By Rosalind Resnick
The rule is that a new company should have at least three months working capital on hand to cover its expected operating costs. It's also a good idea, whenever possible, to put in place a credit line to help smooth out seasonal dips in cash flow and occasional lag times in payment from major customers.
Track your numbers on a daily basis. Running a business without knowing your sales and expenses is like flying a plane without instrumentation. You may be able to stay in the air as long as the sun is shining and you stick close to shore, but the minute you head into a cloud, you lose visibility and run the risk of a collision. That is why installing accounting software from the beginning is mission critical.
Working with my clients at Axxess Business Centers, I am constantly amazed by the number of business owners who have no idea whether their sales are going up or down or whether they're making any money. Easy-to-use software programs allow even the novice owner who knows nothing about accounting to generate charts, graphs and reports that show how the business is tracking month-to-month, year over year, and by product and customer. By keeping close tabs on your numbers, you can spot potential problems at a glance and nip them in the bud before they become financial disasters.
Stick close to your customer. Many first-time entrepreneurs believe -- mistakenly -- that if they build a better mousetrap, customers will flock to their door. Battle-scarred veterans have learned the hard way that building a business is all about listening to the marketplace and giving the market what it wants.
Especially when launching the company, you, as the founder, CEO and principal investor, must work directly with customers, listening to their problems and learning about their needs. As your customer base increases, you can keep in touch regularly through phone calls, newsletters and visits. Even as your business develops, never assume that you can stop prospecting for customers. Indeed, schedule at least an hour a day to market your business.
Plot an exit strategy. Most people who start businesses -- especially for the first time -- aren't thinking about selling their companies. It's quite the opposite! When my partner and I launched NetCreations, my dream was to run my little company for the rest of my life. Anyone who wanted to take it away from me would have had to pry my cold, dead fingers from my desk. Looking back on what happened when the Internet market collapsed, we were fortunate to be able to sell out -- to a European conglomerate -- before it was too late.
The moral? You need to start surveying the landscape of potential acquirers before the ink is dry on your business plan. You must start building relationships with those companies so that you will be on their radar screen when it comes time to sell or seek a strategic partner to take your company to the next level. It's also important to figure out what these companies want -- a proprietary technology, a product line extension, an entry into a niche market -- so that you can shape your company accordingly.
NOW, FOR THE ART. Entrepreneurs don't start companies because they want to manage people, track numbers, handle customer complaints -- or even cultivate potential acquirers. It isn't the science that drives them. Rather, it's the art -- the desire to design beautiful buildings, cook tasty food, or invent an ingenious new widget.
But the science can't be ignored, and so it must--and happily, can -- be learned. Indeed, that is the principal behind Axxess Business Centers -- to package what can be canned for presentation to clients who can then incorporate it immediately. When it comes to entrepreneurship, getting the science right smooths the way for tending more deliberately to the art.
Rosalind Resnick, founder, president and CEO of Axxess Business Centers, is a former business and computer journalist who built her Internet marketing company, NetCreations, from a two-person home-based startup to a public company that generated $58 million in sales. For an another Entrepreneur Byline by Resnick, see "How I Sold My Company for $111 Million".
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