Stuff Your Mother Didn’t Teach You About Business:

Startup Capital:

You can never have too much.  If your business plan involves goods and human capital and you’re short of cash, don’t delude yourself that your passion to succeed will make up the difference.

Where to Find Money to Start a Business:

There is a misconception out there that Governments offer grants and loans to startups.  If you have seed capital to build a plant, buy equipment and hire workers, you may be able to secure matching grants and/or loans.  If you have no cash or collateral, good luck.

What about small business loans?  Under the Canada Small Business Loans Act, Canadian banks will lend to start ups, provided the entrepreneur provides collateral for the loan.  Secondary lenders like the Business Development Bank of Canada (BDC), Futurpreneur Canada and regional Community Futures Development Offices (CFDC) have loan programs to help startups and expansions. Be prepared to demonstrate your creditworthiness and be armed with a bullet-proof business plan.

As a last resort, there is always family and friends, which can be a formula for a financial disaster.  If the business fails, relationships can be strained.  If it succeeds, family and friends may want a larger share of the profits.

In the end, you may need to start smaller and start alone.  How to finance your entrepreneurial dream is a key part of the due diligence in making it a viable reality.

The Dream:

You’ve always dreamed of having a business of your own; a store with a little bell over the door announcing the arrival or departure of another happy customer.  There is a vacant storefront on Main Street for just $1,000. per month and the landlord will give you the first month free if you sign a lease now. 

If this sounds risky, it is.  And it happens frequently.  Businesses open, operate for less than a month then close.  Lack of capital? Yes.  Lack of planning? That too.  And don’t ever think you can just walk away.  If a lease was signed, the tenant is on the hook for all the covenants and obligations in the lease.  If there were renovations and fit-ups carried out, the business “owner” is on the hook for that too.  If there were employees, the business person is liable for severances and employee benefits.  You get the idea.  It’s a disaster that can haunt a failed business owner for years.

Before you sign that lease, do you have enough cash in the bank to survive the first six months if your business takes that long to start turning a profit?  Remember, more than 50% of startups fail in the first four years.  Three things that will help you avoid becoming a statistic:  Good Planning; Good Advice; Adequate Capital.

The Business Plan:

Everything that needs to be said about the Business Plan has already been said.  Today’s Google search yielded 3,450,000,000 results in .53 seconds.  You can build your very own business plan on your smart phone.  “Business Advisor” yields 2,560,000,000 results on your device.  It’s a wonder that accountants and business consultants haven’t gone the way of everything analog.  If you can build a solid business plan, make credible financial projections, predict and manage risk and launch a viable business on your hand-held device, all without spending a dime, you are a testament to the triumph of the digital age.

Otherwise, re-read the section titled, “The Dream”.

Critical Thinking:    

If you are afraid of asking a business advisor to critique your business plan for fear that she will talk you out of it, that’s a problem. It’s a sure sign that you haven’t done your homework, you’re not convinced yourself it’s a good idea or a combination thereof.  

If your accountant or your business advisor challenges your assumptions, she is trying to help you avoid harming yourself.  If your concept survives the critical thinking stage, you may have the germ of a viable business,  It just may require some tweaking.

The business planning or modeling phase enables you and your advisors to “stress-test” the concept.  If the model crashes, no one lost money or sustained injury.  Refine, rebuild, debug and test again.  It’s a cheap way to build a near-bulletproof business model.  Whether you’re launching a business or a rocket ship, it’s always better to find and fix the bugs in the lab before you light the fires.

If your dream has a basis in reality it can become a reality. Don’t be afraid of critical thinking.  That’s what smart business people do.  There is a time to dream and a time to challenge the dream.

Go or No-Go:   

Whether it’s launching a space mission or launching a business, there is a critical point where an irreversible decision is made.  The launch has been planned extensively, every detail has been meticulously studied; every contingency has been addressed.  There is a moment or reflection.  Do we go, do we hold or do we scrub?  As the entrepreneur, you completely own that final decision.  If you decide it’s a no-go, you will never know how all that planning might have turned out.  You may live out the rest of your life wondering what might have been.  Conversely, if the mission fails, you will have lost everything.  This is the first of many critical decisions you will make as a business person; a decision based on facts, analysis, logic and emotionless judgment.  Regardless of how much business advice you receive, the go-no-go decisions are made entirely on your own.

Work-Life Balance:

If you are planning to start a new business and work-life balance is one of your goals, make sure you describe in your business plan how you are going to achieve that.  Depending on the business model and your definition of “balance” it may be achievable.  The success of many businesses depends on a high level of customer service and satisfaction.  If this describes your business, you will have to decide who comes first: you or the customer.  

Thinking About Business:

Early in my career, I worked during the day and studied in the evenings.  In my spare time I slept and thought about my family.  When I changed course and began my sales career, my manager and mentor asked how much time I spent thinking about business.  I realized that “none” was not the correct response.  What he was talking about is a back-of-the-mind, subliminal process of constantly seeking to generate business - where to find new prospects; how to close; how to build a recurring client list.  It took several years of conscious effort before it became a productive habit.  This doesn’t mean you will spend less time thinking about your family and friends.  It does mean that, in those quiet, introspective moments that are simply mental rest periods while mowing the lawn or waiting for the rinse cycle, we can be thinking about ways to improve customer service, motivate employees or improve the bottom line.  It’s a habit many successful entrepreneurs have acquired.

More Thoughts About Planning:

For some would-be entrepreneurs, the idea of planning seems like a futile waste of time. The objection seems to be about the unpredictability of the future and the absence of a crystal ball. There is no denying the future can be unpredictable.  Even the best-laid plans come undone.  That is exactly the reason successful businesses are built on sound planning.

There will always be risk, that’s why insurance was invented.  First you plan, then you manage risk.

A sound business plan begins with realistic assumptions about the target market,  the competition, the competitiveness of your product and your market strategy.  These challenges require objective self-assessment, market research and the resources available to you.  Costs such as advertising, wages and overhead can be closely estimated.  The most difficult challenge in a business plan is in estimating sales.  What is the sales volume of similar organizations in other markets? What is the best-case number? What is the worst-case number?  How many units can we realistically sell?  How will  we structure our pricing?  By building several sales forecast models, we can arrive at a most-likely number.

Based on our operating costs, can we make money at that sales and gross profit number?  If the answer is “no”, either the concept is faulty or the assumptions are wrong.  If we accept that the premise of a business is to make money, is it not better to have a business that succeeds on paper, before launching blindly?

Never Wrestle With A Pig:

This is actually the title of a book by the late Mark McCormack, the founder of IMG Sports Management, a pioneer in events promotion and the management of elite athletes.  Mr. McCormack shares many insights on business management based on his experience in dealing with people and making money for his clients.  One might argue his approach,  is “old school”.  He missed most of the internet age and all of the modern smart phone era.  His analog way of doing business relies on personal contact, building trust and a strong personal network.  Nevertheless, I highly recommend this book and his earlier treatise, “What They Don’t Teach You in Harvard Business School”.  Just don’t get hung up on the analog business tools. The principles of time management, handling employees and customers and the value of building trust are timeless.  And the pig-wrestling analogy? It means you get very dirty and the pig actually likes it.


Dave Hands

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