So You Want To Start a Business? A Note To 23-Year-Old Me Part 3

Continued from Part 2. https://markcavaliero.blogspot.com/2019/04/so-you-want-to-start-business-note-to.htm

3. The importance of setting goals, creating projections, and conducting realistic planning.  Business is chaotic, every day will bring surprises and new challenges. There is absolutely no way you can anticipate everything you're going to have to deal with, but do as much as you can to project your thoughts forward in time to visualize what the future looks like. This ability to visualize helps you to "shape the action" and be prepared. (page 86) Even if you didn't foresee the specific situation, the planning process with have helped hone your ability to think logically and creatively through potential challenges, and this will help you navigate the unexpected. As explained in "The Seven Habits of Highly Successful People", the concept of "Begin with the end in mind" is a great way to start. Think about what you want your business to look like in the future at various milestones, and then use your planning process to fill in the gaps and answer the question, "how".  Set SMART goals for the organization as a whole, and then work with each group in your company to come up with specific goals for them that support the organizational objectives.

Planning should incorporate sales, marketing, delivery, cash flow, credit management, staffing, expenses, and training at a minimum. Your list will be unique to your business, and will grow along with your experience. These items are all interrelated, so your planning should be as detailed as possible. Think about seasonal variations like holidays, three-payroll months, and impact of the snowstorms and hurricanes you know are likely to occur. Understand that in a services business, some months are going to be impacted by vacation (your team as well as client decision makers) more than others. Develop a refined cash management projection that incorporates payroll, vendor payments, taxes, etc. as far as out as possible. Your projections won't be perfect, and at first it will be extremely difficult and time consuming. 

Capture the outputs of your planning, organize it, and write it down. Give everyone on the team a chance to review, comment, and  provide input, then finalize and publish it as your annual plan. Brief everyone in the organization, and rally them around hitting the goals. Show them how the goals are realistic, achievable, and how they snap in to the corporate vision. Let them know how progress with be measured and rewarded.

At the end of a month, review your projections for that month. Examine what was accurate, and what wasn't. Document it, discuss with your team, and incorporate into your next planning cycle. Over time, you and your leaders will get better at the projections and they will become surprisingly accurate. This will make you stronger and more competitive. You'll have an easier time dealing with the unexpected because you have reduced the areas of possible surprise.

There is a bias in business today towards, and a sense of near celebration around failure…popular business culture will tell you if you haven't had at least one failed business, you aren't a true entrepreneur. I reject this. As a business owner, people are counting on you for their wages that they use to support their families. Your vendors, clients, and partners have all put their faith in you. Failure shouldn't be "one of many possible outcomes", it should be the absolute last resort when all else has failed and there's nothing more that can be done. People will get hurt, and you should work every day with a passion, serious intensity, and sense of urgency that recognizes the very personal cost of failure. The truth of the matter is that by accepting the distinct risks of failure into your planning process, you will have a much better chance of avoiding it. The danger that kills many business is often the one they simply refused to acknowledge during their planning.

Chapter One

One

 

“Whatever happens to you has been waiting to happen since the beginning of time.”

Marcus Aurelius

 

In a time long past, giants of men filled the land I knew as home. Their stature was measured in character, not height, and they built and drove this nation forward through dangerous and unstable times. Their essence was distinguished by their courage to face challenges with bravery, their resilience to bounce back from difficult situations, and their strong sense of rugged individualism. On a warm summer afternoon in 1974, I sat beside one of them as he slowly opened his pouch of Red Man chewing tobacco for a refill. His dusty front porch looked out on the curve of a narrow dirt road and a yard full of farm tools rusting in the humid air. His name was James Alfred Bunch, and he was my great-grandfather.

