Projections

I’m in the position at present of making financial projections in an effort to raise capital.  The backasswards thing about it is the most accurate projection is “I have no idea.”

With sufficient funding, then sales grow “a lot.” Without that funding, they grow “not as much.” Zeroing in on anything more specific is tough.  Having been on both sides of the table, I certainly understand the need/want to see what invested money will lead to with a business.  But part of the numbers comes down to simply trusting the people at the business:  the investment is good if you trust them to grow the business, which eventually leads to a good ROI.  And if you don’t trust them, then you should pass.

If your business is looking for funding then the truth is, in the end, the investment is being made in YOU.  That’s why its easiest to raise funds from friends and family; they know you and believe in you.  Convincing a total stranger is a different beast entirely.

A Word About Service

I’ve had two experiences recently that I thought it wise to comment on.

My biggest pet peave (sp?) is when things do not work correctly.  I’d rather know that my 3G phone is going to only get 2G speeds up front rather then be frustrated that it searches – and never finds – a 3G network.  (Note:  my 3G Bold is awesome, I’m just making an example).  If a printer is installed or a wireless network detected, then I expect it to work every time the way the programmer intended.  And when it doesn’t, I get very angry.

I had a computer issue recently where a desktop with a USB wireless dongle was not detecting the new wireless router I had installed.  I called the Austin version of the Geek Squad and was quoted $90 an hour to fix the issue.  The receptionist told me in her two years at the company she’d never had a call that wasn’t successful.  Fair enough.

So the tech showed up at 4pm yesterday as was appointed.  I described that the USB dongle worked great with my wireless router that had been provided by AT&T.  It wasn’t til I installed my own Linksys router that problems happened.   “No problem, this should be easy…”

10 minutes later, nothing had been solved.  But the tech said, “this sure would go a lot quicker if this machine (it was running 256 of memory which is REALLY slow) was faster.  I’ve got some memory in the car.”  So he dashed out and retrieved a 1G dimm and loaded it up.  Machine is now faster.

20 minutes after that, still no wireless but the tech said, “you know, this machine doesn’t have Service Pack 2 which leaves it vulnerable to all kinds of viruses.  I’ll install that real quick if that’s okay.”  Sure thing.

30 minutes later, the machine is updated with SP2.  Next he notices there is no virus protection so he installs AVG 9.0 (free version).  So the machine is now faster, updated and protected.  And still not connecting to the wifi network.

At 6:30pm I told him that I had to leave (company Christmas party) and if I’d known this was going to take so long I would have scheduled at a different time.  “Sorry about that.”   So he printed the invoice for 1 hour of work (instead of 2.5) plus the trip charge plus the cost of the memory.  For $170 I had a faster computer that still wouldn’t connect to the internet.  His final diagnosis was that the USB port wasn’t built for all that data, which makes no sense.  Otherwise, why would they sell USB Wifi dongles and why was it working just fine before?

Anyway, I was miffed that I had gone through the trouble of calling for service and ended up no better off really then when I called.  Sure, a faster machine is nice but that wasn’t why I called.  ANd I’m sure anti-virus is great, but its kind of pointless if the machines can’t get online.

So now that I’ve spent $170 on it, taking it to Best Buy and having their nerds work on it would cost me the same as simply buying an entirely new computer.

Deliver what you promise.  Stay focused on that promise.  And if you can’t deliver, don’t proclaim a moral victory just because you accomplished “something.”

Leaking

If you never learn anything else from starting a business, know this:  leaking money will kill you.  The easy dollar today costs you 2 dollars tomorrow.  From the high cost of “cash” (2% – 14% APR) to the cost of letting good customers have an extra week to pay an invoice, you HAVE to manage your cash like every penny of it is due TODAY.

One of my best customers is having cash flow issues and I am trying to work with them.  But their issues – which have nothing to do with me – are now creating cash flow issues for my business.  My ability to pay employees, pay A/P, order more products, etc. is directly affected by their ability to pay me what is owed.  I did my part in delivering their products; now they need to do their part in paying for them.

Don’t lose sight of the fact that every dollar wasted is not only a dollar that should be in your pocket, but also (more importantly) a dollar you could be using to further your business.

I/T on a Budget

The first time I started a company, we sank oodles and oodles of money in to unnecessary I/T and tech “stuff.”  Off the top of my head I remember…

$60/yr – domain hosting for 4 domains (the main one as a .com, a common misspelling of the main one as a .com, and then .net versions of each.)

$70/month – 800 number with a “vanity” number that spelled part of the company name.

$100/license – ACT! CRM software.

$160/month – DSL line with super-duper speed that our IT guy assured me we HAD to have.

$40/month x 2 for phone lines.

$30/month – Project management software.

$50/month – credit card processors x 2.

——

 

Granted, that was 4 years ago and things have changed but I can’t help but get bugeyed when I look at those figures in old financial reports.  Now, it is INFINITELY easier and less expensive to be an organization with strong, solid, secure I/T infrastructure.    Here’s how…

Domain Hosting:  $10 a year for only the .com of our domain.  If someone can’t spell, why should I pay for it?

Site Hosting: 19.95 a month for 99.99% uptime and great 24/7 support.

Phone and Internet: $75 month through Clear.com for unlmited WiMax, which comes to about twice the speed of DSL in the Austin area.

