Business Consulting

So – you’re stressed beyond belief. The business you’ve dreamed of your whole life has shown moments of promise – maybe even moments of brilliance – but you just can’t seem to keep it going. You’re trying to keep customers happy and deliver on the promises you’ve made. You’ve worked your ass off to get this far, and to see it all slip away is more than you can bear. You have one eye on the bills you owe and the debt you ran up (by the way that payment is 15 days past due). Your other eye is on your dwindling bank account balance. You know that payroll happens again this Friday and you’re not sure how you’re going to pay every- one. Let’s take a pause at this point to paint this picture in a different light. Think of it this way: You’re in a boat on a river. The boat has started leaking and it’s taking on water. You’ve been busy bailing with one hand and rowing with the other for hours, or is it days? You realize that you haven’t even looked up for quite some time, so you’re not sure how far downstream you’ve drifted. Come to think of it, you’ve been hearing a roaring sound for awhile now, and it’s gradually been getting louder. It’s a waterfall. Quickly now – you may have only moments to make a few key decisions. These decisions are going to dictate whether you reach safety, or tumble over the edge. What do you do? Even though things seem dire and you can’t bear the thought of taking a breather at such a critical time, you may well pitch right over the roaring precipice – still rowing and bailing like there’s no tomorrow. If your business means that much to you, you’ll take the time right now to survey your options. Assess your situation • Specifically, this assessment should include 3 things: If you haven’t done so, sit down and do a quick and dirty ”cash received” forecast. Sales on credit don’t count here – only cash. It doesn’t matter if this is written on a cocktail napkin or in a fancy spreadsheet. Do it. I’ll wait while you write ”cash received” at the top of your napkin. Done? Great. You need this to show how much in cash you will receive EACH DAY for the next 30 days, so you’ll need a wide napkin that will hold 30 columns. At what rate are you spending cash? Highly paid MBA’s call this your cash-burn rate. I suspect that’s because MBA’s are secretly excited about the concept of burning cash. They just know it would make the most beautiful glow. – Anyway – we’ll call this ”cash outgoing.” In our boat example, it’s where you stick your finger in the water to see how quickly you’re being carried toward the waterfall. Turn your napkin over and fill this out with a number for each of the next 30 days. It includes any and all money that will be leaving your account. If you’re really not sure (this is very common), that’s ok. Start by looking at your last 3 months’ bank statements. Identify what each withdrawal on those statements was for. Then just decide if each one of them is going to come out again in the next 30 days. If the answer is ’yes’ – or even ’maybe’ – it goes on the napkin. Mind the (cash flow) gap. (Just take the daily totals from #1, and subtract the daily totals from #2). Any days that this is a negative number, you’re ”burning” cash. At some point, you will run out. Based on what you see from #1 and #2 above, you now know when that will happen. If your cocktail napkin shows that you’ll still have some cash at the end of the 30 days, great. You’re farther upstream than you thought. You’ll want to get 11 more napkins, and do monthly cash-flow forecasts for 11 more months. (these are easy compared to what you just did – just one monthly total for cash in and one for cash out). If, on the other hand, your cocktail napkin shows that you’ll be running out of cash in less than 30 days, you have something specific to work with (instead of that nasty feeling in your gut telling you that you were in trouble, but not how much trouble or when.) Believe it or not, this is better than not knowing. Pause briefly to think It’s time to clear your head. Get somewhere away from distractions, somewhere different than where you might usually go. Turn off the cell phone and anything that beeps, buzzes, or otherwise demands your attention. Close your eyes, take some deep breaths, and center yourself. This is where your business lives or dies. Understand that either outcome is possible. It is easy for me to say this, but try for perspective here – you are not actually going over a water– fall. No one is going to die if your business runs out of cash (Unless… you didn’t borrow from Vinnie, did you?) The business might die, but real people won’t. Prepare yourself for the possibility that your business may not survive. Got that unpleasant possibility processed? (or at least begun to?) Okay. Here is where the rubber meets the road. If your business is going to survive, this is how it has to happen: Take action Step 1 Remember that cash gap you identified above? Double it. You cannot operate with exactly zero in your bank account. By adding this cushion, you provide yourself a realistic level of cash to move beyond this 30 days. This number you’ve identified is how much cash you need to raise right now. Step 2 Look around you for options. You need cash, and now you know how much. Find it. (Legally, please). Some ideas for potential sources: Uncle Joe who recently retired and has some savings; Your bank or credit union; Friends. Here’s an often-overlooked option: call successful business owners you know and respect. They have likely experienced what you’re going through and may be willing to help you – especially if you can show them how they have a vested interest in seeing your business succeed. Depending on which one of these sources says ’yes’, they will likely want to see that you have a plan to move past this period of crisis. If your napkin has tear stains or is excessively wrinkled, now would be a good time to consider upgrading it (unless mom is your funder, then tear stains may have upside). Step 3 Get help. There is a good chance that you’re very good at your craft – whether that is baking cupcakes, brewing beer, building homes, designing websites, etc. In cases like this, what you need is oxygen. You need room to move around your business, helping where needed. Your customers need to know you’re there. Your business partners and vendors need to know you’re on