Tuesday, December 28, 2010
Saturday, December 25, 2010
Friday, December 24, 2010
Wednesday, December 22, 2010
Monday, December 13, 2010
I replied in the affirmative. He questioned again: "Do you have a delivery truck"?
I told him that I had a service van, and that my business partner had a car.
"Well the first thing you should buy, young man" he continued "is a delivery truck. Twenty to thirty thousand dollars will get you a good one these days".
And in my mind, the meeting was over. For some unknown reason, I wound up with a small business advisor who wanted me to go out and buy a classic Trash Saddle.
Young business is like young love: it shouldn't be burdened with responsibility. My old POS van worked just fine. For a time (oh...three years...) Mark's car filled in for a delivery vehicle very nicely. The LAST thing my baby business needed was to be saddled with was a $25,000 asset that depreciated by 30% the day it left the lot. Or worse yet, a bum asset like that with a note that had to be paid every month against the full original retail value. Plus interest.
I've heard it said that the most common cause for young business failure is the owner's failure to pay the IRS. This may or may not be true. However, what I CAN say is true is that a substantial percentage of young businesses fail because they are saddled with trash: debt service on buildout expense, monthly payments on spendy vehicles (which also come with spendy insurance tabs), salaries for employees who don't have enough work to do, fees for overblown lawyers, or rent on a flashy space. There is a time for businesses to buy toys, to give out raises and add benefits to compensation packages, and to upgrade facilities. But if spending is done in advance of earnings, in advance of cash flow, it is alarmingly easy to spend oneself into a hole from which there is truly no escape.
Note: this isn't advice to be a cheapskate. If you're selling Kaladi Coffee, buy great coffee equipment and pay to train yourself and your people. Pay for a space that has some sort of long-term promise. As advised in The Untouchables, "don't bring a knife to a gun fight". But really. You don't need $35,000 of tables and chairs to open a new cafe. You don't need twelve $300 light fixtures. Back to Baby: spend on neonatal care and your kid's 529...not $45 a gallon on designer paint for the ceiling of your baby's nursery.
So here it is: keep your young business' burdens light. Don't incur monthly payments that can't be made comfortably. Hope for growth, but don't expect it. And for God's sake, don't let yourself come to NEED growth; don't bet that your new business will make $1435 of net profit per month, wordlessly earmarked for a mortgage payment on the house where your husband and kids live. If you ever engineer yourself into a corner where it's your family against your business...well...don't even bother throwing a punch. Because at that point, you've already lost the fight.
A related but subtly different trash-saddle is that of expectations. Beyond expectations that are strictly financial in nature, we all have "plans" (more like fantasies) of how we'd like our businesses to develop and grow. Maybe we aren't betting on having a Google-like complex within five years, but still...we look to our businesses for validation of who we are and why we work. And what's funny is that a business can wind up being a freakishly accurate mirror of ownership...but it takes a while. No rush. So don't push.
Like parenting, growing a business requires strength, but is in truth a gentle art. It is one thing to find and remove obstacles to your business' growth. It is another thing altogether to try to push it along. Push hard enough and you're cruising for the small business equivalent of American Pastoral. Or, as Mark puts it, "don't push...'cause the Universe will push back, and the Universe is bigger".
Wednesday, December 8, 2010
Critical Mass is a hugely useful and flexible concept. Originally intended, of course, to describe the mass at which fissile material can create a self-sustaining chain reaction, it has been adapted to social movements, think-tank activity, and at least in my mind, to small business.
Critical Mass is achieved when a business becomes self-supporting: when it no longer requires regular infusions of cash or superhuman inflows of energy in order to continue daily operations, and when ownership can, at long last, begin to draw a little meager income. We're not talking about money and energy required to GROW a business, mind you (which very often requires inputs)...just that it can sustain itself and its ownership on a day to day basis. Between birth and Critical Mass, a business is like a baby (a metaphor we will return to over and over again...dirty diaper analogies included) in that all it does is absorb. But it isn't cute. It doesn't make cute noises. And the bills you incur by running a baby business aren't cute by any means at all.
But wait...in addition to frustration, business owners get a big special bonus bummer: fear. The vast majority of babies born in America hit Critical Mass sooner or later, when they get jobs, form friendships with people who manage to stay out of jail, and find their own places to live. There are what...300 million examples in our midst at all times right here in the U S of A? The opposite is true with small businesses. A few die in childbirth, within a few months of startup, and then the vast majority slowly starve (or worse...starve their "parents") over a three or four year period...that excruciating time when, while working fiendishly, owners wonder if their business will ever support them, pay their mortgage, or do anything but suck them dry and waste their time. After all, there is only a slim chance that their baby will EVER become a viable business with a Critical Mass of its own. And any new business owner who denies that they've ever been afraid that their baby isn't going to make it is either an egomaniac or a liar.
