BUSINESS SURVIVAL THROUGH THE WINDSHIELD
© June 2017- Joel D. Johnson
There is none now, nor has there ever been a business, no matter the category or business model, that can remain still. Every action taken, like ringing up a sell, collecting an invoice, paying a bill or paying employees, etc., increases or decreases cash flow as the business moves forward. No business will ever truly remain the same. Businesses naturally move forward. The business is either growing or it is dying. There is NO middle ground. A business cannot set on the fence. It will either fall off one side or the other. There is no safe place to hide. A business is always in a constant state of change, creating history, while moving into its future.
In business there is no such thing as sitting at the red light waiting for things to change, hoping it does not take too long or waiting for the caution light to change to green, because business is constantly moving forward; one direction or the other, straight ahead, up or down, but never backwards. You cannot back into profitability and growth. If you are not moving forward at a steady pace your competition will run you over. Every choice you make in the present moment affects the future you live into and leaves positive proof of the outcome in the rearview mirror.
GROWTH & SURVIVAL
The trick is comprehensive planning. A good CEO will know everything possible about the vehicle they are driving and the trip they plan to take. They will know every detail possible about their own strengths and weakness and that of the competition as well. Before they start any business segment they will know every detail possible about the market, the customer, and the opportunities for growth. They will know if the present business model is the model that will allow the business to move forward. If not they will design the model that will take them down the right highway and discreetly move the business into a better future.
You have to choose a business model based on current market research and projected trends. The model you choose should be centered on the product or service mix you are bringing to the market place and the best model possible for taking and sustaining market share. The business model will be the driving force behind successful market share penetration.
As you think about the current retail market you will agree that Wal-Mart has chosen quantity and price as their model. It is a model based on what they would have the customer believe is a “one stop shopping” model, a large selection of merchandise at the lowest price. The have done an excellent job in building this perception through their marketing campaigns, which suggest they are lowering prices every day. Another thing you might note about Wal-Mart is that no matter what city you are in, when you see a Wal-Mart they are all the same. Same buildings and color schemes, same merchandise, same uniforms, same hours, same everything. If you shopping at a Wal-Mart in another city, you will feel as though you are back home. Everything has been duplicated.
The things you don’t get a Wal-Mart is great service and high quality products. The reason; their business model is based on quantity and price, not quality and service. In order to keep prices low, Wal-Mart buyers make the best deals they can with their vendors. In addition you won’t find a lot of help when you are trying to make a selection. However, Wal-Mart has done and continues to do an outstanding job in developing their business model to a science.
Think of McDonald’s; their business model is based on fast service and low prices. Just as Wal-Mart has perfected their model so has McDonald’s. Even a two-year old child knows what business is located under the golden arches.
Wal-Mart and McDonald’s have taught the world of retailing the importance of duplication. And so, if you think about it, you should also take away from the education ideas for making your business duplicable for sustainable growth
You have to decide who and what you want to be in this market. What is your reason for being? What is your mission? How will you achieve your goals? You have to be prepared to take alternate paths, if necessary through diversification or divesting failed and unworkable segments. You have to be aware of opportunities for growth, which may come through strategic marketing or acquisitions and other means. While these things may appear to be something you would want to think about later, strategies for these events should be included in the beginning plan. If plan A does not work, what is your plan B or C. You must always be prepared.
You have to be prepared to drive through the valleys, when business is not so good. You have to have the energy to climb the high hills. You have to have the nerve to take chances and drive around the narrow mountainous curves with no barriers and two thousand foot cliffs. It is not so much of what happens as you move forward in your business that matters. It is how you react to what happens in your business that will make the difference. If you have planned your business model and have developed your financial base so that you are capable of surviving the devasting events that will occasionally occur, you have taken the first step towards financial freedom.
The structure of the business model, when properly designed, will take you from business owner/employee to freedom. Many people go into business believing their business will earn them enough money so that they won’t have to work in it, but because of poor planning they end up where the business owns them instead. You have to plan the business so that even though you love what you do, you are able to step aside and still remain fianncially sound. To do this you have to work harder on your business than you do in the business. Would you believe the CEO’s of Wal-Mart and McDonald’s have never even seen or been in all their locations? Would you believe that they have never met most of their employees, or if store number 3401 opened this morning? Can you understand why the Sam Waldron family will never have to work a day in their lives, if they so desire? The answer: model and duplication. Business always moves forward.
There is only four basic business models. You can choose quality, price, quantity, or service, but you should only choose to combine two: quality and service, quantity and price, quality and price, quantity and service or any two of the four models, but you should not attempt to offer all four. If you try to be all things to all people, you will be stretched so thin than your business will not make sense to you or your customers and will be doomed to failure. If you are going to offer quantity and price you will not be able to offer high quality products and excellent service. If you offer quality and service, your targeted customers will expect the best products offered within that business segment and they will expect to be served. You won’t find Wal-Mart quality products in Neimans, Saks, or Bergdorf Goodman. And you won’t find Neimans, Saks, or Bergdorf Goodman products in J C Penney. Each of these businesses have targeted specific customers and have based their business model on what their chosen customer base expects. As technology moves forward and customers find themselves battling time restraints, family and financial pressures, new methods of shopping is disrupting the traditional methods of doing business. Major adjustments in business models and business strategies is on the horizone. This applies to all segments including retail, wholesale, and services. Businesses eventually create personalities and character of their own. Customer learn fast and will soon know what to expect when doing business with you, or not.
