As a business consultant, I believe our biggest concern is to get our clients to understand that the planning before starting the business is more important than how they actually run the businesses. Everyone has good ideas, but the business of running a business is what gets most entrepreneurs in trouble. Making the leap from doing three jobs in corporate America, to doing 10 or so jobs as a small business owner, is overwhelming for even the most organized project manager. So what should we do to help small business owners?
I believe that our role is to make sure that would-be entrepreneurs think through what it’s going to be like to run their business every day. Too often, they understand running a business in theory, but we need to help them to visualize and chart out a typical 14 hour day–because that’s often where there is a disconnect. We must also help them understand where the money is actually coming from to start their business. I’m often asked about the likelihood of getting a grant to start a small business. It is frightening that people really believe someone will give them money (that they do not need to pay back) to become a millionaire. Not to mention that they haven’t accounted for needing funds to live — along with money to launch the business.
Then, they want to sell to anyone and everyone or tell you about the five verticals they’re going to target for business. Sometimes, I want to give a homework assignment to write 300 times single spaced, “Niche to get rich!” I want them all to be killer sales people, even though most of them do not want to sell — or think they can. If I could only get them to see that selling is just networking; if you can make friends, you can sell. But I also want them to understand that they are selling themselves as much as their product or service. Then the most important thing I try to share with them is to always focus on their profit margin. Revenues are great, but how much do you get to keep after expenses, overhead, general and administrative costs? I get concerned about how many expensive hobbies pretend to be small businesses. I also want business owners to understand when their businesses are not making money and know why or in advance that it was part of a plan.
After more than a decade in business, I wrote the book Become Your Own Boss in 12 Months, to lay out the Emerson Planning System to help entrepreneurs make a successful transition from having a job to starting a business. It’s a logical system to help startup business owners see planning as building blocks necessary for success in business.
Step 1: The Life Plan–Entrepreneurs need to know what they want out of life and build a business around that. They should make sure the business concept is a good business for them and their families.
Step 2: The Financial Plan–It’s all about the money. They must make sure their credit is stellar and that they have three pots of money: 1) emergency savings; 2) one to two years of household budget; 3) one year operating expenses to launch the business.
Step 3: The Business Concept–Entrepreneurs need to get clear about their business concept and evaluate what skills they have and need to run that kind of business.
Step 4: The Marketing Plan–They must validate the market opportunity and know who is buying and why that customer will buy from them–before going any further with their planning.
Step 5: The Business Plan–Good businesses are run with a business plan that has a budget and realistic sales projections. In the early years of a business, the plan should be updated every 2-3 months to make sure the business is on the right track.
Step 6: Start The Business While Still Working — Entrepreneurs should work two jobs as long as they can to continue to save money. Once the paycheck is gone, that is it!
My mission is to end small business failure. I just want to save would-be entrepreneurs heartache and financial ruin. With a proper plan that they actually use to run their business, there is no doubt their odds of success are greatly increased for small business owners.
Do you have another tip for a start-up business owner?
Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. She has been featured on NBC Nightly News, the Tavis Smiley Radio Show, in the Wall Street Journal and Black Enterprise Magazine. She hosts #SmallBizChat weekly on Twitter for emerging entrepreneurs and publishes a resource blog www.succeedasyourownboss.com Melinda is also the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)
Excellent advice as always, Melinda. One misconception that my partner and I would like to see overturned is that small businesses do not really need to do weekly and monthly accounting. Too many small businesses do minimal accounting during the year and then save it up for the tax accountant at the end of the year. What they miss out on is all of the valuable business decision information that they could be using each month to make timely decisions about the direction and success of their business. The first step in making that change would be for tax accountants to send business owners who arrive with a shoebox of receipts or other clearly incomplete information to businesses advisors focused on managerial accounting for small businesses, such as ourselves. As you point out, if we could catch them early, they will have a better chance at success.
Beth—
Thank you for your comment. Monthly financial statements is a must for a successful small business owner. By the 15th of the month, every business owner should know how well they did last month so they can make any adjustments. Success which starts with knowing your numbers.
Continued success.
Melinda
Hi Melinda, great post. You are definitely on target with your points about having a financial plan. Many start a business without having a handle on their personal finances. They have no idea where their money is going or how to keep track of it. These habits translate into how they manage their business finances as well – leading to failure.
