A practical guide to growing and increasing the value of your business.
This article is part 1 of series to come. Have questions post them in the forum.
TOPIC #1 CASH
In golf, failure is usually attributed to LOFT, lack of freakin' talent.
In business, failure is always attributed to LOFC, lack of freakin' cash.
Cash is king -- the lifeblood of a business. Without cash you cannot operate your own business.
Question #1 -
How much cash do I need? Answer: Two to three times you think you need.
If you are just starting your own business, you need enough to cover at least six month's operating expenses. This amount should fund costs such as payroll, rent, utilities, plus other operating expenses and lunch money.
In addition, you need cash to cover your "working capital" needs. Simply defined, working capital equals accounts receivable plus inventory less accounts payable.
Accounts receivable come from selling stuff to your customers who don't want to pay you for as long as they can get away with it. You set the terms and they try to stretch them. For example: your terms are pay in the 30 days and they try to pay you in 90. So, to be on the safe side, figure 60 days or two months of sales.
You will need inventory on hand to service your customers. Normally, they want the product or service yesterday. How much cash you need depends on how much inventory you need to service and how far you can go without paying your suppliers, normally referred to as accounts payable.
There was a successful Broadway play called Other People's Money. There is also an excellent little book called Buy Low - Sell High; Collect Early - Pay Late. Both dealt with the principle of leverage.
For cash management needed for working capital, the trick is to generate negative hole time.
Hole time equals the number of days' sales it takes you to collect your receivables (DSR) plus the number of days' purchases you need on hand for inventory (DSI) minus the number of days it takes you to pay your suppliers (DPP).
Formula: DSR + DSI - DPP = HOLE TIME
Example: 60 + 15 -- 60 = +15
Target: 30 + 10 -- 60 = --20
You can see, if you manage your working capital cash correctly and hit a negative hole time, your suppliers are providing you with a positive cash for working capital - i.e. they are helping you finance your business - interest free.
Pay attention to hole time management and you will sleep better at night. Other than getting orders, this is one of the main areas of your business focus. Think about it, if you can do this successfully, the only cash you will need to run your business is your payroll.
Question #2 -
Where do you get money?
For starters - your own, your spouse (be careful), your relatives, friends. Normally these funds come in the form of loans with some type of debt service plan for principal and interest.
Credit cards?
Sell stuff?
The second tier as we covered in the "hole time" concept - from your suppliers.
Next comes investors - they typically want a piece of the action and an exit strategy.
Then comes lenders - i.e. banks - they usually want all the collateral, your home, dog, and first born and generally won't lend you money when you need it.
The lesson is: Cash is king. Treat it like gold. Become a Silas Marner, a cash mizer about about cash. Pay attention to every penny you spend.
Of course, the ultimate cash generator should be from your profits and to do this you must sell your stuff for more than it costs you.
That's it for Lesson #1 -- Remember...
Rule #1 - Cash is king.
Rule #2 - refer to Rule #1 every day.
The New Face of FREE in business
By Karen Post
Just a few years ago, the question of utilizing a free business giveaway might have gotten a snarky response from quality-seeking buyers. Must be second rate or defective, a desperate attempt at luring customers, or just pure no-value offer; “you get what you pay for.” Today, the land of FREE is landscaped quite differently; respectable, credible brands do it, hot emerging start-ups launch with them, and international mega companies like Google have built their empire by building and offering free products and services.
Chris Anderson, author of The Long Tail, believes Free is the future of business; a powerful new economy of opportunity and the subject of his new book called Free, due out in July 2009. “The idea that you can make money by giving something away is no longer radical. Over the past decade, a different sort of Free has emerged.”
So is FREE back in Fashion?
Trendspotters think so. Trendwatching.com, a global of force of over 8,000 trend spotters, defines it as Free Love—free, valuable, and available stuff for consumers and businesses—on- and offline. In their view, this Free giving movement will become an integral if not essential part of doing business.
I must admit, for years I’ve been a buying snob; an almost an anti-frugal, no-coupon ever, free stuff skeptic customer. In my view, any organizations—be they consumer or B2B that employ these free or discount tactics—do so because they are likely losers. Philosophically for me, if a service or product is truly good, it should command full price to cover the costs, overhead, and earn a profit. I am running my own business and I’ve always sold my professional services at full fare, and hated when buyers wanted something for free or at a discount. After all, I am not the Walmart of speaking and consulting services, and I do not want to be.
Free is definitely back. Even the naysayers like me now have an appetite and new respect for this FREE economy frenzy. Free, done well, now earns my attention and often provides a trial before commitment, and in a world packed with so much stress, receipt of even a small meaningful gift from a company gets big points from me.
For any professional, a strong identity and a distinct market position are key factors in achieving optimum business success. They can supersede academic credentials, experience and even your skill sets as a competitive edge. The power of perception allows you to make a unique mark in the minds of your industry, peers, customers, and prospects.
Companies and organizations worldwide spend enormous resources on building their brand. They know that a sound brand adds value to their existence, secures customer and employee loyalty and enhances profits. For professionals, the same fundamental brand building principles apply. A personal brand can deliver significant professional benefits: command higher fees, earn more money, increase your market share and even enjoy a celebrity status.
Whether you are referring to a product, company, organization or an individual professional, a brand is a mental imprint, which conveys a personality, promise and unique position. Brands are visual, emotional, rational and cultural. Powerful brands start at the core of one’s existence and spread throughout every point of contact with their target audience.
I was at the Midway Airport in Chicago a while back, waiting for a flight out. A young guy walks from another gate to approach me and asks, “are you the Branding Diva?”
“Yes, I am.”
“Wow, that’s so cool. I have your book and read your columns in Fast Company.”
“How did you know it was me?”
“I know I’ve seen your photo in the magazine, but can’t really remember what you look like. But, from your writing, I feel like I know you. When you were at Starbucks and I saw that red leather band on your wrist covered with rhinestone bling and letters spelling out the word brand, I knew it was you.”
Well, that little branded red bracelet opened the conversation that led to my getting booked by his company to deliver a speech.
That’s selling without selling.
And it happens to a lot of people in many industries every day. People become magnets for their products and services based on their personal branding.
Imagine a big glass tank loaded up with hundreds of squirmy gray guppies. Pick the one you want and in seconds you’ve lost it because they all look alike. Suddenly, behind the coral tree, from within the school of many, emerges a slim, purple and orange fish wearing goggles. He quickly stands out from the group, his distinctiveness apparent. He swims around with a unique confidence and a bold identity; the others just seem to fade away.
Odd fish are memorable. Odd fish command a premium price. Odd fish exude added dimensions of value. Odd fish finish first.
In business, understanding this metaphor is the difference between drowning in a sea of sameness and being a great brand.
Jack Trout (speaking of smart fish) noted in his bestselling book Differentiate or Die that choosing among multiple options is always based on differences, implicit or explicit. Psychologists point out that vividly differentiated characteristics anchored to a product can enhance the public’s memory of it because they have added uniquely to the mind of the consumer, the product thus appreciating intellectually. In other words, if you are promoting a product or service, give the consumer a reason to choose it.
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