2 TYPES OF CHANGE - HOW IT IMPACTS YOU!

Most entrepreneurs love it when things change. That's what makes us entrepreneurs, right? If we didn't love change we would still be working for "the Man" doing our best to keep things status quo. Actually, to be more accurate, entrepreneurs love influencing change or having some level of control over how to react to change when it hits the business or industry.

There are two ways to classify change:

Cyclical Change: Neck ties get wider and then skinnier and then wider again. Hair styles get longer then shorter then longer again. 80's metal hair bands should be cycling back around soon...right? Anyway, I bet you get the idea. Essentially, things come into favor then go out of favor and then come back again.

Structural Change: Here's an example...the IBM Selectric typewriter. Is it coming back? I don't think so. How about the horse? Is the horse going to replace the automobile? I don't think so unless aliens attack us and use their advanced weaponry to render all of our machines inoperable. We've had a structural change that has impacted businesses in the past 15 years. It's called the internet.

My Point: It's important to be thinking how change impacts your start-up. What if you are working on a product or service that will be obsolete in the next few years. Paying attention to the different types of change that may be shaping your industry can improve the sustainability of your business.

Action Plan: Make a list of as many changes as you can in at least the following areas -

• Technology - what technology changes and new innovations will impact your customers, vendors, etc?


• Economic - what economic changes are shaping your industry? For example, how is the weak dollar going to impact your customers, vendors, etc?


• Demographic - what changes are shaping your customers buying habits? For example, if your customers are closing in on retirement then how will this impact their purchasing habits?

WHAT'S YOUR SOLUTION?

In my previous and magically well-written post we discussed the importance of clarifying the "problem" that your customer has that you intend to solve. This can also be stated as the customer pain that you are alleviating. This is a very important piece when starting your business. Your business plan should contain a clear description of not only the the problem that your customer has but also the solution that you are offering.

Gaining some intense clarity around these two important elements of your start-up will ensure that you are not just a solution looking for a problem. If you've spent some time identifying your specific customer's pain then you will have less trouble selling your solution and ultimately have more success in passing the wallet test.

As entrepreneurs we tend to get overly excited and often overly attached to our great ideas. When this happens it is easy to focus on the technical aspects of our product or service without enough focus on what the customer's problem truly is. However, if you think about it, our great ideas aren't really so great if there isn't a customer with a problem or pain that our business can alleviate.

Additionally, investors, partners, and vendors will be much more excited about the size of the problem than with the elegance of your solution.

WHAT'S YOUR PROBLEM?!?!

Actually, this post is less about "your" problem and more about your "customer's" problem. When starting your business, you need to begin by answering some basic blocking and tackling elements...aka...fundamentals.

Today, let's discuss FUNDAMENTAL NUMERO UNO...

THE PROBLEM: You need to clearly identify the problem that your customer has or the pain they have that you can alleviate.

For Instance:

Problem: I'm a coffee drinker but I hate truck stop or convenient store coffee.

Problem: I spend all day dialing phone numbers.

Problem: My weapon doesn't load fast enough.

Problem: I can't carry everything I need when I go out.

Problem: I'm tired of getting out of bed to turn off the TV and lights.

Problem: I'm tired of waiting in line for rides at Disney Land.

Problem: It's a hassle to try to return items I've purchased on the internet.

Problem: I have to go inside the restaurant to get the food.

Action Plan: Yes, whip out the trusty sheet of blank paper and jot down what your customers problem is or the specific pain they have that you can alleviate.

Stay Tuned: In the next post we'll address the "solution" you provide your customer.

6 POWERFUL WAYS TO MANAGE CASH FLOW! (part 2 of 2)

4. Increasing Sales. One would think that increasing sales would lead to increased cash flow. However, if you invoice your customers for a large portion of your sales, when sales increase, your accounts receivable increase, not your cash. At the same time, inventory is depleted and must be replaced. Because receivables usually will not be collected until 30 days after the invoice, a substantial increase in sales can quickly deplete your firm's cash reserves. So, yes, increasing sales can help to improve cash-on-hand. However, this will be dependent on how well you manage your receivables. (additional tip: we have many clients who have used PayPal or Google Checkout to improve their cash position)

5. Managing Payables. A key strategy in managing cash is to shoot for bringing cash into the business as quickly as possible, then hold onto your cash as long as you can by managing your payables. That means, quite simply, take as long as you're allowed-without incurring late fees or interest charges-to pay your company's bills. Remember that a bad credit history can stifle your business, so you need to protect yours. Know which vendors you need to pay first. Better yet, negotiate with some of your vendors to extend to your payment terms. Also, you have to balance this with the necessity to have solid relationships with your vendors. You want to manage your payables but you also want to have a partnership with your vendors.

6. Investing Spare Cash. If your cash flow has become stable and predictable, you can consider investing your excess cash. This is also applicable if you raise a large sum from angel investors or venture capitalists and you will not need to spend it all quickly. You can earn additional interest income, as well as have the necessary cash to dip into during tough times. Can I interest you in some swamp-land in Florida?

Here's a recent audio cast from our Start-It-Up Cafe Cast on managing your books: http://startitupcafecast.blogspot.com/2008/03/get-your-books-in-order.html