Business Tips

5 Seasoned, Local Business Owners Give Advice on What It Takes To Run a Business

Building a business is tough. As SBDC consultant Steve Imke says: “It’s not for everyone. There are easier ways to make money.” It can also be one of the most rewarding experiences of your life. The Pikes Peak SBDC is committed to helping businesses of all sizes in the Pikes Peak region grow. So we decided to tap the experts, asking them for advice on what it takes to run a business in this current Colorado Springs environment.

We feature an all-star lineup of successful business owners in the Colorado Springs area. We tried to include a variety of businesses: businesses from the trades, digital, law, and education. If you are thinking about starting a business, or growing your business through the SBDC’s free consulting and affordable workshops, take notes from the pros.

Here are the 5 pieces of advice from successful, long-standing businesses in our area:

There are a number of factors in running a successful business. First you must identify the market for your business. Are your products or services needed? If so, by whom, what and where? Once you identify the need for your business you must do basic market research in order to build a business plan. Creating a business plan helps clarify your strategy, gives you key areas to focus on and a road map to follow. This plan will allow you to understand your gross margin, cost of goods and your end game, net profit. From these vital areas you can identify your KPI’s (Key Performance Indicators). Just like the gauges in a car tell us if the battery is charged or the engine is running hot or cold. KPI’s allow us to monitor the strategic indicators of a businesses’ health. Finally, one individual characteristic that I noticed with nearly every successful business person or individual that is great in their field…discipline! Learn the art of self-discipline!! This will help you push through the challenges a business brings.

Succeeding in business in today’s climate is challenging. Most industries are saturated with other businesses with the same target market and are offering the same product or service. A business owner should determine early on what makes them special or unique and focus on those areas. As with most things in life, this can be a very experimental and frustrating task. Define what your core values are and then decide how to translate those values into the business. Being a female attorney in a formerly male dominated profession, it has taken some time to determine what makes my business different from the many other law firms in the area and determine what value I can offer my clients. Find your niche to stand out among your competitors and provide extraordinary customer service, some days will not seem like good days, make the good days count.

Build your reputation with communication: Word-of-mouth is a powerful lead generator – or lead killer, and it’s all based on how your client perceives their experience with your company. Great communication can mean the difference between a happy and an unhappy customer, and it relies on these three things: method, timing, volume.

Method: Choose the method of communication that best fits your customer, whether phone, email or in-person. Don’t know what they like? Ask them. Skip email for sensitive conversations. You can always follow up with an email summary if you need it in writing.

Timing: Proactive communication builds positive impressions. Touch base on a regular basis with clients, even just to check in. It’s better for your business than waiting to hear from them.

Volume: Particularly in a high-tech field, we work hard to keep clients informed but not overwhelmed. Pay attention to how your clients react (or don’t) to your efforts, and calibrate the amount of detail they get accordingly.

Quality communication is art, not science. Try new things. Admit when you didn’t hit the mark. Don’t let imperfections get you down. Like most things in business, your communication reputation is a long-term game.

Being a company that has been in business since 1955, we have seen our fair share of volatility in our industry. The key to our success is having the ability to pivot to the need of our consumer based on the current economic climate. In the most recent housing crisis we focused on building our service department as new homes declined. To keep our business running we kept our costs and prices low which attracted and retained new clients. The focus with new clients is maintaining a sterling reputation, which is accomplished by employing qualified candidates that have the same passion to provide consistent quality service that is expected of us. To separate ourselves from our competition we encourage our employees to be creative and provide us with recommendations on how to improve our current processes. As a management group we always think long term but focus on what is necessary to be successful each and every day.

The definition of small business success is debatable; however, there are some undeniable desired qualities. Successful business owners identify quality products/services that the community wants or needs, even if the community does not realize it yet. Next, the entrepreneur creates a detailed list of the reasons the “why” is more important than the “what”. This list/plan maintains the passion, excitement, dedication, and honesty necessary to be a successful business owner that community members will recommend. If a small business owner is not passionate about his or her product or service, how can he or she expect someone else to be enthusiastic about it? Successful small business owners are positive risk-takers that provide the best product or service at a reasonable price. A few additional necessities of a successful business are making smart hires, focusing on what the company does best rather than spreading too thin, and mastering the budget to avoid going into debt.

