When you get some quiet time, when you have a few minutes to yourself and you think about your business, do the numbers scare you?  Whether it’s your bank account balance, your taxes, your profitability – are those financial numbers scaring you?

Do you ever wake up in the middle of the night sweating because of the numbers?

While that may or may not be true for you, it is sadly true for a lot of business owners.  They love their business, their clients and even their employees but they don’t have a good relationship with the financial numbers around their business.

The good news is there are ways to deal with the fear (and the numbers) and if you can get past this issue you will find your self in a position of power and control that is probably hard to imagine right now.

The first thing to figure out is if it’s really a fear (or lack of understanding) on how the financials of your business work, or is it a fear that it will be bad news.  That knowing the actual details might confirm a significant problem with you business.

If it’s a lack of understanding, then you will need to invest at least a minimal amount of time in some targeted education.  You don’t need an accountant’s level of understanding – but you have to understand the basics of money in and money out.  From there, the end result of next steps is the same – once you have a basic understanding of what’s actually going on, even if it’s bad news you’ll at least have the data you need to start fixing it.

3 Things you must do to get comfortable with the numbers

1.  Find a finance person who gets you and gets business!

There are a lot of accountants, bookkeepers and finance folks out there and most of them are pretty good at numbers.  However many of them aren’t necessarily good at business (some are strictly tax focused, some just aren’t very sophisticated).  The other problem with lots of the finance support out there is they aren’t very good with the people element.  If spending time with your accountant is painful, then you’re probably not getting much help there.

The good news is there are finance professionals out there who are great at what they do and enjoy working with people.  I know quite a few of them, so if you’re looking I’d be glad to make some introductions.

One accountant who I would highly recommend from personal experience to any small business owner (especially those who are growing and/or new) is Mike VandeBrake from VandeBrake and Baker CPAs.  Within a few minutes of meeting Mike you’ll be struck by a couple of things – what an overall great guy he is and how quickly he understands what you’re doing and what needs to be done when it comes to financial issues.  He does taxes, but he also helps business owners understand the financial fundamentals.

2.  Create a profit plan

A profit plan is similar to a financial forecast or a budget – essentially you lay out revenues and expenses that you plan to incur over the course of the year.  The kicker is, in addition to the numbers, you also lay out the assumptions behind each line item. 

For revenues, break it down into your different products / services and where you expect that money to come from.  It could be as simple as expecting to grow 10% (4 new clients) in the next 3 months selling X. 

Expenses are typically a little easier to project (once you have actuals), but make sure they match up with the assumptions you list for revenue (i.e. if you’re adding 4 new clients, what are the typical costs associated with delivering to new clients…and you should also include costs for marketing and sales to get those new clients).

A profit plan isn’t something you can throw together in a few minutes, but it is a very tangible planning tool that brings together most components of your business into a sharp focus.  A profit plan is also a perfect way to honestly assess your opportunities – if you’re showing a 50% jump in revenue, but you don’t know how you’re going to get there, then you’ve got some work to do (or you need a new plan).

3.  Get a handle on your cash flow

This overlaps a bit with creating a profit plan and having a finance person you can count on.  However for many business owners it’s worth having a specific 90 day cash flow forecast that not only projects how much money is going in and out, but when that money is going in and out. 

There are a lot of business owners who are struggling to make monthly obligations (payroll, paying vendors on time, etc.).  The first step is to have  a clear picture on how things really stand (how bad is it) and then if needed, look into strategies that can help you address the cash flow side of things.

If you have outstanding receivables and you need cash now, one strategy to look into might be factoring (selling your receivables to a 3rd party) – if that sounds like it could be a fit for you, I’d recommend contacting my friend Jerry Becnel at Magnifunding Capital to learn more about it.  He’s a good guy and factoring can be a great way to give yourself some breathing room.

For more on how to really get started on controlling your cash flow – check out the discussion on starting with cash as your first priority that I wrote a while back.

You’re not alone if you’re struggling with the numbers!

It’s common to be uncomfortable with the numbers of your business…very few people got into their business because they wanted to work on the financials.  However if you want to succeed in the long run, you have to know exactly what’s going on and your numbers are the best way to do that.

Do you struggle with your financials?  Do you know of someone who does?  Share your thoughts here on any resources or ideas on working with numbers that you’ve seen before.