the front lines working your magic. Remember why you started this business? Whatever you were passionate about in the beginning, do that. Find people to help you do things you’re not good at or not passionate about. You cannot be all things to all people, so the chances that you can continue to be on the front lines and operate your business (row and bail that boat), while at the same time making the additional plans you need to move beyond this 30 day period, aren’t good. It isn’t that you can’t figure out the finance and operations pieces of this puzzle, it is more a matter of making the best use of your time and talents. What gives you the best chance at success is a turnaround team. Here are some places to find your team: Me A local bank – specifically smaller banks. Look for the senior lenders and relationship people SCORE or Executive Service Corps A local accountant A local businessperson willing to serve as a mentor I would avoid having Uncle Joe on this particular team. What you want here is objectivity Don’t make your team too big. It needs to be as small, as nimble as possible, and willing to help take you beyond this 30 day critical window. If you aren’t in dire straits, now is the perfect time to build your team – BEFORE you hear the waterfall. Who is on it? I will gladly discuss this with you free of charge. If I cannot help, I will tell you so (nicely). If I can help, we’ll talk about how. Whatever happens, you deserve congratulations for having the courage to face the job ahead.

Don’t let money run the show. I’ve spent most of my adult life around money. So I don’t sound like a complete pompous ass here, let me clarify: I’ve spent my life around OTHER people’s money…Lots of it. I’ve been a stockbroker & Financial Representative, I’ve been a bank manager in charge of lending money to individuals and businesses, and I’ve been a Chief Financial Officer – in charge of the financial workings of a small to midsize private company. If there’s one thing I’ve learned in all those years of managing finances it’s this: Money, like alcohol, is a wonderful servant but a terrible master. It doesn’t matter if you are a company of one or thousands. It doesn’t matter if you are a non-profit or a manufacturer or a retailer. The basics are always the same. Money can either be a servant or it can be a master. People are generally much too intimidated by finance stuff. Accounting seems like some secret art with arbitrary and confusing rules. It doesn’t help that most many finance professionals love to perpetuate the b.s. notion that it takes a real master to read your financial tea leaves. Nope. What I love most is when I meet with a client who is mystified or intimidated by the financial side of their business…. Then helping take the sting out of it for them. They’re often embarrassed to admit that they have no idea what their own reports even mean. If they’re a small business, they sheepishly turn over a shoebox full of receipts to their accountant every so often and then wait to be told how much tax they owe. You can change that and put yourself back in charge. I’ve consulted with $50 million companies that felt the same way. The receipts weren’t in a shoebox­–the software is usually more expensive and capable at that size, but the psychology is the same. Company boards, presidents and senior managers are just as intimidated. This leads to trouble way too often. I love accountants, bankers, and the like, but they shouldn’t be running your company. You should. Make the accountants give you information that MEANS SOMETHING. That’s what they’re there for. When you’re setting up your small business with some reports to know how you’re doing, keep it simple. Think about what it is that you need to know at a bare minimum as an owner. You can let your accountant worry about fancier stuff, but as a manager or business owner, have just one or two key measurements you keep an eye on weekly or at least monthly. Here are some basics that will keep you out of trouble: Cash. How much is: Here now? Next 30 days on the way in? (Accounts Receivable) Next 30 days on the way out? (Accounts Payable) Profit. How much do you earn on each: Product or Service When do you break even each year? (optional) Key measures. If you love this sort of thing or if you are just curious, I like to look at a few key ratios to understand how your business is performing. Much like getting lab work done at the doctor’s office, these numbers tell a story. Here are a couple measurements I frequently look at: Efficiency. How hard is your business working for every dollar of profit? – in other words… If you barely broke even this year and had to work your tail off to get there, then it’s not likely you’ll be able to maintain that pace. Just like a car engine that’s been running with the pedal to the floor, eventually, it will break. Your business will do that as well if you don’t make a change. You need a bigger engine or a lighter car. ROI. What is the return on investment that your business provides? If you think about it, your business should generate a return (or a loss sometimes). If you have 100,000 invested in the business and you make a 1,000 profit each year, that’s a 1% return on the money that’s invested. If you do that every year, you should reconsider. A bank will pay you more than that just for doing nothing. These are just a few examples. Different types of businesses will naturally benefit from looking at different indicators. The point is that you can develop a dashboard­–just like your car–with a couple of “dials” to check from time to time. This dashboard will give you (at a glance) a quick idea how your business is operating. Just don’t get carried away. Remember that you’re here for a reason. What is it? Let that reason be your guide. Don’t let money dictate how you run your business. Yes, you have to behave responsibly if you want to stay in business, but money should be a tool to accomplish your mission–not the other way around. Once you identify what it is you’re here to do, go crazy. Get creative. Dream as big as you can possibly dream. What could your idea be? How many people could your business help? Once you have dreamed big enough, we can fill in the blanks and figure out how to put money in its proper place: as just another tool in your toolbox. Remember: Money is the servant. YOU are the master.