Remember, the SBDC is committed to helping you grow. If you’d like guidance or help growing your business—sign-up for our free consulting and affordable workshops.

We’d love to meet you.

3 Risk Levels to Becoming a Business Owner

 

By Steve Imke, SBDC Consultant and Small Business Specialist

Most of the clients I see want to start their business from scratch, but there are 2 other options to becoming a business owner. The first option is to buy an existing business and the second is to buy a franchise. Clients often tell me that these two options simply cost too much. They argue that they are choosing to start from scratch because it is the cheaper path.

At that point in the conversation, I often remind them that starting a business from scratch is by far the riskiest way to become a business owner. In fact, statistics from the US Department of Commerce say that 65% to 90% of start-up business are likely to fail within the first five years. In other words, only 10% to 35% will have a chance of success. The principle reason for this high failure rate is that most businesses take on too many fixed expenses early on. On top of that, their revenue ramps up slower than planned and the business simply runs out of money before breaking even and turning a profit.

One client who had previously been a pilot in the US Air Force summed it up when he said,

“I guess they had too much payload and not enough runway.”

Entrepreneurs that buy an existing business have a 90% to 95% chance of still being in business after 5 years. The principle reason for this higher success rate is that when you buy an existing business, you already have revenue from customers and have a predictable level of expenses. You know these expenses are less than the amount of revenue, which leaves the business some profit and cash flow to work with. Moreover, existing businesses often have employees that already know their jobs, are well trained, and the business has proven processes to capture customer value.

Entrepreneurs that buy into a franchise concept have a 90% chance of still being in business after 5 years. Although franchises need new customers to generate revenue, the entrepreneur is often buying brand awareness and a proven system. Moreover, most new franchises are able to reduce the cost of goods sold by taking advantage of the economies of scale established by the franchiser since they have franchise-wide buying power.

When you buy a franchise or another person’s business, you also have access to someone who knows both the business and financial model as well as someone who has a vested interest in your success. Obviously this is not the case with start-ups. Let’s not forget that the primary goal of business ownership is to make money for the owner.

Existing businesses make money on day one. A successful franchise will earn the owner income not too long after starting up. However, a start-up, even one that survives, may take months or years to begin to pay the owner a salary for working in the business.

When it comes to business ownership, have you considered buying vs. starting from scratch?

For more articles like this, visit Steve's Blog here!


 

 

 

 

 

The Hidden Value of Crowdfunding

By Steve Imke, SBDC Consultant and Small Business Specialist

Traditionally, entrepreneurs had 2 options to raise funds to start their business. They could either get a loan or give away ownership to investors. Because of the risk involved in the early stages of a small business, founders had to give up large blocks of equity to entice an early stage equity investor. On the other hand, having to make interest and principle payments for debt financing can, at best, slow growth or even cripple a company during it’s fragile early stages. Enter crowd funding, a viable option to preserve equity and eliminate the need for debt.

In a real estate deal a few years ago, a builder I know needed to raise capital to build a new residential tower in downtown Denver. With a mock-up of the finished building, some computer generated images, and some floor plan layouts, he pre-sold many of the units at a discount to come up with the seed money he needed to get the project off the ground. Crowd funding shares many similarities to the strategy used by the builder to raise capital and validate the concept.

In many cases, a product based crowd sourcing campaign allows people to pre-order the product before anyone else. This campaign accomplishes several vital steps for a company still in its early stages.

1. It provides the company with the capital it needs to build the first wave of products without either giving away equity, or pay back principle, or pay the lender interest. These benefits occur when equity is most under valued and capital preservation is most needed.

