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Ask Score: This Month's Topic: Starting and Managing a Business in Tough Times
This Month's Topic:
Starting and Managing a Business in Tough Times
by Richard Walton
In this series, we will present a number of topics that represent the issues and questions that are typically raised in our business start up and operations management counseling.
We will present these topics and questions in a Q&A format. Further information on any of these issues is available by contacting SCORE.
Question-Is this a good time to start a business?
Answer-Businesses are started up in all types of times. Good times are no guarantee of success, nor are bad times (like today) always going to result in failure. Success in business is dependent upon the quality of the central business idea and the quality of its implementation.
Question-How can you evaluate the quality of the central business idea?
Answer-Evaluating a business idea should be made by researching the market to determine potential (or actual) customer interest. Business ideas that address significant problems existing in the target market are more likely to stimulate interest and future purchase.
Question-Is it possible to fail with a great business idea is it is implemented poorly?
Answer-Both the idea and its implementation are central to success. The key to a great idea is always in the value the potential customers can understand and accept. The key to great implementation is the entrepreneur's ability to execute the business plan effectively and efficiently.
Question-What are the tools that business entrepreneurs can use to ensure success?
Answer-Market Research tools include surveys, interviews, sampling and test marketing, as well as promotional material welcoming further inquiry. For implementation issues, the key is a well written business plan that contains milestones that require periodic review of 'progress to date', both as to effort and results. Project Management software is ideal for this purpose.
Question-How can a business manager effectively navigate the tough times?
Answer-Managers have to initially assess their vulnerability through financial analytics. Normally this process begins with a current operating statement (accounting speak for a Profit and Loss statement) that is reviewed both from the top down and the bottom up. Top Down analysis compares current results with plans as well as earlier results (last year, for example). The objective of Top Down analysis is to pin point overall positive results and attempt to replicate them while avoiding negative results, while at the same time projecting cash flow for the coming year. Bottom up analysis starts with individual products and customers and attempts to pinpoint where the potential exists to develop profitable business either by expanding the production and sale of profitable products and/or services and/or developing new products that address new market needs.
Question-What is the single most important thing to do in tough times?
Answer-The single most important thing to do in tough times is maintain a reality based outlook of both the opportunities and threats facing your firm, and its strengths and weaknesses in avoiding the threats and taking advantage of the opportunities that may be present in today's environment.
Summary: Remaining positive when everything around you is negative takes courage and commitment.
Written by Richard Walton. Richard is a counselor for SCORE as well as President of ERMACORP, a small business research and consulting firm. His latest publication is "Small Business Tips and Strategies for Managing in Tough Times", co authored with Dr. Marty Mattare of Frostburg State University.
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