SCORE: Mini-Business Plans & Startup Cashflow
SCORE is the Service Corps of Retired Executives. I went to their free seminar at the Cobb Chamber of Commerce on Mini-Business Plans and Startup Cashflow Analysis.
In SCORE, retired company executives and former entrepreneurs in retirement mentor those who are just starting business or looking to expand. I've heard their name over and over, and I had been thinking full-blown business plans were overwrought for presentation to a small group over dinner (as I've mentioned before). I was going to learn a format that was only a couple pages.
Turns out the mini-business plan format they were proposing was sufficient, running about 3-5 pages and addressing organization, marketing, legal, financial and other basic needs of a business plans in a couple pages.
The second part of the seminar, which I didn't even really remember was happening until I got there, was more interesting. It was "Startup Cashflow Requirements". This is basically getting that room full of people to correctly model the following variables:
Startup cash
Fixed costs
Profit per unit
Cost per unit
Receivables payment terms
Payables payment terms
Monthly Growth
They did this by showing the cash flow calculator on this page then walked through 4 people's business plans who were in the room.
A revelation to me was the cashflow squeeze put onto the small businessperson by the fact when you're new, you have to pay every supplier immediately, but (for many industries) your customers will demand that they have 30-60 days to pay you (Net-30 and Net-60 in the lingo). That causes many profitable businesses to go under, simply because they must offer credit, but can't get it themselves.
This is the mechanism that allows growth to bankrupt many business: They don't have the cash required to handle all the orders/clients/widgets so run out of it before getting the payoff that will save them. As many costs are merely forecasts, a small error when you're growing quickly can incite bankruptcy quite quickly if your operating cash is low enough (as it is for many small businesspeople).
Other additional tidbits: Business loans right now (for small companies) are going to require about 30% collateral if above 25K. The interest rate will be ~13% if you personally have good credit.
Community loans are available to many people, especially women and racial minorities for amounts up to 50K.
In addition to the seminar itself, I talked to the businesswomen on either side of me. They came to the seminar for the cashflow half. Merissa, is the founder of Cornerstone Tutoring. They serve Henry and Clayton counties, providing tutoring to children after school. Of interest to current tech students: Tutoring in math pays surprisingly well. The second person was Terri Robinson. She has a diverse range of offerings (including a credit card payment system), but the thing that made me talk to her was that she sold one of her products (greeting cards) in supermarkets. This was a trick I wanted to learn, even though the product I wanted to sell in that position has already been made.
(While the lesson can be learned, why not learn it for the future?)
As she explained, there is an office of buying agents at the corporate headquarters that you contact with your product. You send a product and arrange an in-person meeting if at all possible. You provide racks (usually) for the store, and you keep in contact with the stores so when the racks are getting empty, you provide more product to them. This question was on my mind because the Startup Nation's radio show (which is podcasted on their website) has an episode I'm now listening to talks about the selling of product on QVC (Children's Items Don't Sell; Ability to Demonstrate Product is King).
As everyone in the room knew I was a deep tech guy, people asked me questions too. I am amazed how much more fundamentally sound tech businesses are when thought up/started by non-tech people. Most of the people in that room would need a sound technical partner to look out they weren't being snowed at first, but some of those ideas were clearly great business ideas that used technology in a way that would clearly relieve pain yet make money. (I don't know what level of discretion these people expected, so I'll err on the side of caution as far as mentioning their ideas). Some of those ideas will go quite far indeed if they seize them.
--Michael
Atlanta Chapter of SCORE
In SCORE, retired company executives and former entrepreneurs in retirement mentor those who are just starting business or looking to expand. I've heard their name over and over, and I had been thinking full-blown business plans were overwrought for presentation to a small group over dinner (as I've mentioned before). I was going to learn a format that was only a couple pages.
Turns out the mini-business plan format they were proposing was sufficient, running about 3-5 pages and addressing organization, marketing, legal, financial and other basic needs of a business plans in a couple pages.
The second part of the seminar, which I didn't even really remember was happening until I got there, was more interesting. It was "Startup Cashflow Requirements". This is basically getting that room full of people to correctly model the following variables:
Startup cash
Fixed costs
Profit per unit
Cost per unit
Receivables payment terms
Payables payment terms
Monthly Growth
They did this by showing the cash flow calculator on this page then walked through 4 people's business plans who were in the room.
A revelation to me was the cashflow squeeze put onto the small businessperson by the fact when you're new, you have to pay every supplier immediately, but (for many industries) your customers will demand that they have 30-60 days to pay you (Net-30 and Net-60 in the lingo). That causes many profitable businesses to go under, simply because they must offer credit, but can't get it themselves.
This is the mechanism that allows growth to bankrupt many business: They don't have the cash required to handle all the orders/clients/widgets so run out of it before getting the payoff that will save them. As many costs are merely forecasts, a small error when you're growing quickly can incite bankruptcy quite quickly if your operating cash is low enough (as it is for many small businesspeople).
Other additional tidbits: Business loans right now (for small companies) are going to require about 30% collateral if above 25K. The interest rate will be ~13% if you personally have good credit.
Community loans are available to many people, especially women and racial minorities for amounts up to 50K.
In addition to the seminar itself, I talked to the businesswomen on either side of me. They came to the seminar for the cashflow half. Merissa, is the founder of Cornerstone Tutoring. They serve Henry and Clayton counties, providing tutoring to children after school. Of interest to current tech students: Tutoring in math pays surprisingly well. The second person was Terri Robinson. She has a diverse range of offerings (including a credit card payment system), but the thing that made me talk to her was that she sold one of her products (greeting cards) in supermarkets. This was a trick I wanted to learn, even though the product I wanted to sell in that position has already been made.
(While the lesson can be learned, why not learn it for the future?)
As she explained, there is an office of buying agents at the corporate headquarters that you contact with your product. You send a product and arrange an in-person meeting if at all possible. You provide racks (usually) for the store, and you keep in contact with the stores so when the racks are getting empty, you provide more product to them. This question was on my mind because the Startup Nation's radio show (which is podcasted on their website) has an episode I'm now listening to talks about the selling of product on QVC (Children's Items Don't Sell; Ability to Demonstrate Product is King).
As everyone in the room knew I was a deep tech guy, people asked me questions too. I am amazed how much more fundamentally sound tech businesses are when thought up/started by non-tech people. Most of the people in that room would need a sound technical partner to look out they weren't being snowed at first, but some of those ideas were clearly great business ideas that used technology in a way that would clearly relieve pain yet make money. (I don't know what level of discretion these people expected, so I'll err on the side of caution as far as mentioning their ideas). Some of those ideas will go quite far indeed if they seize them.
--Michael
Atlanta Chapter of SCORE
posted by Michael Langford at 9:13 AM
1 Comments:
I'm taking an entrepreneurship class right now that sounds like it would be right up your alley. In fact we just presented our final business plans today. Interesting to hear your take on some of this stuff.
As my professor says, it's not the idea that will determine whether you succeed, it's the execution. Inevitably, you're not the first person to come up with a brilliant idea to solve all of your potential customer's needs, but whether you are able to execute effectively on your ideas (for example, how do you get investors to invest? how do you make sure to have enough capital for the start-up period?) that will ultimately set you apart. Just some of his words of wisdom that have stuck with me. :)
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