Series: Figuring out your Personal finances. One of the things I do is help people figure out their personal finances. From planning for retirement, to figuring out how to buy out your long-time business partner, money is always a piece of the puzzle. People let it get too out of proportion, though. Money is alway an issue, but it need not always be THE issue. The key – in my experience – is your mindset. If money and everything about it seems stressful, negative, and an argument waiting to happen, it’s because money is not in it’s right place.  This happens a lot, and it’s nothing to be ashamed of. The best part is that you can fix this; at any time and no matter how bad things seem. Here’s how you do it. I said that it’s all about a mindset, right? Think about these words:          ⁃        can’t          ⁃        expensive          ⁃        won’t          ⁃        bankrupt          ⁃        without          ⁃        without These words make you feel bad, no? In fact, they make me feel like shit just reading them. They’re words I used to use when I occasionally tried to get my own financial house in order. Today, I have zero debt. I mean none. I have some respectable savings, and some investments – both retirement accounts and regular taxable ones. Right now I don’t make much money – in fact, as a writer and consultant, what I do earn is very sporadic. Thankfully it’s growing, but thanks to the overhaul I did a few years ago, I don’t stress about money. The shitty words I showed you above don’t come around anymore when I think about money. Here’s what helped me, and has helped several of my clients and friends reframe their relationship with money. Most of us (me included) love new things. We might love nice cars, tech gadgets, fast food or fine dining. We might love to continually redecorate the house, travel, or horses. Any one of these can be tremendously expensive – and most of us like more than just one of them. Enter the problem….. The Scarcity Mindset. The Scarcity Mindset is a real bitch. It’s responsible for continuing to raise hell in our lives. We get divorced, bankrupt, addicted to drugs, food, shopping. We get fat, sick, depressed, and bitter because of it. The lousy part is that it’s all a lie. The scarcity mindset is just that. We’re caught up chasing something we can’t name. Let me help you out. I’ll name it for you. Happiness. Yes that donut makes me feel pretty fucking happy sometimes, but it’s (I imagine) like heroin-happy. I’d bet one of my readers can back me up on that since I haven’t tried heroin. It ain’t about the donut. It’s about the happy. All you have to do is take out the donut and replace it with your go-to habit. What is it? Porn? Gambling? Work? Yeah, I know this sounds coarse. It sounds rough around the edges. Know why? Because life is like that. Life’s tough, right? I know. Mine’s tough too. If you ever see me holed up in the back of the bagel shop with my face buried in a bag of chips at 2 in the morning, do me a solid and pretend we don’t know each other, ok? I’m in a moment of weakness here. Ok. Back to the money thing. Here’s the deal. If you never take the time to unplug from the world and all the bullshit expectations you put on yourself and figure out what REALLY makes you happy, you’ll never get out from under this money thing. I’ve worked with people that were thrilled beyond belief to have thirty bucks in their new checking account – and I’ve worked with people investing tens of millions of dollars with complex hedging strategies. The amount of money you have does not matter. Let me say that another way: If you’re stuck in a Scarcity Mindset, you will NEVER HAVE ENOUGH money. Never. The only way to break this cycle is to forget about the money and focus on you. In the next part of this series, I’ll take you through a simple exercise you can use to get yourself right. I’ve used it myself, and it works.