When you visit Wal-Mart you know what to expect, even before you go. The same is true with McDonald’s or any business that has learned the importance of modeling and duplication.
No matter what model you choose, if there is a need for your products and services, someone is already serving your chosen customer base with similar products or services. Who is your competition? Is there room for another business that has similar products and model? Will Internet shopping have a major affect on y0ur business? You have to know!
A DISTANT TRIP
Surely, you would never take a distant trip in your car without first knowing all the details about your car’s condition. Most likely you would not venture out without complete faith that the car is capable of making the trip. In addition, you would make plans concerning what, why, where, when and how you will get there. You’d want to know where to lodge along with all the details concerning food, entertainment, miscellaneous expense, medical options, etc. Of course you would! It is just the normal thing you do when you plan a distant trip. Yet, it is amazing how many knowledgeable business owners let business planning slide.
Business planning should never be done for the sole purpose of obtaining a bank loan or to attract investors. Although a business plan is often required, especially for a new business, in order to obtain needed funding. The main purpose of a business plan is to force you to think about every detail concerning your business ideas. A good business plan becomes a road map that you should follow. And when unforeseen obstructions, barriers, and other events occur that affect the flow of business, you change the plan, not the goal. A business plan should be a living document that guides you into the future in which you are living.
Consistent planning, measuring progress, making adjustments, is all part of the process. Unfortunately, many new entrepreneurs believe they do not need a formal business plan. I suppose they prefer the excitement of not knowing. The question remains, if you don’t plan it, how do you know if you are on the right highway or if you have chosen the right direction? Someone once said, “If you don’t know where you’re going, how will you know when you arrived?” Surely, bankers and investors will want to know before they hand their money over to you and you should want to know too.
Bankers and investors will also want to take a look in your rearview mirror. They will want to study your history. They will want to see your last three years income tax returns and your current financial statements, which are all historical documents. They will want to see what you see in through your windshield for three to five years out. They will want to see your cash flow projections and how you intend to occomplish your goals. They are interested in knowing if your cash flow projections are realistic and if your realistic projections will provide enough cash flow to service debt. Your business plan will paint a realistic picture because you have or will create your plan for in house operational purposes. In addition, bankers and investors are you partners. They have a right to be informed as the business progresses. Periodic financial statements will most likely be required. You certainly don’t want to fool them or yourself. You have to know.
When you first start your small business it can be compared to a mini-van with all employees and other assets on board and you are the driver. When you are ready to go, you sit behind the wheel and push the accelerator. Every foot you drive forward is now in the rearview mirror, which has now become your past experience as a person and business owner. As you look out the windshield in front of you, you are driving into (living into) your future in the present moment; however, you will never arrive at your perceived destination because the future never comes. It is always now. What actions you take in the present moment determine your success or failure. The past is only a memory now. You cannot erase the past, but you can take actions in the present moment to enhance the future you are living into.
In business, you are always looking out the windshield, praying that all will go well and that you will not have an accident, but you can never be positive of what lies ahead. No matter how much business education you have under your belt, you can never see much further down the road than your eyesight will allow. You drive carefully, making every adjustment necessary to assure you do not crash.
You are making progress and your mini-van is full. It is time to trade up, so you buy a new model, a bus, and you add more inventory and more employees. You have to succeed, so you make sure you have the right people on the bus. Soon that bus has reached its maximum capacity, so you decide it is time to buy another bus. The first was successful, so you want to duplicate that successful model. You gradually fill it with inventory and employees until it too has reached its capacity. You make sure you have the right people on the bus. You get the picture.
You have learned powerful lessons. The rubble of experience is scattered on the highway as you move forward. You can see the rubble of mistakes plainly in your rearview mirror. Everything is documented. What is…is! The past, which hopefully you will not bring into the present moment, tell you not to stop. You know that you must constantly move forward or die.
When a vehicle gets old and is in constant repair it is time for a new model? Business owners that do not consistently analyze their business, refuse to change with the times, are digging their own grave. Intelligent CEO’s rid themselves of unprofitable operations, ineffective staff, and slow moving inventory. It is often necessary to clean the bus. A good CEO does not get married to locations, fixed assets, current assets or nonproductive staff. A good manager understands that, in reality assets and debt are not things, it is cash…real money. The inventory setting on the shelf is not products to be sold, but rather cash that has been invested and must be returned with preplanned profits. He knows that the more times he invests his operating capital during a given period of time, that a better net profit will be achieved. A good manager knows that nothing happens until something is sold.
As you plan your distant trip think about the current landscape of business. Look at the current trends. Learn from the mistakes of others. A good manager will also develop a good exit strategy because, as the old saying goes, “And this too will end.”