Jason Holden has been saying plenty about how to select an accountant who will be an advisor but there's one thing he misses in my opinion. Language.

Let's say you're a builder. When talking to your advisor, would you expect him/her to know what a reduced level dig is about and the cost implications on a contract of a sandy substrate? Say you're a nursing home operator - do you think the advisor should know about spend management on food supplies? How about if you run a nightclub that has live acts - would the advisor know about gig over-riders?

If they do, then there is a fair chance that when seeking advice, you'll have overcome the first hurdle in building a relationship - speaking the same language.

There is a catch. These business specific terms and their business implications are not learned overnight. One way you could think about helping the professional advisor - yes…they need your help as well…remember we're talking relationship…is to run a blog site where you talk about the things that matter to you in business. A great example is Stormhoek, the vinyard blog for a South African winery. It's a roaring success. As is English Cut, a blog by a bespoke tailor. And let us not forget Tinbasher. The name should give you a decent clue.
Of course this cuts the other way. The professional advisor who fails to offer you insights into the profession that are useful to you and written in a language you can understand is not much good to you. Are they?

I am sure you have all heard the expression CASH IS KING; well this has never been truer than in business.  The lifeblood of any business is its ability to collect its debts and pay its bills, employees and ultimately you as the owner.

There are many small businesses that are profitable, but they can find that they do not have enough operating capital to meet their immediate needs, this can result in them being forced to sell out to a competitor, seek outside investors and thereby giving away more of the business than they would like or even worse, closing the doors for good. Not exactly something you intend to happen when you start a business.

This is where forecasting comes in. You need to forecast cash resources so you know where the peeks and troughs are, when you will be swamped with money and when you won’t have any.  You have to remember that forecasting is an art; it’s by no means a science, after all none of us have a crystal ball.

When forecasting you have to bear in mind you are guessing as to when customers will pay and when you will have to pay others, you are also guessing at what the sales figures will be and how much your expenses will cost you.

Some hints on forecasting:

You need to be able to make a guess/estimate at the level of sales you will generate for the period of the forecast, this figure needs to be as realistic as possible, after all there is no point in saying your sales will be in the millions if no one in your industry has ever achieve anything past £250,000.

Forecasting sales like this is harder for a new business than an existing one; after all if you have been in business for a few years you already have historic data that can be used as the basis for the forecast.  If you’re new to business it maybe worth trying to get the historic details of a similar business operated by a competitor.

Other areas you might want to address in the forecast are what if scenarios; what if you add a new product line, cease unprofitable products, increase the workforce, or reduce the workforce for those who are not productive enough when compared to everyone else (be careful though, employees have rights).

Also, consider other areas that may impact on your forecast, is your industry subject to seasonal variations, what state is the economy in now and for the rest of your forecast.

Once you have achieved the above, you know your target sales figures and you have accounted for the numerous outside factors that will impact on your sales you now need to consider the CASH side of the forecast, what percentage of your sales will be on credit and over what period, 30 days, 60 or even 90 days, what percentage will you receive in cash, what about discounts for early payment or if a customer pays on credit card you get your money quicker than waiting 60 days, but the credit card company will charge you a percentage, all these factors must be factored into the forecast to determine what your inward cash flow will be.

It maybe you will at some point need to invest in machinery, or a new car, for this you will need money, will you take a loan out or put the money in yourself, of take on an outside investor, again this needs considering for the forecast.

Once you have dealt with the inward flow of money for the forecast you can move onto dealing with paying money out. This will operate pretty much the same as above, you need to deal with how you will pay for goods and services, over what period you are allowed credit, what and who is paid and when and how much.

Important to remember:  Once you and/or your accountant/business advisor have prepared your forecast for a given period of time don’t just put it in a draw and forget about it, your business is fluid and always changing and it is for this very reason you should do the same with your forecast, revisit it on a regular basis, update the figures for changes that are occurring, this way you will have a forecast that is worth the paper its printed on.

This recent article from Cobweb Information Ltd caught my eye so I thought I would reproduce it for everyone. The one that interested me most was Cameron Johnson, I wonder if there are any accountants out there advising nine year olds on how to run their business?

A US journalist-turned-author reckons there are just eight traits essential to entrepreneurship:

• Seizing opportunities that nobody else has noticed.
• The desire to run your own show.
• Innovative behaviour since childhood.
• Flexibility.
• Doggedness.
• Self-confidence.
• Pragmatism.
• The ability to 'fail upwards'.

The final one, apparently, means that you should be prepared to go under - as long as you take away the lesson of why you failed, and what you can do better next time.

That's according to Brent Bowers, who says: "Some entrepreneurs brag about their bloopers. As one of the experts I talked to told me, they consider making a mess of things practically a badge of honour so long as they take stock of what went wrong and learn from it."