Your partner just did that annoying thing AGAIN. This has to be the third time in the last few weeks and it’s driving you insane. How can he not know how ridiculous and insulting it is when he does that? You’re furious and you make darned sure he knows it. Sound familiar? Everyone has these moments – Especially in business, but at home too. Here’s the thing: If something isn’t ok with you, you have to say so. No matter how obvious you think it may seem, you have to actually communicate (out loud and using words, not eye rolls, foot stomps, glares, or sighs). When is the best time to let someone know it wasn’t ok? The very first time it happens. When it’s still small. Why then? Because it isn’t a loaded issue at that point. It’s a simple reset. Something didn’t go like you expected, it’s not a big deal.  You aren’t angry over the countless times it’s come up. You aren’t frustrated yet. You just saw something that you think should deb handled differently. Likewise, your partner isn’t dug in yet – entrenched in his behavior either. He isn’t puzzled or angry or frustrated himself because you don’t see things his way. You have insulted each other, you haven’t yelled or screamed or gotten personal.  At this point, it’s an easy conversation to have, especially compared with the emotional, possibly business-ending one that I get called to help defuse months or years later. If it’s a personal relationship, you may just give it a chance at becoming something amazing.  Believe it or not, it isn’t unusual for teams to have this problem. It’s also not automatic that teams figure it out. Personalities dominate, anger over perceived slights and insults festers for years without ever being resolved – even in successful companies; even in “successful” relationships. It doesn’t have to be that way… I promise! I help startup teams and companies resolve conflict. Lack of this basic learned habit (communication) is to blame for the vast majority of cases I’m called to help with. Good communication is more habit than skill – in fact, I see good communicators suffer from lack of a routine more than quiet types who know they have to work at maintaining connection. A typical scenario like the one at the beginning of this article happens because the owners or partners are alike in many ways. Because we share so much, we are led to a false sense of connection and we assume we will each see problems the same way. We assume that two people, facing the same problem, and sharing access to the same information, will automatically decide the same thing about what to do. What happens when your partner (spouse, co-owner, boss, etc.) does something unexpected? You’ve just finished talking about how tight the household finances are, and your spouse goes and spends money you don’t have on something you think is a luxury you can’t afford. The first time this happens, you’re probably puzzled more than angry (ok, you’re probably angry too). But by bringing up the issue NOW, though,  you allow it to turn into a productive conversation and play off each others strengths. Maybe the money was spent on a networking event that holds big potential for new business, for example. Now you’ve just flushed out an important question: Is it ok to spend money to grow the business? Maybe it is.  By having this “unloaded conversation” now, you can setup a healthy, productive routine. I suggest you formalize this routine and do it weekly. Make a standing, simple agenda that forces each person to bring up 2 simple things: Expectations for the week ahead and a *brief* review of the previous week. Now it’s not personal, you’re just going through the agenda you’ve both agreed on beforehand.  By each being open to understanding the other’s view – just for a few minutes – and not belittling or threatening, you foster useful dialog and conversation. A weekly meeting like this should be short and sweet – twenty to thirty minutes at most. This takes practice and it means that you have to bring up things that feel uncomfortable, but you’re worth it. Your business is worth it. Your relationship is worth it. I coach clients to use this routine, and I use it myself with my spouse.  It doesn’t always happen, and it isn’t a 100% success, but it DOES give us a framework to use when the important questions come up.  Which do you choose… a few words now, or a breakdown / blowup later on? Personally, I’ve been down both roads. I know which one I prefer!

Here is how to make sure your business will fail The startup world is one of big dreams, world-changing zeal, and unstoppable optimism. This is one reason it is one of my favorite places to operate. The ideas and the energy are contagious – in a good way. With all the boundless energy and optimism, though, this end of the Dreamer-Doer spectrum is no different than the established, mature end of the spectrum. Dreamers and their businesses are reliant on cash, plain and simple. 
In my years of small business counseling, lending to businesses, and managing the finances of a growing company, I came to recognize that, like it or not, cash is the foundation that our hopes and dreams get built on. Every single time, businesses starved of it will fail. Every single time. This is often one of the least fun topics to cover when helping a dreamer become a doer, but it is one of the very most essential. Let’s take a look at a common scenario. Tom is a fantastic home-brewer. He has been perfecting his craft for a few years, and has started brewing his signature recipes in larger batches for sale and gifting to friends and relatives. A friend of Tom’s owns a bar & restaurant and would love to start selling Tom’s beers on draft. Until now, Tom’s purchases of brewing equipment & supplies have been financed out of his salary as a market researcher – Tom’s day job. A couple of times he has used credit cards to pay for brewing equipment he needs, but he has kept things small to this point on purpose. Now Tom has allowed himself to dream of quitting work for a large corporation and making a go of it as a brewer. He convinces a friend to invest with him in a cool new microbrewery idea. Together they pool the cash in retirement accounts, savings, and the limits on their personal credit cards. $53,000 later, they have some warehouse space, 2 big shiny stainless steel kettles and a bunch of pumping and monitoring equipment. They have a little left in the bank, and have secured agreements with Tom’s bar-owner friend, as well as a couple  other bars in town to distribute their product. He’s not sure how things will go since he hasn’t ever done this before. He hopes to be able to pay back the money he borrowed, but he is so busy making beer, he hasn’t had time to figure out how the finances are going to work. He checks the balance in the bank account every so often and as long as there is some money in it, he’s guessing he’s okay. Instances like this one sometimes end well. People also sometimes win lottery drawings. Both are bad ways to plan for your future. 
If you want to make sure this does not happen to you, get some assistance. Whether you contact me or some other experienced professional, it is important that you not neglect the lifeblood of your business. Although cash planning may not be inspirational, it is the backbone upon which your dreams are built.