He was from a time of horses and wagons, one room schoolhouses, and kerosene lamps. In my earliest memories, I was about five years old, and my grandparents would deliver groceries to him each week. He lived in a single-story two-bedroom clapboard structure like the ones that dotted the landscape and lined the back roads of rural Stanly County, in the Piedmont region of North Carolina, about 45 miles northeast of Charlotte. The local area was known as Palmerville. It wasn't exactly a town, just a loose collection of small houses over the span of a couple of square miles. There was a Baptist Church with an ancient cemetery, but not much else. He wore a sweat stained brown felt hat, faded denim overalls, and usually had a “chew” of tobacco tucked in his cheek. During his life, he had been a teacher, a farmer, and worked backbreaking shifts in a local factory that turned the rich red clay of the county into bricks used to construct many of the state’s buildings. He was a humble but confident rock of a man. Like a biblical Patriarch, he was firm, wise, and steadfast. As many men of that time, his family and close friends called him by a nickname, and his was "Poster" (the “o” was a short “o” sound like "possible"). The name came from my aunt Carolyn trying to pronounce “grandfather” when she was very young, and it stuck. He didn't seem to mind.

            In later years, I would recognize his philosophy. He was a Stoic. Like Marcus Aurelius from Roman times, he lived in accordance with the will of God and nature, taking whatever came his way with calm, serious determination to do the honorable thing without complaint or protest. He was born in 1882 in a small town outside of the state capital of Raleigh, only 17 years after the end of the Civil War. The world he grew up in lacked modern conveniences such as electric appliances or running water, and he lived until well after airplanes crossed the globe daily and a man stepped onto the moon. He was my earliest hero.

            I was his only male descendant. His oldest daughter, Pauline, was my grandmother. Pauline had two daughters, one being my mother. James Alfred’s youngest daughter, Virginia was afflicted by a serious illness and high fever when she was a toddler. The common treatment of the time was to "sweat" the sickness out, so they held her over a cauldron of boiling water and let the rising steam envelop her. I can only imagine her desperate cries and the fear of those in the room as they realized the seriousness of her condition. Crippled for life after this illness, she could not fully form words and only walked with great difficulty. Virginia still lived with him in the small house they had moved to when the old family farm got to be too much to take care of.

            James Alfred’s wife was named Rosa, and her maiden name was Morris. The Morris family had lived in the area since before the American Revolution, proudly farming their land. Recent years had been difficult though. The family estate that had once been several thousand acres was now down to around a hundred and in bad shape. Sometime in the 1950s, Rosa had been afflicted by a mental illness that sounded like early onset Alzheimer’s disease. The Sheriff had brought her back to the farm after she had been found wandering, and my grandfather had driven her up to the state Mental Institution in Morganton. Far away from her home and family, she passed away soon after arriving. 

    In the early 70s in central North Carolina, the scars from the Civil War were still apparent. Not so much in the landscape, which had escaped the worst of the fighting, but in the generational poverty that had come over the South.  The war had taken the healthiest, most ambitious, and spirited young men off to fight in dreadful battles. Their blood soaked the ground of places like Chancellorsville, Gettysburg, Richmond, and Manassas.  By most estimates, North Carolina sent more men to fight for the Confederacy than any other state, some figures have it at over 2 million, and many of them never returned. When a generation of a region's best men are taken over the span of a few exceptionally deadly, violent years, it leaves damage far deeper than the initial heartache and loss. Gone were the future husbands, fathers, and grandfathers. Farms fell into disrepair, criminals and scoundrels often went unchecked.

