Security Brokers and Dealers
Local Trucking
Source: http://www.statisticbrain.com/wp-content/uploads/2011/07/businessfailure.jpg.
In virtually every sector looms the fear and specter of a competitor taking quantum leaps ahead that will eclipse your own Herculean efforts. Endlessly we hear the lament of a business owner about some far-off company or competitor, an obscure participant on the playing field, who suddenly releases a new product that has dire consequences for the rest of the players!
Time and timing are your two cruel enemies. There is no longer the luxury of stepping back and admiring what you have created. As an owner, what you have built today you must metamorphose drastically month after month. Scalability and foundations for growth will be your hallmarks of success. Unless you have a unique patent or technology that needs not be deployed, the race or “land grab” for market share is always underway in a helter-skelter rush to market prominence.
Why is the failure rate [of new businesses] so high?
There are too many “unfit” entrepreneurs entering markets for the wrong reasons. They are drawn to entrepreneurship by the perceived image of the entrepreneur—a rich, famous, smart individual who stands out as hero … I use the term “unfit” here to refer to people who, while [they] may be good at the technical work they do, are NOT good at creating, running, or growing businesses.1
Over the last decade, the rapid turnover and creation of new businesses has shifted the focus of small to medium-size business from “build to hold” to “build to sell.” The enormous amount of capital that can now be deployed by strategic partners, private equity groups, angels, and family offices to buy what once would have been considered a firm not ready for market has changed the playing field forever. This is all good news for the entrepreneurs who have come out of the chute hard and built their company to be acquired. These professional buyers and investors are not necessarily looking for a perfectly humming company. They are seeking to acquire an organization that is advancing rapidly in its industry and oftentimes has a large geographic or industry footprint. These future buyers of entrepreneurial businesses pride themselves (for right or wrong) in having a deep bullpen that can join or direct the entrepreneur’s firm to even more rapid growth. These professional buyers seek to combine it with other synergistic partners to drive the company further and faster in a way a stand-alone entrepreneur never could.
If, however, entrepreneurs seek a lifestyle business or want to buy a job, then their goals and aspirations are different from a “build to sell” campaign. The long-hold owners can run their business in a much looser fashion and take liberties that they will not be called on the carpet for. Being part of a stable industry and supplying a service or product to their community is an honorable and less risky affair; it has lesser returns but more sanity. Long-term owners do not have to heed midnight calls or texts that the world is coming to an end from investors or potential buyers focused on maximum productivity. The risks and rewards shift dramatically for the long-hold entrepreneur— lesser risks in their favor, rewards not so much!
One of the major stumbling blocks we see is people who have horse blinders on and willingly ignore the truth because it undermines their dream. It is amazing how many people plow their life savings, sacrifice the well-being of their families, and risk their physical health in a business endeavor that is doomed from the outset. With horrid fascination, we watch these slow-motion train wrecks unfold. At some time in this disastrous process, they grasp reality. But, then, are they too late to salvage or set their course for salvation?
No matter where you are in the life cycle of your business, you must surround yourself with trusted advisors. There is a difference between advisors and decision makers! Entrepreneurs can call the shots as it is their show, but they should make sure they have wise and learned people weigh in for each key component of their business. It is never too early or too late to have up-to-date pertinent opinions from successful professionals in their area of experience. Don’t let the lawyer give the buyer advice on the balance sheet, and don’t have the accountant weigh in on a growth strategy. Instead, accumulate their opinions at critical junctures, and as the buyer/entrepreneur, make your own informed decisions. Perhaps the buyers/operators should have a Grand Wizard with whom they speak on their overall strategy tying in data and feedback from each of these disciplines. Even a buyer/operator’s closest friends and colleagues don’t like to work for free. An entrepreneur should find a way to bind them to the firm for the duration, as common goals and joint history give great insights for decision-making.
NOTES
1 Raymond Adeyemiking, “The failure rate is so high because …,” http://adeyemiking.com/post/319250723/the-failure-rate-is-so-highbecause.
Chapter 2
WE ARE ALL DREAMERS OR RISK TAKERS or you wouldn’t be reading this book. We all think we know our strengths and weaknesses, but do our assessments correspond with reality? Assessing ourselves to see if we have “the right stuff ” is becoming a science. There are many psychological testing services that can accurately assess your strengths and weaknesses. These and other tools are just another component to use in self-evaluation as you propel yourself forth in your quest.
Being bold is a prerequisite to success, but we cannot let it carry us away. We must critically assess our capabilities and understand the financial runway; we have to pass each checkpoint on the flight to our destination. Running out of gas—or money—to propel the machine forward is an obvious but essential self-critique to be undertaken. To be caught in the frustrating netherworld of having a great strategy on the drawing board but not being able to implement it is painful beyond words. Thousands of promising plans for start-ups or existing companies’ initiatives die on the infertile plains of non-funding. Having the flight plan to success can be as much as a curse as a blessing without growth capital.
Owners and executives often retreat into a world of secrecy and suspicion thinking their brainchild will be stolen or shanghaied. Better to share your initiative with a potential partner who can take it to market quicker through existing channels than to let it languish until it becomes dated and eventually eclipsed by a more open-minded competitor. Speed to market is the key to success.
Do you have the financial resources to undertake this odyssey? Many first-time buyers or start-up entrepreneurs make a fatal judgment out of the chute. They all can calculate the cost of acquisition, but many do not focus on the follow-on cash needed to propel the business forward. Over a third of new or acquired businesses, in our experience, run into cash-flow issues by the end of year one of operations. Buyers usually have the cash to pay at closing the agreed-upon terms, but the road to heighten profitability eludes them.
In contrast to an acquisition, a start-up needs an even longer runway to reach profitability as it has no existing sales. Start-ups’ main issues lie with time to market and ability to keep plowing ahead, despite the maddeningly slow pace of generating sales, let alone cash flow. To run a start-up with all its inherent risks, you must have the ability to carry on financially month after month. You must examine your reserves, understand your limitations, avoid signing up for debt you cannot pay back, and learn to use others at no cost to the mother ship!
This may sound cruel, but the best start-up operators are the slyest foxes in the forest. Telling the story, entrancing executives of influence in the sector, and trolling through their connections are absolutely key undertakings in your quest. The experienced players involved in start-ups understand and admire those founders that whittle and cajole others to do their bidding for no apparent up-front compensation. Creating an aura of excitement