I had coffee last week with one of my colleagues, the CEO of a venture capital firm.
We compared our experiences working with student and adult entrepreneurs and ended up wondering out loud if mature small businesses were similar to second stage entrepreneurships.
What would you show me if I asked you for your business plan? If you have one, it’s probably the document you put together to gain initial funding from a financial institution (compared to an angel investor or a venture capital fund, as is the case with high tech entrepreneurs, for example).
Is this crucial document, the manifesto of your idealism and business passion, now collecting dust?
Many mature small businesses figure that if they have a positive cash flow, are winning contracts, have a back log of work and can make payroll, they are in good shape. And so it goes.
Perhaps you own a business or are thinking about starting one. Some of you have been in business for 10 or more years, and have weathered – and successfully survived – a financial storm or two. Well done! So what is/was your business plan, other than a great idea that has some durability?
A business plan is a diagnostic tool for your business, like an annual physical exam. It lets you know whether your company is in good shape to move forward, diversify your product mix, purchase capital equipment to target a new market or technology, or partner with another company on a larger project.
Flash forward 3-5 years. When I ask clients what their “business looks like” they describe the environment built up to support their habits so they maintain positive cash flow – whether it makes sense or not.
They describe their status quo, not a business plan.
And if they have a business model to begin with, guess what it looks like now? Yup, their status quo, or the way things function to maintain their current rate of cash flow. What happened to that start-up passion and idealism?
Once cash starts rolling in, that status quo mindset is preserved at all costs – even if it prevents growing your business to the next level.
Second-stage entrepreneurial ventures have been in business for a while, too. Investment groups require these companies to fulfill milestones to protect anticipated return on investment. Their business plans are not allowed to collect dust and their business models pivot during this process. Ideally, these companies are coached to stay on task.
These second stage entrepreneurial ventures have products, sales coming in and peaks and valleys in cash flow, focus, marketing, business development, supply chain, and just about every aspect of running a business.
The CEOs of these mature start-ups wear their sales hat to win business, swap that hat for the engineering hat to design the solution, put on the General Manager’s hat to outsource for production, and put on a firefighter’s hat when there’s a quality issue or when they have to take their place on the assembly line to get the product out the door. Oh, and then they put on their accounting hat to invoice their customer, pay bills and create payroll. It’s not always smooth sailing.
Does this sound like your own company – and I’m talking about small businesses with 3-20 employees and annual gross revenue of less than 1– 7.5 million USD. That’s a wide business range, but the profiles are similar. If you looked at your financials and business model for the past years you’ve been in business, would you find yourself in the same place or ahead of the game…. And by how much, really?
We can all learn a lesson from the technology startup community. These companies are coached so they don’t fall into those bad habits reinforced when cash starts to flow. Yes, they still get tsunami’d by all the stuff they have to do to stay afloat. But their business plan and model is always part of the goal.
Perhaps you should be asking yourself “what does the status quo look like for my business?” You may find your loyalty to preserving the status quo holds you back from achieving the next stage of business growth. Your thoughts?
Babette N. Ten Haken, Founder & President of Sales Aerobics for Engineers®, LLC, brings entrepreneurial mojo and business- and revenue-producing collaboration and communication tools to small and mid-sized businesses and startups. She was named one of the Top 50 Sales & Marketing Influencers 2013-2016. Her book, Do YOU Mean Business? focuses on technical / non-technical collaboration strategies and tools.