Shawn Kinkade  Kansas City Business Coach

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We’re at that time of year when the winter blah really sets in (I’m sure February is the longest month of the year!).  We’ve at least had a couple of days that weren’t gray, but it’s certainly been looking more like Seattle then Kansas City.

It’s cold outside – so here are 5 diversions on your computer that might help brighten your day up.  Shake it off, have some fun and check out some cool stuff (some with a local tie)!

1.  Amazing Shot!

You’ve probably seen this sometime in the last few days – it’s been all over TV and the internet, but in case you missed it – you need to check out the vide of the Olathe Northwest Girls Basketball coach who’s getting set up for a prank.  The students are challenging him to shoot a 1/2 court shot…blindfolded and if he makes it he wins Final Four tickets.  The prank is that the students are going to cheer wildly when he shoots to make him believe he hit it.

The drawback to their plan?  He actually hits the shot!  It’s unbelievable and a lot of fun to watch.

If that video doesn’t work, here’s a link with the video along with some additional coverage:  http://onwravens.net/media/www.onwravens.net_media/The_Shot.html

To complete the story, it turns out someone has now donated Final Four tickets so he actually did win!

2.  More Basketball fun

It’s not as dramatic, but it will likely waste more of your time!

Check out this free online game of Basketball!  The idea is to make as many baskets as you can during a timed session.  It takes a few tries to get a handle on how to shoot, but once you make a couple of baskets you’ll be hooked.  It’s challenging and addictive!

3.  A Flight of Imagination!

Remember the Jetsons and their flying cars?  Apparently NASA engineers have developed a concept of a personal flying vehicle that could be built any day.  It’s an all electric vehicle, so it’s quiet with no pollution and although the range is only 50 miles on a single charge, it can go 140 miles an hour at cruising speed!

I’m not sure who would really use this, but it’s definitely got a cool factor to it!  You can learn more in Wired’s article on the Nasa Puffin.

4.  Jump start your travel planning!

It’s always good to have an inspiration when it comes to day dreaming about cool places to travel to.  This article on the Top 33 World’s Strangest Buildings might just inspire you to find some cool places to visit.  There’s a Kansas City connection here as well (you’ll have to click through to figure out what it is).

5. Pigeon Impossible!

All of the other stuff here is great, but this one is really spectacular!  I’m a huge fan of all things Pixar and they clearly inspired the team that created Pigeon Impossible!

A group of 100 volunteers spent 5 years making this 6 minute animated video, but it is one of the funniest, most creative things I’ve seen in a long time.  The link will take you a larger version of the video than I can fit here – so go check it out and enjoy your break!

Shawn Kinkade  Kansas City Business Coach

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I had a chance to catch the 2nd half of an episode of Shark Tank over the weekend (I saw the last half of Episode 7 if you’re looking it up).

If you’re not familiar with the show, it’s a 1/2 hour reality show where aspiring entrepreneurs pitch their idea or business to a group of self-made multi-millionaires who have made their money by wheeling and dealing, creating, buying and selling businesses (the Sharks).

The business owners have an opportunity to raise money and make a deal on the show – either as an investment or a buyout.  They’ll pitch their idea and then ask for an amount of money in exchange for a portion of the business.

The Sharks are all legitimate business gurus, and they’ve got big personalities and egos to go along with it.  They don’t seem to like each other very much and there’s a lot of back and forth that has little to do with the business ideas – hard to tell if it’s staged much, but it does make for good TV.

Here’s a couple of the ideas that were discussed in the episode I saw:

Dance Dance Revolution!

I only caught 2 of the business ideas on the repeat I saw this weekend.  The first one was BoogieBoxFitness, a fusion of dance, kickboxing, cardio and more.  Their request was for $700,000 in exchange for 70% of the business to do a ‘Hollywood’ like rollout of a home DVD product for the masses.   

The end result?  They have a relatively unproven product and they were asking for too much money to put into a 1 shot chance at success or failure.  The advice given, which I thought was strong, was to start smaller, keep expenses down and prove the product and market out before jumping in with both feet.

Making some dough!

The second idea that I saw was Soy-yer Dough.  Soy-Yer dough is a gluten free alternative to Play-Doh for kids who are allergic to wheat products.  Although it’s a fairly new product and the inventor is still making it in his mother’s kitchen, they do have traction and they’re generating positive revenue over the internet.

More importantly, the inventor also has a patent pending and apparently has received a buyout offer of $500,000 from Play-Doh!  He was asking for $125,000 in exchange for 25% of the company.