800# – $12.95 a month, with voicemails sent to me as MP3s in emails, unlimited forwarding, hold music for 5 extensions, etc.

Fax: $9.95 a month – converts the faxes to email so I get them on my Blackberry.

Project Management – Basecamp.  $20 a month.

CRM – Highrise – $25 a month for 5 users.  Accessible from anywhere

Email – Gmail for Business – FREE.  I think you have to pay $30 a year per account now, but we got in early so we don’t pay anything.

 

Anyway, technology has changed a lot so there are a lot of cost-effective ways to do everything from building a website to handling your CRM.  And there are people out there who will try and convince you that more expensive products are worth the price.  They aren’t.  At this point, if you have ANY tech knowledge at all you can find free CRM software (like SugarCRM) and set them up without a lot of hassle.  More importantly, once you start making money you’ll be even more pained to see even a little of it go out to something overpriced.

Checking In…

Has it really been so long since I posted anything?  Interesting.  4 months is a long time for a business blog to not be posting much about business.  But I’ve moved from one thing to another:  I’m not building a business anymore but rather, I have one.

That’s not to say I’m not focused on growth and expansion and making things “bigger” all together, but the day-to-day operations of simply managing and maintaining what we’ve already built takes up most of the day.  It’s rewarding to be “here” where the business makes money and sustains itself.  On the flip side, the entreprenuerial attitude has to get pushed to the back a little bit in favor of practical engagement.

be careful promising the farm

When we started our business a year ago, we were desperate for opportunity. We knew we could do a great job but getting a seat at the table in a crowded market is really tough.
So we went about promising things to customers that would have been ludicrous for our competiton to match: free delivery, razor thin margins, savings of 10 percent compared to the next best nid, etc.
The gamble worked; we ended up building a healthy customer base and we have successfully started a profitable business in a bad economic climate.
That said, we still have customers that receive the same “specials” from a year ago only now those specials cost us a lot of money. For example, we offered free delivery because our staff had enough free time to drive orders to customers. Now, we are so busy that we have to hire a courier at $30 a trip to keep the promise we used to get the customer in the frst place.

When you’re getting started, its understandable to do whatever is necessary to earn business so you can live to fight another day. Just be careful in promising too much. You’d hate for your earliest customers, the ones who made all of this possible, to end up as drains on your bank account due to your early desperation.

growth v stability

Growth takes money. No way around it. To grow your business requires cold hard cash.
On th flip side, when growth slows down you might find yourself with some cash in the bank. While it may be tempting to see the bottom line inproving and celebrate, the truth is that growing your business as long as possible is always a great thing.
Yes, if you own a small shop or niche firm you may turn down business andquit growing. But the real goal should be to swallow up as much marketshare as you can. So you must find a way to not only sustain but promote growth.

As an aside, did you know that john paul wahtshisname from john paul mitchell os the majority owner of patron tequila? He makes 3x the money on alchohol as he does o shampoo.

growth v stability

Growth takes money. No way around it. To grow your business requires cold hard cash.
On th flip side, when growth slows down you might find yourself with some cash in the bank. While it may be tempting to see the bottom line inproving and celebrate, the truth is that growing your business as long as possible is always a great thing.
Yes, if you own a small shop or niche firm you may turn down business andquit growing. But the real goal should be to swallow up as much marketshare as you can. So you must find a way to not only sustain but promote growth.

As an aside, did you know that john paul wahtshisname from john paul mitchell os the majority owner of patron tequila? He makes 3x the money on alchohol as he does o shampoo.

billy mays – rip

Various outlets are reporting that tv pitchman billy mays was found deceased in his tampa home. So that reminded me to post some thoughts on mays that I keep forgetting to post.

Mays is the world’s most effective salesperson. He accomplished this not by selling great products necessarily but by creating a “branding” of himself. The beard, the blue-shirt, the over-talking with his hands, the excitement without hyperbole. Over time, mays became synonymous with product sales on tv. By attaching himself to products that delivered on what they said they would, mays was able to become a trusted salesperson in an industry full of snake oil salespeople. You never saw mays selling crap like the sham-wow or pedipaws. No, he sold simple items that did what they saod: wall hangers, industrial strength stain remover, etc. And when you bought a product he pitched and it ended up working, a little more trust was given in to what mays might sell you next time.

Billy mays was 50 years old.

business is business always

Imagine my surprise today when an email made it to my inbox today fro$ a customer to a non customer expressing the customers displeasure with an order we had coordinated for him.

I thought I had a good rapport with this person. We had an excellent track record of exceeding his expectations,saing him money, and going above and beyond to keep him happy. We never gave him a hard time about being 3 weeks late in paying us. We always worked hard to meet his insanely quick timelines. But the day we misse a delivery by 24 hours he jumped at the chance to badmouth us to a potential new partner.

So the gloves are off. I understand how he operates and now all of the allowances we’d granted him are gone. You work hard to get the benefit of the doubt with someone and they shit at on you the first chabce they get. For shame. But at least I’m reminded of something important: business is business and that’s how it should be. We’ll continue to do a good job for him. We’ll continue exceeding his expectations. But now he’ll be paying the same top dollar forour service as anyone else and he’ll be expected to pay on time for it. . No more charity, no more consideration. Just a sterile working relationship. His loss.