ask SCORE: Five Steps to Successful Entrepreneurship
Five Steps to Successful Entrepreneurship
A New Way to Ensure That You Venture Will Succeed
By Richard N. Walton
Co-Chairman, SCORE, Hagerstown
I have been a mentor with SCORE for 11 years. Most recently, I have simultaneously held the positions of Assistant District Director for Western Maryland and Co Chairperson of the Hagerstown, Maryland Chapter Number 0539. In these two capacities, I have counseled hundreds of entrepreneurs who are interested in starting their own businesses. At the same time that I have worked with SCORE, I have also operated my own consulting business, taught in both the graduate and undergraduate programs at Frostburg State University, written extensively in local media (The Picket News for the past 4 years) and been busy developing a book with the working title of 'The Small Business Life Cycle'. In this article I want to share some of the experiences I have had over the years with the objective of enabling small business entrepreneurs to be more successful in their startup ventures.
I believe there are several extremely important steps that need to be taken by the entrepreneur to stack the deck (don't mind my use of a slang expression) in his or her favor. Here they are for your review and comment: 1) Understand that innovation is what will distinguish your plan from the competition and that innovation is both about process and product, not just product alone, 2) Take the time and effort to develop your dynamic business plan before seeking startup funding, 3) Think about your firm as an organization, not a 'one man show', even if the actual hiring of people may come later, 4) Develop a 'smart growth' plan to take effect immediately upon venture launch, and 5) Remember that 'cash is king', Let's explore each step.
1) Innovation is about process as well as product. You do not need to create another high tech gadget or app to be successful. Your work can be focused upon lowering costs and/or increasing productivity in an established business environment. Incidentally the payoff for cost reduction and productivity improvement is usually faster and easier for a startup primarily because innovations in process usually don't require a heavy investment in plant and equipment. Think process first, product later!
2) Most entrepreneurs I counsel can speak quite eloquently about their ideas and plans, but writing a Business Plan is a much more daunting task. Yet a written plan is essential, and there are many sources of help you can draw upon to 'get 'er done'. Two good places to begin are www.score.org, and www.sba.gov. Or your local SCORE chapter office.
3) Many entrepreneurs come for counseling as individuals, not as teams or business partners, yet it is obvious that almost any business requires more than just one person to be effective. So thinking in terms of an organizational structure early on gives you a head start in long term planning, and makes your presentation more reasonable to suppliers and funding sources.
4) A Smart Growth Plan should be prepared as part of the central Business Plan. After all, any action taken upon the launch of a new business is growth since an entirely new venture has no history or performance statistics beforehand. But Smart Growth requires planning, and the plan must include profitability. There is no gain in growing only to suffer continued losses.
5) Cash is king. Have no doubt about it. Without a solid cash flow plan, your business will not survive. Cash flow should be sufficient to pay all expenses with extra income to pay salary and/or dividends to the owner, and also to provide for expansion. A good way to think about how to do this is to break expenses into operational and capital categories. Operating expenses should be covered by operating income. Any excess (and there better be some if the firm is to survive long term) is reserved for capital expenditures, which actually represents the means by which the firm can grow in the future. Cash, whether flowing out or in is indeed king. No cash, no company!
So what does this leave us with? From the stand point of the entrepreneur, there is a need to do more careful planning and to seek counsel from a variety of sources. At the very beginning of a new venture (before operations and financial expenditures), information is king, and it is best obtained through collaboration. Going it alone is not a good strategy early on. While there are many sources of advice and counsel, SCORE is usually the best place to begin.
Mr. Walton teaches Financial Management, Operations Management, Corporation Finance, and Entrepreneurial Finance at Frostburg State University and is the co-chairman for SCORE, Western Maryland, and is president of ERMACORP, a Hagerstown based Management Consulting Firm. Richard can be reached at 301-462-9850 or via email at Richard@ermacorp.com. Find him on Facebook(r) at "Small Business Life Cycle" for inquiries and an exchange of ideas on small business management, issues, resources, and experiences.