            My Great-Grandfather Alfred's uncle Henry had been a private and fought with the Confederates in Northern Virginia. At some point in the campaign, young Henry had an accident and got one of his toes shot off. The exact details of what happened and how are lost to history, but he was in the ranks at Appomattox on April 9^th, 1865, when General Robert E. Lee recognized the cause was lost and surrendered his forces to US General Ulysses S. Grant. The once mighty army of Northern Virginia had been beaten decisively, and the men doubtlessly expected their fate to be years of starvation and disease in a desolate prison camp for the crime of treason against the United States. Approximately 28,000 Confederates surrendered, which would trigger a collapse of Southern military opposition throughout the breakaway states. In a wise and generous gesture, the terms of surrender were lenient. In exchange for oaths of loyalty, Grant had graciously granted parole to the men. Instead of languishing for years in prison camps, they would be allowed to return to their homes. Officers could keep their sidearms, horses, and personal baggage. Men could keep their horses and mules to work the fields, so they could provide food for their families. Lee was given food from Union supplies for his now starving men. Grant’s sensible decisions were in keeping with the spirit of the words from Lincoln's second inaugural address only a few weeks earlier. "With malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in, to bind up the nation's wounds, to care for him who shall have borne the battle and for his widow and his orphan, to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations."

Grant’s adjutant, Ely Parker, was the one to write out the surrender document. Parker was Native American from the Senaca Tribe. Recognizing his heritage, General Lee quipped that "It is good to have one real American here." Parker replied, "Sir, we are all Americans." 

After his parole, Henry made the long trek home to North Carolina carrying a small bundle that held his toe. It rested in a jar of vinegar at the family farmhouse for many years. My grandmother told me she had seen it sitting on a shelf in the corner cupboard when she was a young girl, but by the time I arrived it was long gone.

Unfortunately for the South, President Lincoln’s vision of a healing reunification died with him six days after Lee’s surrender. The inarguably just war to cleanse the nation of slavery had been settled on the field of battle, but atonement for the bloodshed that polluted the land was yet to come. In a tragedy for the young nation, an assassin had chosen Lincoln to pay the cost. In this version of the Biblical redemption story, Abraham himself would be placed on the alter. There would be no redeeming ram caught in the bushes. The South descended into the chaos and resentment of the Reconstruction era.

“My Captain does not answer, his lips are pale and still,

My father does not feel my arm, he has no pulse nor will,

The ship is anchor’d safe and sound, its voyage closed and done,

From fearful trip the victor ship comes in with object won;

Exult O shores, and ring O bells!

But I with mournful tread,

Walk the deck my Captain lies,

Fallen cold and dead.”

 Walt Whitman

So You Want To Start a Business? A Note To 23-Year-Old Me Part 2

Continued from Part 1 https://markcavaliero.blogspot.com/2019/03/so-you-want-to-start-business-note-to.html

2. Learn some basic accounting terms and use them as tools. You understand the importance of delivering a great service and an outstanding customer experience, and you're going to get excited about promoting and growing your business. I know the last thing you want to do is to slow down, crack open a book (or open a browser these days), and spend time learning accounting terms. Do it anyway, make time for it because it will keep you away from danger as well as accelerate your success. Don't think you can just delegate this to your accountant or business partner because it is "accounting stuff". I want you to understand the following concepts at a minimum. Gross profit (GP), Gross Margin (GM), EBITDA, SG&A, Income Statement, Balance sheet, and Statement of Cash Flows.

These terms will be the measures that you will use to get a realistic picture of how your business is doing. Think of them like gauges on an airplane. They tell you how fast you are moving, how high you are flying, how steep you're climbing (or descending), and how much fuel you have. Learn what levers and controls you can adjust in your business to impact each of these measures. Study them intensely after you close each month, and make adjustments to get the results you want. If you aren't seeing reports of these measures each month, this is an indicator of a big problem in how you run your business, and it's every bit as important as the customer facing aspect. If you aren't getting a timely and accurate close to each month, it's an even bigger indicator of problems. Failure to pay attention to these measures is like trying to fly an airplane blindfolded. Failure to get a solid month close is like flying the airplane blindfolded, hearing an alarm, and doing nothing about it.

Use these terms to develop a core set of Key Performance Indicators (KPIs), that you can rally your team around. Make information on these KPIs accessible to the team, and use them to set goals and incentives. Not only will KPIs help you understand what is working and what isn't, but they will help you project forward into the future. If you want to grow successfully, these projections will become critical. More about projections in part 3.