22 Şubat 2008 Cuma


I went to Les Schwab Tires this week. Not only did they do a great job with the pair of new tires I purchased, they found some problems with my good tires and fixed them up at no extra charge. Ive seen this superb standard of customer service every time Ive shopped there and I no longer even bother calling other stores because I know that Les Schwab is a quality outfit. They are a national chain with big marketing money behind them but they havent lost sight of the fundamental truth that good marketing will bring people in but excellent service is the only way to keep them coming back. Far too many small businesses havent learned this lesson. I hope you have.

OK, back to your business startup. Last week you looked at your projected revenue and sliced your share right off the top. If youre still with me, then its safe to assume that your ideas have passed this first step of the financial planning process. If not, then you need to rework your model until the numbers make sense before you can possibly move on.

EBIDTA stands for Earnings Before Interest, Depreciation, Taxes, and Amortization. Its whats left over after youve paid yourself and your operating expenses. What will it take to:

� Hire employees?
� Rent, lease, or buy office space and equipment?
� Purchase raw materials or items for resale?
� Create your marketing (Web site, logo business cards, etc.)?
� Get the legal, financial, and other help youll need?
� Pay utilities, insurance, licenses?
� Cover your many other expenses?

Add everything up and then subtract that figure from whats left over after paying yourself. Remember to always pay yourself right off the top because (you guessed it) your business must serve you, not the other way around.

Having hacked and burned your way through your expected revenue, whats left? If your EBIDTA is greater than $0.00, then your business has a fighting chance for success. If not, then you need to go back to the drawing board to see whether or not you can make it work. The operative question here is not whether you CAN launch this endeavor but whether you SHOULD. Hey, would you rather find out now or would you rather risk losing everything you have in addition to everything youre trying to build?

All of this assumes that your business is up and running at its designed capacity. So far, we havent covered the startup phase. Youre going to need to invest a lot of time and money before your business earns its first cent. Youll then need to keep infusing resources into the business until that magical day when your revenue finally catches up to your expenses, or cash flow breakeven. From there, youll need to pay back the initial investment. Only once all this is behind you will your business be truly profitable.

The trick is to figure out how soon your business will begin earning revenue and how fast that revenue will grow (with comfortable margins of error just in case). You then need to figure out the bare minimum you need to get up and running, when you can add additional components and take on more expenses, and under what circumstances. Dont think that you need a big bang to get started at full capacity. On the contrary, determine the bare minimum you need to get going and how to parlay that into realizing your grand vision.

This may seem a little unorthodox for several reasons; however, think of it this way: Sure, a grand opening is a lot sexier than a slow start, but that sexy beginning requires a massive infusion of resources that greatly increases your exposure and subsequent risk. If you seek outside capital (investors), youll have to fork over a much larger share of your company. Start small and youll need a lot less, which means youll get to keep a lot more. You know me well enough to know why I think the latter is the way to go.

Heres a real-world example: Im building a business plan to greatly expand my own business. My initial guess was that Id need up to $1.5 million in venture capital to get going. I then implemented a phased approach and its looking like Ill be able to start with less than 10% of that amount. Think this will pay off big time down the road? I do too.

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