Categories
Business

Why Small Businesses Fail

From 1980 onward, business plans have become a staple in lending and investing. They provide, or so their supporters will argue, a standardized way to look at a business. Business plans require entrepreneurs to actually “plan” and they are the road map an entrepreneur uses from start-up through to a full-scale operation.

So why is it then that businesses with business plans still fail?

There are several reasons. Oftentimes, the challenge is not in the business plan itself but in the strategy of the entrepreneur and in the broader business model.

The first main reason that businesses fail, is that they are just generally bad business ideas. One of my favorite shows is the Canadian version of Dragon’s Den. Just watch one episode (they are available at www.cbc.ca) and see the sheer number of bad business ideas that exist. Bad ideas are bad for several reasons. The market for the product may be small or ill defined, the marketing or distribution strategy may be abysmal or non-existent, and the entrepreneur themselves may be the biggest obstacle the business has.

The second reason that businesses fail, is cash flow. Entrepreneurs are great at predicting prospective revenue, but poor at understanding cash flow. They are so eager to get orders that they will take any payment terms from their customers, even if it is at their own expense. I have seen entrepreneurs come to me and they offer 90 day payment terms for their customers, but have all payments due in 30 days or less from their suppliers. It does not take a rocket scientist to figure out that there is going to be a cash flow problem here. Unless the entrepreneur has a good line of credit, or a large degree of personal savings, this issue can mean the death of the business.

There are many other reasons. Poor management, inexperience, lack of contacts in the industry–take your pick. My favorite reason cited for the death of a business is poor planning. Planning in itself is not the answer. What these critics mean, but rarely get around to saying, is that the need to implement good risk mitigation strategies is key. Identifying what the risks are to a business and confronting ways to mitigate those risks is really where the crux of all business success starts.

Categories
Inner Balance

Finding a Mentor

Nearly every self-help book will tell you that you need a business mentor. The general purpose of a mentor is to provide you with a foundation of advice, support and knowledge in the early days of business. The early days are tough. Cash flow will be tight, personal time will be non-existent, and to-do lists are never-ending. How is an entrepreneur supposed to find time to find and meet with a mentor?

Mentoring relationships need not be formalized arrangements. They can be as simple as having someone that you meet with for coffee every few weeks and discuss your business. Many entrepreneurs may have informal networks from which to choose a mentor; think industry associations, chambers of commerce, customers, and neighbours. For others, the choice to develop a relationship with a mentor is an exceptionally personal and large time commitment. Several mentorship programs exist which formally pair a mentor and a mentee. Having participated once as a Mentor, I can tell you what a fulfilling relationship it was. My Mentee would call me, often just to tell me what was going on in her life. Years later, we still keep in touch.

So, how do you go about finding a mentor?

Step 1: Decide on the type of relationship you want
The first thing is really figuring out the type of relationship you want, the realms of expertise the Mentor needs to have, and how they can help you. Set this expectation at the forefront, and make sure it is something that you can commit to.

Step 2: Research possible mentors
The next step is to research and brainstorm a list of possible mentors. These may be people in your community, industry or field of study. Make a list of the people who you would want to be your mentor and list the reasons why they would be good mentors for you, particularly what attracts you to having them as a Mentor.

Step 3: Try to find commonalities using resources such as LinkedIn
Did you graduate from the same school, have the same ethnicity, or are you members of the same association? Use points of commonality to open conversation or email about what you have in common with them. Much of this data can derived using LinkedIn or other social media platforms. Research the individual and show that you know something about them.

Step 4: Have an honest conversation with them about what you are looking for, the time commitment, and the goals you have
It is important to be honest to the prospective Mentor about the time commitment you require and what you are looking for in a mentorship.
If the individual is not interested or is not a good match, go to the next person on your list. You need to ensure that the match is a good one from the onset.

Step 5: Be realistic
Most professionals and business people cannot dedicate 10 hours a week to a Mentorship. You will be lucky to get 2 hours a month of their time. Use your time wisely. Communicate over email and phone, and when you do have face to face meetings, make sure you also give your mentor a chance to speak–there is nothing more irritating than a one-sided conversation.

By considering the commitment you expect from a Mentor, being realistic, and doing your homework, you will be leagues above the majority of individuals. If you do not succeed at first, don’t be discouraged. Finding the right mentor can take a while, but it is a wonderful experience that will help you professionally and personally, for years to come.

Categories
News

Small Business Survival Rates

As more people became unemployed during the recession of the late 2000s, more people turned to entrepreneurship than ever before.

The challenge is keeping those businesses open. How can we better support entrepreneurs?

More businesses exited both the goods and services markets in 2009 than survived. 1 in 2 businesses surviving is NOT good enough.

As advisors, our job is to both educate and mentor new entrepreneurs. We educate job seekers, but do little for new entrepreneurs. It’s time to open up and start talking about the challenges entrepreneurs face. If we can save even a few, our economy becomes all the more diverse for it.  Let’s focus on changing the numbers, empowering entrepreneurs, and becoming better business advisers.