There’s a couple of interesting points to the discussion:

1.  Apparently 1 out 8 kids has a problem with wheat based Dough, so the market is fairly large and with a patent it would be protected revenue.

2.  The inventor isn’t really just looking for a quick buyout (or he would have likely gone after the initial Play-Doh offer).  He wants to create a business in his home town that will create jobs and help the community.

The end result?  One of the Sharks (Kevin) has  extensive experience in licensing and negotiations so most of them defer to him as the expert in the space.  He offers $125,000…but for 51% so he’ll have full control of the negotiation and assures the owner that he will give him a much better deal than anything on the table.

If you do the math, Kevin is promising a buyout deal of more than $1 Million (in order to get the 49% payout above the $500,000 initially promised for 100% offer.  Clearly not a great deal for the inventor, but he knows he needs some help.  Luckily for him, two of the other Sharks agree to buy in as well – giving him a total of $300,000 for 51%.  That’s a slight premium as compared to the un-negotiated offer that was already on the table and probably a good idea, marrying up his idea and patent with strong experience and business contacts.

Overall, it’s an interesting show and I’m glad to see some focus on TV about business deals and entrepreneurs (that’s not as cheesy as The Apprentice was).  Have you seen the show yet?  What do you think of it?  Share your thoughts below.

Shawn Kinkade  Kansas City Business Coach

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Looking through the lens of nostalgia, business used to be simple.  You could set up a road side stand (or the equivalent) and offer things that people wanted locally.  Your long term success totally depended on your local reputation and at the end of the day it was more about how you interacted with the community and your customers then it was about having some sort of great business model or get rich scheme.

Honest weights, Square Dealings – with the fish specials of the day.  Back in the day, it wasn’t just a numbers game, it wasn’t about having a sophisticated sales and marketing strategy or coming up with a surefire closing technique.  It was about doing the right thing, adding value and helping your customers win (while you win as well).

Sounds refreshing doesn’t it?

Somewhere along the way, we lost sight of those values – maybe because slow and steady wasn’t good enough or all of the technology got in the way of good business practices.  However…the good news is that we’re starting to see a return to the good old days – people are using the technology that’s out there to break down the barriers, not create more of them.  Let’s look at few examples:

Finding your tribe…online

One of my favorite case studies in Social Media are the guys behind Bacon Salt.  If you’re not familiar with it, it’s salt that makes things taste like Bacon! (brilliant!)

The quick version of their story is that the 2 founders, who worked for a Seattle tech company, were out having some drinks one night and had a classic conversation that probably went something like this (after a couple of beers):

“Man…I love bacon!”

“Me too – I wish I could make everything taste like bacon!”

“Whoa – we should totally make that happen!”

And so the idea behind Bacon Salt was born – however there were the slight obstacles of not actually having the product, not having any experience in the food industry and not really being sure what their target market was or where to find them. 

What they did have was technical savvy and creativity.  They started by validating the market, would there be any interest in bacon salt?  To figure that out, they went out to Myspace, which at the time was the largest social media platform (back in 2007) and eventually found 37,000 users who listed Bacon as a primary interest on their profile – they had found their tribe!  They started talking to these bacon lovers, telling them what they were planning…and started receiving orders even before they had a product.

The end result?  They sold over 600,000 units in 18 months (starting from scratch)!

They attribute the success to working with customers as part of a community – engaging with them one on one, the same way your neighborhood stores did a long time ago.  You can see more on their story in this article.

Developing rapport and relationships with Social Media

Politics may be the only thing that’s drifted farther away from traditional values than business, but even in the political arena we are seeing the positives that are possible from connecting with people and leveraging online tools to make that happen.

Everyone is familiar with the amazing success that President Obama had using social media in his campaign, so it’s a bit surprising that the latest example of social media success in politics comes from the Republicans and not from the Democrats.

It’s not scientific, but it appears that one of the keys to success for the Massachusetts Senate race earlier this week was the ability to engage people via Social Media.  Sara Paxton from the Evans Media Group wrote a great article the night of the election and laid out the case for why Scott Brown was able to pull off his surprising victory.

