If you are like me, then sometimes you learn new things and actually state – “I wish I had known this 5 – 10 – 20 years ago.”
This is a common theme as leaders and entrepreneurs grow in experience through the school of hard knocks and trial and error. For this reason, I have decided it is time to share information, knowledge, experience and wisdom with others – so just maybe, they will not have to ask the above question.
Now the reason it is important to understand the five non-negotiable and threatening challenges to a Start-Up organization is quite depressing. Research shows that 80% of new businesses fail in the first five years. Seems the 80/20 rule is still accurate when applied to the percentage of surviving start ups. Only 20% of the start-ups make it to their fifth year anniversary.
Some very good research into what is needed for a company to successfully grow (and remain in business) is for the leader to focus on the most important things in their business during this time period. James Fischer conducted this research and formulated guides for the leaders and CEO’s to navigate the Growth Curve for Small Businesses.
This research covers companies with 500 employees or less. – Yes, even the sole owner or one person shop is impacted by the information contained in this model.
So, let’s look at the Five Non-Negotiable Challenges a Start Up Company in Stage One of the Growth Curve must focus their time and energy on mastering.
I got reminded of this simple idea or concept by one of the Internet marketing guru’s who shared some of his valuable knowledge regarding how to create your future. And, one of the key components in his discussions was the importance of making the numbers talk to you – in advance.
What a simple concept. As I reflected upon the importance of knowing your numbers, I recalled how I had used this simple technique when I moved to Memphis and opened my business without knowing any business leaders in town. Wow, this would be very scary today given the amount of security and technology used today.
However, the numbers were my main guide during the start up years. Knowing your numbers relative to all the critical processes was required for success.
Today, I’m looking at value adding opportunities for the Maturity Phases of a company life cycle. This could also be applied to a company’s product or service life cycle. This information is provided to assist sales people deal with their customer’s situations and internal managers looking for ways to improve the performance of their company.
The Maturity Phrase is an interesting period and seems to have a large number of companies in this category. However, most of these companies are in commodity industries and are working hard to stay out of the declining phrase – which I will discuss on Thursday.
There are six opportunities for you to consider when you have identified a company or product in the maturity phrase. The six that we have assisted our clients with include:
Today we look at 12 ways to manage working capital. These methods can be used internally by managers looking to improve their productivity or unit performance. Externally, B2B sales people can look for ways their products or services can produce these advantages for their customers. The key is to review the lists and find one that makes sense for you. Then take that one method – launch and measure your results.
Working Capital is one of the key factors in financial management and is one of the things that managers and sales people need to understand. The dozen methods I’m sharing with you today represent both basic and high level methods or decisions to be made for a company to improve their working capital position.
Remember that Working Capital is about cash and near cash that is available for the company to use during their normal operations. Think about the net cash available to use over the cash needed for basic operations and capital investments.
So here are the 12 ways to manage working capital:
Reflecting on my experiences with economic downturns like we are having today… In reality it is quite simple, cash flow has slowed down and there is currently no substitute source for cash. Thus, we have an economic recession. In fact, during the mid-80’s Louisiana, Texas, Oklahoma and some border states had their own severe recession. Back then it was called the oil and gas driven downturn. Only these areas were affected, thus the national economy and the media did not report this on a national level.
Okay, here were the lessons learned during this time period. First, it started in one industry – the oil and gas industry. Many people felt that since they were not directly tied to the oil and gas industry that they would not be affected. Wrong! Here are the cash flow issues: people were laid off; the supplier industries were impacted due to lack of sales and they started going under or laying off employees; the Mortgage industry started noticing higher default rates, decreasing home values and loses; the FDIC and FSLIC started closing S & L’s and Banks due to bad retail, commercial and mortgage loans; retail sales dropped – closing stores and creating vacancies in shopping centers; office building speculators found themselves with empty towers and foreclosures rose; and people stopped buying things in all categories – some had lost their jobs, some had lost oil and gas revenue checks, and the “beat goes on… Does this all sound familiar?
We are seeing the same situations that occurred during the mid 1980 in a limited geographic area – but now it is global in nature. This is a difficult situation because the system of cash flow has to restart and grow to “normal” levels. What we call normal, however, is the big question. Does “normal” include speculation, free or low cost loans, senseless refinancing for short term gratification, unnatural home value increases, or hyper anything for short term gains?
What needs to occur is for people to understand that the lottery ticket mindset is not normal. Normal is earning a fair return for a fair day’s work. Greed is not acceptable and systems need to be reset for progress to happen everyday. I learned all this the hard way. The key point is that I learned how to earn back my self-esteem and start growing everyday and passing on the “get rich quick” mentality that seemed to be everywhere.
For the system to work, national and community leaders need to focus on how to get business jump started and operating at efficient levels, train employees for higher level work, and get cash flowing again based upon the commerce system. The lottery winner is only one person – what we need is for large groups of people to win while providing value for themselves and their organizations or communities.
If we don’t focus upon the right things, we will all lose and lose big. All industries will suffer to survive and people will be hurting – financially and mentally. If we all start adding value and losing the non-value added activities, we will all win in the long run. Yet, remember this, economic issues will rise and fall, our job is to focus upon ways we can grow personally, add value to the world, and earn our fair share during the process.