Some of the examples he gives of entrepreneurs showing the eight traits include:

• James Poss, who spent his childhood pulling apart, mending and creating gadgets. He later founded the Seahorse Power Company, which makes solar-powered rubbish compactors.
• Cameron Johnson started in business at nine, selling greetings cards online, then made $1,000 auctioning his sister's toys on eBay, before earning up to $150,000 a day while still at school by selling Internet adverts.

Find out more from Brent's book If At First You Don't Succeed: The Eight Patterns of Highly Effective Entrepreneurs.

You can also check out some of Cobweb Information Ltd factsheets, which will help you to assess your own personality traits to discover if you could run your own business.

ABOUT THE AUTHOR: This small business news article has been written by Cobweb Information Ltd, the UK's leading publisher of information for small businesses and their advisers. To get more regular, fresh, practical information and news about starting up and running a small business, go to www.enterprisequest.com.

Andrew over at trizle has a great and very relevant question today: “Should you build that million dollar product if you’re starting up?“. He is quoting Harvard’s Amar Bhide:

Look for quick break-even, cash-generating projects. The rule in large companies and well-funded enterprises is to stick to the basic strategy. Not so with the bootstrapped start-up. Profit opportunities that might be regarded as distractions in a large company are immensely valuable to the entrepreneur. A business that is making money, elegantly or not, builds credibility in the eyes of suppliers, customers, and employees, as well as self-confidence in the entrepreneur.

This all expresses the simple business truth, small steps, simple products, niche markets, and low overheads, are the way forward for small business. This makes for an environment, were problems are not disasters.

Tags: Business Development, Business Idea, Business Infrastructure, Business Mentoring, Business Start Up, Client Relations, Entrepreneur, Great Business Idea, Home Business, Micro Business, Selfemployed, Small Business, smb, sme, sme-blog, SOHO, The Prince’s Trust, trizle.com, Very Small Business, VSB

Health Warning, the contents of this post is slightly addictive. I came across this guy some years back, on holiday, bored and I needed something to read. Yes I know it’s a bit sad, put then Tom found out that CEOs Are Idiots.

Anyway, among great books, you read while on holiday, like ” A Passion for Excellence ” and my favorite so far ” Re-imagine! “, you can now find his wisdom on his website / blog. He has been there for some time, but then CEOs Are Idiots ( Reason 2, see below ), so I can only tell you about this now.

2. CEOs Fail to Spend Hyper-aggressively on IS/IT; Fail to Follow “GameChanger” IS/IT Strategies; Fail to Put Their CIO on the Board of Directors; Fail to Fully Exploit the Web (Revolution Now!).
We all live in a Dell–Wal’Mart–eBay–Google world! All, apparently, except for ….those “idiot” CEOs. IS/IT is changing the world! Dramatically! Fast! A handful get it. (Most don’t.)

Part of the website, is his Project05, with his rants from Summer ‘05. It makes a great read, well it’s a weekend, and I’m bored and I’m a CEO. You know by now CEOs Are …., what am I saying!?!

ENJOY tompeters e!paper

Tags: Business Development, Business Mentoring, Business Start Up, Client Relations, E-Commerce, Entrepreneur, Great Business Idea, Home Business, Micro Business, PR, WOW, Small Business, smb, sme, Software as a Service, SOHO, Tom Peters, Very Small Business, VSB, Web Technology

Deborah Brown posted on BizInformer a post titled: “Burning Bridges“. She is of the opinion that a vendor overstepped the mark, when he replied to a bulk-email from a client and wanted to get a 12 month overdue invoice paid.

It is not a nice thing to happen to you, when someone publicly asks to get paid. But being owed money for 12 month is certainly a justification to ask to get paid anyway possible. After 12 month the lawyer should be dealing with this, in which case it would also be in the public domain.

I have to disagree with Deborah on this, businesses need to get paid, they are not banks for clients. I think it is the client who has burned the bridge. If this vendor is still working with this client I think he deserves the situation he is in. It may also indicate to other vendors that there may be a problem, with this client.

Cash flow is king for business, am I wrong?

Tags: Business Development, Business Mentoring, Business Start Up, Cash-Flow, Client Relations, Home Business, Micro Business, Selfemployed, Small Business, smb, sme, SOHO, Very Small Business, VSB

I have been reading my bloglist this morning and came across the “You should pay me…..” post on Businesspundit.

