From the starting line…
Operations will always have some negative period of time. These times and trials are what business owners anticipate. You’re a business owner now, or an entrepreneur who’s making their start. You may have a partner, family, or friends coming into business with you and everyone must work to create positive reactions to these events.
Why success statistics get thrown around:
Now the ‘statistics’ on success and failure of businesses are skewed drastically. Which means they don’t mean a whole lot and you’ll eventually find something in your favor. It’s beyond the statistics; create a plan that anticipates the worst. This should be what you or you and a business partner as a team are fully knowledgeable of. Success in planning is the entrepreneurial skill that determines a businesses life span.
Be someone who doesn’t want to buy in
Plan by embodying the negative person that would turn down your proposal. You’re not pitching at this point, there are so many avenues to get a business off the ground that the steps of finding funding are already in the plan. We want to target the after, and someone has to ask the difficult questions. What would happen if something were to change your relationship with your partner? How do you anticipate to end the life of the business?
What can you Control?
How will you react to an new threat in the external environment? The external environment is uncontrollable; how you react is completely controllable. The success of a business is within the direct influence of the owners. You can create a successful and thriving business.
Control the greatest threats
One of the primary reasons businesses fail is living outside of the means of the business. Just as your household your business needs a strict budget that allows for unforeseen happenstances. Things break down, need repairs, and you may have to higher people that require a higher salary than you intended but you need their experience. Planning for the financial stability of a business in the beginning should be the same as budgeting for the first time you moved out on your own. You can do it, there’s no doubt that you can create a successful business.
Control the advantages, Use Them!
For those who carefully plan: I’ve seen businesses put away twenty percent of their income each period for the three years following the break even point. I’ve also reviewed businesses that placed a dollar amount aside. The purpose here is that this is an account to be utilized for unexpected financial need. The company that I worked for that delegated twenty percent to this account experienced a break in that end-all cost the company forty thousand dollars. They were properly insured but almost twenty thousand dollars was in building damage that the insurance wouldn’t cover. That’s were this back-up account came in.
Past financial planning, seeking out personal situations that could be changed or altered is the next most important concern. What is more difficult in this position is that you’re now working with people not numbers.
Partnerships are Hard
In a perfect world, business partners agree simultaneously on every subject except how they take their coffee. The downfall is if you and your partner are so similar then you are both contributing the same thing and now one of those people is useless. In a perfect business world, partners develop each others skills and feed their ideas. Supporting, criticizing, and debating build well operating business partner relationships. These are the most difficult to maintain relationships because of their complexity. There must be an extenuating level of trust and respect.
The ‘Just In Case’ Clause
When beginning a business with a partnership before a business plan is completed there should be a partnership dissolution contract. This is like telling your soon to be spouse that you want the most frigid and clear cut prenuptial agreement available. You want to protect yourself from the person that you’re investing a good part of your life with. The idea behind these agreements is not to tell your partner before you even open for business that you want to jump ship if times get hard. It’s to establish the ideals of the partnership and what should happen if you and your partner or partners go separate ways. Yourself one day, could see that your partner is doing the bulk of the work and that you’re not really contributing much, or that you have a passion for another project that will take the most part of your time. These contracts are to keep partnerships fair, and leave options out under any circumstances not simply that any one party was taken advantage of or mistreated.
Anticipate an Exit
Finally, an exit strategy should be included in your business plan. Yes, you should present this when searching for funding. They may not always be as critical as potential investors can be, but they do want to know how you intend to pay them if your business doesn’t work out. Now not any one exit plan works for every business. Some popular plans are to just liquidate, pay off the debts and call it quits. Others hit the public market, or are sold to friendly buyers. You should decide this before you open when your company debt should be at its highest, and while there are only good terms between yourself and potential partners.
You’re Prepared for the Worst, which leaves only the easy parts!
After getting the hard stuff out of the way, you’ve protected yourself from common downfalls in starting your business. These decisions break companies, and you already have it figured out.