Here are the highlights on the Social Media statistics from the race:

Facebook Posts since Jan. 1: Brown (128), Coakley (58)

Facebook Fans: Brown (70,800), Coakley (13,529)

Tweets since Jan. 1: Brown (142), Coakley (144)

Twitter Followers: Brown (9,679), Coakley (3,385)

YouTube Videos: Brown (57), Coakley (52)

YouTube Video Views: Brown (578,271), Coakley (51,173)

Clearly Brown had a lot more traction on Facebook and Youtube and used that visibility to drive his message and establish a relationship via Social Media – ultimately resulting in a come from behind surprise victory that’s shocking the world.

Making the world a smaller place

Teusner wines come from a small winery in the Barossa Valley in South Australia (beautiful area if you ever get a chance to go).  There are only 3 people on staff, so there’s not a lot of opportunities to spread the word 1 on 1, especially internationally.

However they have figured out how to reach the world via Twitter (you can find them @Teusnerwine).  They’ve only been active on Twitter for about a year, but they see increased interest in visits to the winery and people asking where they can find the wine in their local areas.

Again it all comes back to relationships – relationships with their end users, relationships with restaurants and stores who buy their wine and relationships with influential people in their industry who can help promote them. 

Just like the ‘good old days’, it’s not about selling, it’s about educating people, getting feedback and building up honest relationships.

Advantage for Small Businesses?

Inherently people want to know the companies and providers they do business with.  We’ve seen big box stores come (and some go) and they clearly have the advantage when it come to pricing, but do small businesses that have survived this long have an advantage over the big corporate players because of old fashioned values?  Are they more willing and able to create relationships with their customer base?

What do you think?  Do you believe that buyers will pay a small premium for things like quality service, a real relationship with a real person, personality and the chance to engage in a meaningful discussion?

Share your thoughts below, I’d love to hear them.

Shawn Kinkade  Kansas City Business Coach

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I ran across an interesting article on CNN Money that talked about how recessions don’t spark start-ups – essentially the number of new businesses that get started every year (at least over the last 30 years) is steady and doesn’t have any correlation to difficult times (or much of anything else).

The source of the data is a recent study from Kansas City’s own Kauffman Foundation:

Regardless of the dataset examined, each year’s total of new companies is consistent with other years, with annual numbers fluctuating only mildly.

It’s surprising to me at least there’s no apparent correlation to the economy, government policy, availability of resources or education – in general the takeaway is that at a macro level there’s a consistent number of new businesses formed every year.

So what can we learn about starting a business during difficult times?

There are at least 3 things we can pull out of this information.

1.  Entrepreneurs are a special breed!

Even during this severe recession, when the number of unemployed people are at extremely high levels, the number of people who are willing and able to become business owners is a small percentage despite a lot of people being incented to do their own thing. 

You may not think of yourself as an entrepreneur, but if you own a small business – even if it’s just a business of you for now, you are an entrepreneur and you’re a driving force for the US economy!

2.  Tough times teach tough lessons that help you win in the long run!

Although there aren’t more new start-ups during recessions or bear markets – the start-ups that do start during rough times are more likely to thrive in the long run.  In another study from the Kauffman Foundation, “well over half of the 2009 Fortune 500 are companies that started during a recession or a bear market”.

Although there’s no solid proof as to why the overall success rate is higher, it doesn’t seem like a stretch to me that companies that start during difficult times learn right away how to keep costs down, how to creatively market with low cost techniques and the importance of maintaining a positive cash flow.  If your business is doing well in those 3 areas – you’re likely to have a great chance for success!

3.  There’s a lot of opportunity, despite / because of difficult times!

As mentioned earlier, there are a lot of really talented people who don’t have jobs right now (and even more who might have a job they hate because it’s paying the bills).  That opens to the door for smart businesses to find GREAT people.  And if there’s one universal law to business success it’s having the right people in the right jobs is a key to winning in the long run.

Additionally, the downturn has caused a lot of businesses to pull back into very defensive postures, minimizing their spending.  As I shared more than a year ago – one of the lessons learned during the Great Depression is that long term success went to  companies that innovate and keep marketing despite the economic climate.

Things will get better!

Actually depending on who you listen to, things may already be getting better when it comes to consumer optimism and a general turn-around for the economy.  A lot of people are predicting a noticeable uptick as early as the 2nd half of 2010.  It’s not going to be all wine and roses, but it’s never too early to start planning for growth and thinking about ways to build the right kind of momentum for your business.

What lessons have you learned during this rough stretch?  I’d love to hear your thoughts – share them in the comments below.

Shawn Kinakde  Kansas City Business Coaching

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