And the question: “How often do you/we things that upset our clients?”, comes to mind. And it often is not really anybodies fault, but just a simple misunderstanding. But then you have companies that really don’t seem to care about clients, apart from getting their hands on the clients money. Businesspundit writes:

[…] It’s been a few months now and I’ve called, emailed, filled out online forms, and I have never reached a live person or received confirmation that my account was shut down, and I still get charged. I finally had to file a dispute through my credit card company. It’s $8.99/month, so they owe me at least $26.97. […]

These businesses do not understand that they damage their own business not only by reputation, but also financially.
Your customers are very upset and of cause they will talk (or blog) about their experience. And that all for $8.99/month, that is madness.

I’m sure that Businesspundit has cost them far more then $8.99/month for the last three month, by complaining to the staff, who did not care and now by blogging about it, it gets even worth. The best part is that they will have to refund all this money, so this is going to be a real profitable deal.

Cock ups happen, at $8.99/month per customer, you draw a line, and let the customer go with an apology, even if you think you have done nothing wrong. Rather then spending time on getting $8.99, let the customer go now, find out what went wrong, and fix it. If you make your unhappy customer part of this process and offer a month or two free service, for his/her help, you may even be able to retain this customer. Even if you don’t, at least the customer knows you did care.

It is always nice to hear from customers who like your service, but you do not learn anything from a conversation like that, unless your customers come up with the “I love your service, BUT…..” statement, then count yourself lucky. It shows you that your clients care about your business and products or services enough, to wanting to help you.

Don’t ask your clients to sign long term contracts, with notice periods, etc., give them a cancel anytime, no contract needed relationship, it saves you money, overheads, and forces your organization to focus on your clients. If your service or product is any good, it will get even better, and the bottom line will follow by word of mouth, your clients word of mouth.

To cut a long story short, it makes perfect business sense to pay your customers.

Tags: Business Development, Business Mentoring, Business Start Up, Entrepreneur, Home Business, Micro Business, bad business, Selfemployed, Small Business, smb, sme, SOHO, Very Small Business, VSB, WinWeb

Running your own business means first and foremost to look after the money. Being an entrepreneur is hard work, make sure you enjoy what you do, but do not forget the nuts and bolds of your business, money!

Millions of turnover are a waste of time, if you can not show a profit at the end of the year!

Looking after your money means getting paid, and on-time. Also make sure you are not relying on one or two customers alone for all your turnover, no single customer should be more then 10% of your total outstanding funds. If you have a larger number of clients then it is easier to live with one or two late payment customers. You can even decide to stop trading with these clients, after all, are you a bank? So credit control is one of those vital, but often hated jobs in a business, but of enormous importance. You can do this yourself, or outsource it for a fee. Have a look at your bank balance, and now add all the money that is overdue from clients. See what I mean!

However, looking after your money also means not spending money or at least keeping it to a minimum. Just remember what you need is not only money or better, liquidity in the bank, but also a positive cash-flow. Both of these are important factors in your businesses survival. If you don’t know how to plan and forecast your cash-flow, learn it. See your accountant and have him / her show you how it’s done, it is as powerful as it is easy. You will learn in a couple of hours where your bottle-necks are and what you can do about them. Try and keep your fixed cost down and use outsourcing techniques if possible. Use on-demand SaaS - Software as a Service technology to keep your IT cost to a minimum and at the same time outsource some IT functions, like security and data back-up.

All this will help you to keep your feed on the ground, focus on the important issues, and never to get complacent. Nothing is more fun then a good running business, that makes money every month. That means not only sanity, but success.

Tags: Accountants, Business Development, Business Infrastructure, Business Mentoring, Business Start Up, CPA, Home Business, Micro Business, Cash-Flow, SaaS, Selfemployed, Small Business, smb, sme, sme-blog, Software as a Service, SOHO, Very Small Business, Virtual Assitants, VSB, Web Technology, WinWeb

Recently, in SME / SMB Have Become Obsolete Acronyms I discussed how now, that business software and services have become affordably available to small businesses, the SME term has become inadequate to describe this market, especially from the software industry's point of view. Simply because the needs of a $100M company, which SAP and Oracle consider a "small" business are not even comparable to a 6-10 person company - traditionally referred to as SOHO, while recently a new term is popping up: VSB - very small business, the absolute "S" part of SMB.

Innovators in the software business are increasingly focusing on this segment. The result of this change is that "Enterprise Software" is no longer the luxury of large corporations. This might sound like a shocking statement, since "Enterprise Software" typically means the world of SAP and Oracle, and the traditional heavyweight, expensive, pay-huge-license-fees-upfront, then try-to-implement-forever model that does not work anymore.

But there is another definition that is largely being overlooked:
Software that allows a company to conduct it’s everyday business, supporting most of the core, fairly standard business processes any company performs repeatedly.

