try. Hey Andy, Scrabble is really fun!
Wake up and clip the coupons, people. As an entrepreneur, you need to learn the Zen-like joy that will come from saving money and postponing gratification. When you finally fix that hole in the ceiling and remodel the bathroom, you will admire sheet-rock like you never have before. So here you go, executives who are turning entrepreneurial–the start of a list of ways to improve your relationship with money. (More will be coming in future posts.)
1. Have a Money Buddy: Before you spend more than $500 on anything for your business or home, consult a buddy. Do you have to spend it today, or can you wait six months? Get a reality check.
2. While You are Spending Less, Work on Making More: Like a Fortune 100 business, your small business can’t cost-cut and save its way to growth. You have to create more sales for the business even as you think frugally. Skip Amazon.com and go to the library (the building with all the books in it–and they let you borrow them for free!) and check out The Secret by Rhonda Byrne. If Rhonda were an ice cream flavor she’d be tutti frutti, but she has an important message. While I can’t promise that if you close your eyes and imagine checks arriving in the mail your wishes will be answered, I do think that you can behave in a way that promotes sales even while you are sober about spending. Get the audio tape rather than the book, and listen to it twice. The first time you will be put off by her strange Australian accent and even stranger ideas. The second time (I’ve listened to it about eight times) it starts to have meaning.
3. You Don’t Need to Have it All Right Now: Our front door was a mess. The lock was busted, the paint was chipped all over. I hated the front door! I wanted a new front door. A contractor said we could have one for $6,000. It was really nice in the catalog. A few years ago, new door! Now….a can of paint cost $20 and a locksmith was $200. And you know what, I really like that new color. I love our front door! For the Boomer generation that is used to having it all, it can be a hard turn to fix rather than replace. But try it. That applies to home repair, cars, appliances, any big ticket item. Get just one more year out of them and you will be thinking like an entrepreneur.
Posted by Mitchell York under Uncategorized
Entrepreneurs often have a tough time in an economy like the one we are in now. One of my coaching clients in financial services has just a few months of savings in reserve. He was close to panicking when we spoke for our weekly call. His situation, which is all too common nowadays, always reminds me of a startup I worked for a decade ago. You have probably heard of it–LendingTree. One of the more impressive entrepreneurs I’ve ever met was the CEO/founder, Doug Lebda. I remember at one point we had perhaps three weeks of payroll in the bank. I was starting to hyperventilate a bit, but Doug wasn’t fazed by this at all! (If he was, he didn’t show it–another great sign of leadership.) I remember saying to him something like, ”Boy, you sure do seem to enjoy living on the edge.” To which he replied, with a grin, “This isn’t even close to the edge.” That was an amazing statement from a guy in his twenties who had borrowed and mortgaged everything he had and taken millions more in investment to get his company going. Even 10 years ago, before LendingTree was a household name, there was plenty to lose, a lot at stake. I think Doug managed his way through it because he was able to de-personalize the situation. That the company was going through a rough patch, even potential insolvency, wasn’t a reflection on him personally–it was a business problem that could and would be solved.
To bring this back to my client’s situation, we looked for sources of short-term cash infusions and discussed an approach to restructuring his financial obligation. This client has so much going for him in his approach to business, sales, ethics and self-discipline that he has all the tools he needs to stare down this mini-crisis. There’s a lesson here for small-business owners and entrepreneurs: The edge probably isn’t as close or as sharp as you think, especially if you can step back from it and gain perspective–and then, calmly, plan as if today’s “crisis” is just another business problem to be solved.