So one skill new business owners need is a good measure of patience. Another is faith. Stupidity in small measure helps, as does proclivity to obsessive behavior, deafness to criticism, and the ability to make Ramen noodles 300 different ways while waiting for the holy grail: the very first paycheck.
But perhaps in a more useful context, the notion of Critical Mass can help guide startup owners into building a business that has a greater chance of achieving Critical Mass before it strangles Momma and Daddy. The same way different fissile materials achieve Critical Mass at different weights, differently configured businesses hit Critical Mass more or less quickly, with more or less financial and human-energy input.
Next up: CM part II, in which we look at some of the variables that dictate when a business may...or may not...reach Critical Mass.
Sunday, December 5, 2010
But among the thousands of things I've messed up over the past ten years, I think I've botched rules more than anything else. Contrary to popular belief and the measurements of dullards like Stephen Hawking and Albert Einstein, I think the Universe is a Remarkably Small Place. I've never been anywhere else where it's quite so easy to trip over my own damned self.
The origin of a rule is usually a Bad Experience: some dirtbag steals a travel mug, an employee arrives at the shop late, or a Kaladi Coffee wholesale customer pays slow on their terms. Wrongdoing births Indignance; I get bent because Someone didn't do Something they were supposed to do. My indignation causes me to structure things so that the same Wrongdoing doesn't happen again.
And so rules are conceived.
Rules are often phrased as "Don't" statements. "Don't give Marko coffee on terms 'cause I'll have to call him and hound him to get paid". "Don't run payroll without examining punch times...employees are always trying to come in late and leave early". Or, "don't give a refund without a receipt: everyone is out to screw me".
When narrowly examined, rules like that may indeed keep the (also narrow) Wrongdoing from happening again. But like something out of Greek mythology or like Zombies, rules have a way of reflecting their origin. There's a demonic mutation that occurs...rules born of Bad Experience have a way of turning on themselves and in turn, on their authors.
When more broadly applied, a rule intended to keep Marko from overextending his tab makes me hound Paul, who while a day late is one of those folk who most often pay their bills in full and on time. A well intended but badly constructed rule leads me to chastise an employee who is five minutes late today, but who is usually punctual. The customer who is denied an exchange or refund without their receipt is one time in ten a thief...and nine times in ten a regular good customer who lost their receipt, and who, feeling disrespected, won't come back after being denied.
If rules are made to address customers who steal, employees who cheat, and wholesalers who are deadbeats, those rules will, in effect, create a business whose customers steal, whose employees cheat, and whose wholesalers are deadbeats.
It's kinda an extension of the old saying "be careful what you wish for...you just may get it".
Rules should be created to sculpt the kind of business you WANT, not the kind of business you'd like to avoid. Rules should create a positive flow, they should direct events toward the Desirable.
I know that sounds like a bunch of hippie poop. Anyone who knows me knows that I'm not hippie like that. I'm not always a peace-nik, and I'm certainly not a pacifist. But I'm not deaf either; I can hear it when the Universe says "let up, Dude. Let go of your indignation. Don't make Zombie Rules. Make rules that serve your Good clients, your Good employees, and that help define your Good company".
Wednesday, December 1, 2010
My beef with UPS was settled after a mere eleven months. Fortunately, time flies when you're having fun, right?
In early December I wrote to UPS' corporate customer care address. While I'll spare everyone the tedium (and anger, and snide comments...) of most of that letter, the following excerpt comes word for word:
I subsequently spoke with Ms. Holdren about UPS policy, and whether it was acceptable to leave such “notice of suspension” with people NOT listed as account contacts. Ms. Holdren assured me that yes, that is UPS policy. Ms. Holdren was defensive. She offered no apology.
I would like to hear from you; please let me know if Albertine and Debbie Holdren really DID execute UPS’ collection policy. In the meantime and for fair comparison, I will call Federal Express to inquire about THEIR collection policies.
If a teeny tiny business owner like myself might be so bold as to offer a piece of collections insight to a large publicly traded company like UPS: if you treat your customers like deadbeats, all of your good customers will leave you in order to be treated properly. And guess who will be left? You’ll be left with a pool of customers that are…well…deadbeats.Eleven months later I got a call from someone (whose name has been lost to history) from UPS indicating that the letter I wrote managed to work its way around to a bunch of the muckity-mucks in training and that, in fact, UPS' collection training had been changed as a result. Which, of course, is a decent consolation prize for me, though I'd have preferred to see Albertine on the cover of the UPS Customer Monthly, attractively attired in a tightly-zippered gimp suit.
Somewhere in the distance, a chain rattles. December is upon us; the air is crisp and the promise of holidays to come fill our hearts with the great and generous spirit of forgiveness...