With this definition, Enterprise Software has a whole new, largely unpenetrated market to enter: that of small businesses. Such business functionality has traditionally been beyond reach for a typical small business, for two major reasons:

• Cost (license, hardware, implementation, maintenance ..etc)
• Lack of IT resources (integrating applications, designing processes, dealing with multiple vendors ..etc)

SaaS is the right answer for both, since it allows the SME user to start using the functionality without an upfront investment, does not require implementation, upgrades, maintenance, worrying about backups and security ..etc.

Of course several Open Source packages are available completely free, which is a perfect solution for the cost problem, but frankly most of these packages are by geeks for geeks; i.e. you really have to be quite IT-savy to implement, integrate, upgrade them, and as we stated most small businesses simply do not have that type of resource.

Stefan, Winweb's Founder and CEO started an excellent mini-series on Saas Benefits detailing a lot of technical, delivery, usage aspects - now I am going to look at the changed economics from the other side, the software vendors' point of view.

If SME’s could not in the past afford Enterprise Software, the same held true for the Software Industry: they could not afford SME’s, since there was just no way to profitable reach millions of small businesses. The cost of customer acquisition vs. the very low license fees made it an uneconomical model, whether via direct or channel sales. A common "dirty secret" of the industry is that about 80% of a an enterprise software company's cost is Sales and Marketing. There's a lot of "fat" in that sales process that needs to be cut out.

Once again, technology comes to the rescue: the Internet, and largely Search Engine Marketing changes everything. Joe Kraus, Founder of JotSpot and previously Excite sums it up:
“ Ten years ago to reach the market, we had to do expensive distribution deals. We advertised on television and radio and print. We spent a crap-load of money. There’s an old adage in television advertising “I know half my money is wasted. Trouble is, I don’t know what half”. That was us. It’s an obvious statement to say that search engine marketing changes everything. But the real revolution is the ability to affordably reach small markets. You can know what works and what doesn’t. And, search not only allows niche marketing, it’s global popularity allows mass marketing as well (if you can buy enough keywords). “

Another benefit of SEM (search engine marketing) is that while traditional advertising can pick the right demographic groups, it cannot pick the right time, only a fraction of the target audience is in “change mode”, looking for a solution. That’s the beauty of Search Engine Marketing: obviously if you are searching, you have a problem and are looking for a solution, which is half a win from the vendor’s point of view.

Small Business Trends published a survey on “Selling to Small Businesses”, which supports the increasing importance of SEM: “A full 73% of vendors attract small business customers through search engine results”

Joe has another excellent article worth reading; especially the last two bulletpoints are relevant to our discussion here.

What we're seeing is that the SaaS model changes not only the technology and the delivery of software to customers, but the marketing and sales process, too, which is perhaps where most of the excess "fat" can be cut from. Software companies can now directly and affordably reach millions of small customers. The entire marketing, sales, delivery, implementation, support, upgrade process is seamless, highly standardized, conducted via the Net, teleconferencing, Webex-like sharing in new low-cost ways.

So how do software companies make money on small businesses? Ziff Davis has the answer: “Products for the long tail and SMB market, where 72 million businesses spend $5k or less each year, are a much easier play” Wow, I don’t know where those numbers come from, but if I were a SME-focused software vendor, I’d certainly like them … there’s a goldmine out there.

AMI Partners confirm: U.S. SMBs to Spend $2.2 Billion on Software in 2006

(This article, with minor changes is cross-posted on my personal blog)

Tags: Enterprise Software, Sales, Enterprise Sales, Demand Generation, SAP, Oracle, Jotspot, web20enterprise, business model, Open Source, SEM, Search Engine Marketing, SMB, SME, VSB, Small Business, Winweb

Yesterday a business friend of mine contacted me with information about an interesting business deal. I had a look at the information and began to think of ways to make this work. In short, I was interested to do something about this opportunity.

This morning I got up and started looking through my RSS feeds and I found a post on David Maister’s blog: Can you say NO? He says:

[…] One of the saddest mistakes businesses make is that by stressing growth and volume (goals that are almost sacred in most companies) they are inescapably, unavoidably inevitably led to compromise their own strategies and turn themselves into undifferentiated organizations that look like everybody else.[…]

Hmmm, that hit home. I think this is a very important lesson to be learned, you need to focus on your business, because let’s be honest, I do not have enough hours in the day to run my own business, and now I am thinking about getting involved in another business.

Further down the line David also says:

[…] there’s a difference between “Let’s make money by delivering on our strategy” and “let’s make money any way we can.”[…]

You should read his post and his article on his website: Strategy Means Saying “NO”.

I will say NO to my business friend, sorry, but I will stick with my strategy!

Thank you David for your timely advice.

Tags: Accountants, Business Development, Business Mentoring, Business Start Up, Entrepreneur, Home Business, Micro Business, Sales, Selfemployed, Small Business, smb, sme, sme-blog