2. It validates the hypothesis that consumers are willing to exchange cash for the product. Proving the value of the product is a major tenet of the business model canvas and for business that employ the lean start-up methodology.

3. It can raise to the surface demand for new and innovative products that might be hidden without a large number of investors actually seeing the product.

4. It attracts early adopters who become social activists, evangelizing the product to their networks and raising product awareness.

5. Tiered raises create excitement. Excitement can create a valuable feedback loop to further product improvement by exposing the product to early adopters, the people who are most likely to provide feedback.

6. It provides funding for a particular product and not the company. It is like a direct investment in a single oil well rather than buying the diversified portfolio of an oil company, such as Exxon.

In addition to pre-order campaigns, some crowd funding campaigns allow for micro ownership of an early stage company. This creates a whole new class of investors who can buy into companies before they become large and go public.

Before crowd funding, only accredited investors (investors with more than a million dollars in net-worth or investors that earn over two hundred thousand per year in wages) could get involved with ground floor investments. Prior to crowd funding, companies who tried to raise money from unaccredited investors would run afoul with the Securities and Exchange Commission (SEC). Crowd sourcing allows small investment levels that bypasses SEC oversight, opening the opportunity for micro investors wanting to buy into early stage companies.

These micro investors hope these businesses will grow substantially. They hope that these businesses will then give them a significant return on their investment when the company experiences a exit event such as being acquired or going public. Before crowd funding, even accredited investors would have to either invest large sums of money in only a few companies, which is very risky since there is limited diversity in invested capital, or find a venture capital fund to invest in and lose ultimate control over the specific investment allocations in new companies. With crowd funding, a small time investor with only a few thousands dollars can invest in dozens of hand picked companies and achieve investment diversification, a domain only previously available to venture capital principle investors.

Setting up a crowd funding campaign generally requires a good video demonstration of a sexy new product. Need a little help getting your idea from conception to a point where you are ready to begin a crowd sourcing campaign? No problem! Companies, such as Quirky can help get you there in exchange for micro equity stakes.

However, the funding of your venture may be the easy part. The real work comes when the new company or product gets funded. Now the owners must produce the product. To do that, they must now manage a long supply chain and learn to run a real business.

For more articles like this, visit Steve's Blog here!



Turn Your Financials into a Powerful Management Tool

How many of you have seen the ”Dave” Staples commercial? It shows “Dave” serving in all the positions of his company, asking “Dave” when “Dave” needs help.

As business owners we serve in so many capacities, it is difficult, if not impossible to do everything well. When we get pressured, we get stressed. Negative stress (yes, there is positive stress) can cause exhaustion and illness often follows. Most of us have experienced that sinking feeling when we realize we are “in over our heads.”

When it comes to our financials we try really hard to get everything not only in the system, but in the right bucket. Time is often our enemy. Invoicing gets behind which can cause a cash flow crisis. The ‘taxman cometh’ and we might not be ready.

Whether we do our own books or have them done, we are ultimately responsible for the result. Although responsibly managing the ‘books’ was probably not the reason we started our business, it will be one of the primary reasons we succeed in business.

It all starts with organization. Chaos has no place in a financial system. It starts with a Chart of Accounts that actually matches the business and more importantly you, the owner. The second step is imputing good information and most importantly getting the data in the right place. Once these steps have been taken, you can then produce various reports on a regular basis. Those up-to-date reports can provide the information needed to find the answers to the following questions and more:
  1. Are my products/services priced to make a profit?
  2. What is labor actually costing me?
  3. What are my true production costs?
  4. Are my overhead costs under control?
With this financial information, you are now empowered to make key strategic business decisions based on fact not hope. Having access to these answers put you in the driver’s seat of your business. That control alone can bring down your stress level. Take action today to get control. If you need outside help, get it. Make sure if you get help with your financials, you stay involved in the process. Learn what you need to know about financial management, so even if you choose not to do it yourself, you can inspect what you expect and know it is being done correctly.

This week’s tip brought to you by Nancy Barnett and the Denver Metro SBDC.