Dorethia–
Thank you for your comment. I feel so strongly about giving small business owners a plan for success which starts with knowing your numbers.
Continued success,
Melinda
Hi Melinda.
Step 6 is vital. I’m not sure why so many people recommend that you quit and just start a business…like it’s that easy to get the 6-figure practice immediately. I’m a huge advocate for planning, being reasonable, and doing it all comfortably as you work.
When money is coming in from a guaranteed source (ie: a job) the pressure is off, and the chances of your passion becoming more like work are very slim! Keep your passion your passion until you have the finances to turn it into pure freedom. You can actually afford the coaching, the programs and the products that will make you successful.
There is a point where you have to stretch yourself, but working will help with the anxiety.
I have no empathy for people who claim they can’t work AND start a business. There IS time, if you make time. I made the time and this year I worked 30 hours a week at a pre-existing position, followed my passion (ie: coaching and working on my business) 25 hours a week, AND I found time to write a book, “The Now Of Happiness.”
You have to make sacrifices, but they don’t have to feel like sacrifices. Set yourself up for success, and success follows naturally.
Great insight, Melinda. As a business and marketing coach and consultant, I concur. There’s more to being an entrepreneur than the title and when small business owners are prepared by hiring coaches and mentors to help them, while also utilizing other small business resources like the SBA, Women’s Business Centers and SBDC’s and SCORE they can succeed and live their dream of small business ownership. Thanks for shedding some much needed light and The Emerson Planning System is genius. I especially love steps 4 and step 6 – as a marketer, I share “if you’re the bomb but nobody knows it you and your business will blow up by yourself”…and I worked two years as a Women’s Business Center director while growing my small business. It takes prior planning to prevent piss poor small business performance. Thanks again.
Be Incredible,
Darnyelle
www.incredibleoneenterprises.com
Darnyelle—
Thanks for your comment. I agree with you that small business owners need the right combination of coaches, SBDC resources, and reading articles on the internet to make sure they are on top of all the potential traps that await them. Small business owners must focus serving a specific customer and telling the world they are open for business.
Continued success,
Melinda
Great post, great insights and great advice. In my mind, Step 1 is the foundation and you can’t do anything successfully without figuring that out. Too many expect someone else to tell them what they should do – often, as a result, they end up throwing money at something that will never work for them. They fall into the trap of putting a target on themselves as “scam” bait.
Hi Randy–
Thank you for your comment. I was trying to help start-up entrepreneurs really understand what they are getting into as they step in the wild world of entrepreneurship. There are so many ways to make expensive mistakes when started a business, I pray this post helps some avoid those hard lessons.
Continued success,
Melinda
Hello Melinda, thank you for the excellent post. As a ‘new’ entrepreneur starting a business, I am finding out first-hand about all the different Steps you mentioned. Fortunately, I have been able to utilize my network as a means to gather relevant information, check my planning strategies, consult with experienced entrepreneurs and hone the messaging.
While still in its start-up phase, swift progress is being made. In fact, something I am doing a bit differently is inviting ones to become observers (or guides if they choose) of the process, to witness the birth of a socially responsible business, conceived from social networking.
The Rose of Education Organization will be focused on using technology to empower, enrich and uplift people, especially in under-served communities, by giving them ready access to the positive and helpful information they need, whatever that may be.
We will support and promote education and educators of all kinds. We will do our part to give due honor to teachers everywhere, until teachers are honored – everywhere.
I hope you will consider becoming an observer, or guide.
Anthony—
Thank you for reaching out to me. Your business sounds like a wonderful social entrepreneurship venture. I would be willing to talk with you about how I can help you refine your business. Please email me using the comment form on this blog.
To your success–
Melinda
Melinda,
I am following your suggestions and “preparing” before taking the “leap.” Thank you for writing your book and for your business savy.
Marie Ruddock
Contain It With Ms. Marie
Ms. Marie—
Thank you so much for your comment. I am do excited to hear about how my advice helps small business owners. Keep going, Keep pushing. Please give me a review on amazon it really helps others learn about the book.
To your business success,
Melinda
One of the things that I have been able to take part in is a website (FREE!) called Confessions for Success www.confessionsforsuccess.com. I am able to have my personal and business goals sent to me as a text message every 30 minutes or hour. It helps me stay focused on my goals and dreams and on what is important!
Hope that helps!