You run your own business. Things aren’t going as well as you’d like. Every month you work every hour possible. Yet the financial return you’d like to enjoy still isn’t there. Sure, you have a product or service that your customers like; the challenge is to get more customers so you can make more money.
That isn’t happening. Maybe you tried to get financing. You just couldn’t get any bites. Why don’t lenders want to give you money to grow your business? Let’s take a look at two common mistakes that make it difficult to get financing.
You have a lot of unfinished business.
Bob started a used-auto-parts company several years ago. He’s got a pretty good inventory, and the collision shops that deal with him like doing business with him. Still, his monthly revenues aren’t as high as he wants.
He’s never been able to find the time to set up a computerized inventory system – he just keeps it all in his head. His competition lists their inventory online, so customers can order the part they need quickly. Bob’s customers have to talk to him directly: He’s the only one who knows what auto parts are in stock. Result: he’s on the phone all day, six days a week. And forget about taking a vacation!
It’s no surprise that Bob starts to burn out. He realizes he has to make some changes to the business – and fast. Bob’s cash flow isn’t looking that hot, so his first focus is getting more revenues to come in.
The obvious solution is to put his inventory online and do a little marketing. Then he could increase his customer base and turn over inventory faster.
Instead, Bob launches a brand-new business – a full-service auto repair shop that requires a high capital equipment investment in a competitive market. It’s also going to require a hefty marketing program to attract customers.
Now Bob has two underperforming businesses, two sets of headaches, and a still-inadequate cash flow. Who’s going to want to finance that business model? Bob needed to get the auto parts business running perfectly and profitably before ever thinking of opening an ancillary business.
You come up with too many ideas.
Linda is a passionate entrepreneur whose company has been around for 10 years. She’s carved out a nice niche for her product, but cash flow is very uneven through the calendar year. Linda always feels like she is playing catch-up. Meanwhile her competition is getting a bigger piece of market share every year. Yet Linda’s product is the best out there.
But Linda lacks consistency. Her approach to business development is unfocused. She is a great idea generator – forever coming up with great ideas for finding new business. One month Linda decides the company focus is going to be government agencies, so her team starts work in that direction.
The next month, she decides on another new focus – and her team starts work on that. Result: a company that is unfocused. Who are their long-term customers? What is the brand known for? The market doesn’t really know what her business does. Her team is unclear as to what the company goals are, as they keep changing – and this leads to frustrated employees who keep leaving. Being creative and full of ideas for new business is great, but as company owner, your main job is to be extremely specific about what the company goal is, and to keep everyone tightly focused on accomplishing it.
Business success requires great execution even more than good ideas. If you are looking for financing, you will need to be able to show what you are going to do with the money. You will need a clear plan outlining well-defined goals, strategies and milestones for how the business is going to benefit. You will also have to show that you have the management ability, knowledge and experience to use the money wisely and lead the business well.
Before applying for financing, take an honest inventory of your business practices and your management ability. Identify things that can be fixed easily. Take action on them before you ask for money.
Fiona Walsh started FM Walsh & Associates Inc. when she saw how many business owners struggled to sell effectively. An expert in sales and business development, she has worked with hundreds of businesses throughout North America to double, even triple, their revenues. She offers tips for growing your business at www.fmwalsh.com.