Being First to Market

In the competitive world of technology, being first to market is a worthy leadership objective. Getting an early lead on competition is most often well rewarded and could lead to Entrepreneurial success.

Is being first to market something that Entrepreneurs should always strive for? Absolutely, but first ensure that your product or service is working properly and fairly reliable.

While waiting for perfection before launching your product or service is utopian, it is not a valid competitive strategy. Fulfilling a market need on a timely basis is optimal.

However, in rushing to the market merely to be first to fulfill a need could be disastrous if your product or service is not yet fully ready. One might be first to market, but the negative reputation from an unreliable, not fully tested  product or service is definitely more harmful.

Entrepreneurs would be well served to aim for launching a new product or service first, but only after fully ensuring that their credibility is not jeopardized due to a premature introduction. Test your product/service and be comfortable with its function and reliability before you go to market. You might not get a second chance or it might be too costly!

Ravi Patel

www.patelCFOservices.com

 

A Strong Foundation For Growth

Watching a tree sway with the gusty Santa Ana winds creates a business analogy in my mind.

In order to survive the strong winds, a tall, growing tree needs to have a strong foundation (deep roots) combined with the flexibility to sway with the gusts instead of being rigid.

Similarly an Entrepreneur needs to build a solid foundation to combat competition, market and regulatory forces and an uncertain economic environment. Without a solid foundation a business might not be able to grow significantly. It would be akin to building a castle on sand.

What are some of the key ingredients to build a strong foundation? It starts with a system to deliver quality products and services repeatedly and consistently. In order to do that one needs a competent and dedicated team of employees and management utilizing robust business processes and procedures. A superior customer service mentality coupled with continuous innovation and improvement adds to the mix.

Just as a tree cannot remain rigid to survive gusty winds, a company must be nimble and flexible to adapt to the changing environment and customer needs to grow the business.

With such a foundation and flexibility not only survival but also significant growth is possible. Have you built a solid foundation for growth?

Ravi Patel

www.patelCFOservices.com

A New Dawn in 2012

As you take on 2012, it is time to take a “Balance Sheet Review” of your business; not the true accounting numbers kind, but philosophically similar.

Entrepreneurs should evaluate their “assets” in the business – products/services, secondary leadership, people, customers, processes, etc. This should establish the strengths of your business to either build upon or further improve in 2012.

A determination of your “liabilities” will give you an idea of the weaknesses that need to be focused on in 2012. These “liabilities” need to be mitigated or converted to “assets” so that you can utilize them for success during the year.

By performing a “Balance Sheet Review,” Entrepreneurs can set their priorities, resolutions and goals for 2012 – a new dawn!

As Napoleon Hill said, “Hire good people, make money, and have fun,” in 2012!

Ravi Patel

www.patelCFOservices.com

Unmanaged Growth Can Be Painful

Most people would love growth in their business. However, managing growth could be painful especially if it is rapid. In fact, managing growth successfully requires thought and is really hard work.

Adding employees quickly might indicate business growth. Has the infrastructure to support the integration of these new employees in the company increased simultaneously? If not, it creates a painful situation for both management and the new employees. Unaccounted or unforseen indirect costs, such as payroll taxes, benefits and insurance, could adversely impact cash flow. Rapid employment growth might also attract government scrutiny for compliance of labor regulations.

Fast growth in sales orders is a great thing. Do you have the ability to deliver those orders on time and maintain quality. Do you have an adequate customer service function to handle potential issues?

Rapid growth in revenues also means an increase in receivables (unless you are fortunate to have a cash-only business). Do you have sufficient working capital or access to funds to accommodate such an increase or even delays in collections?

While growth is exciting, Entrepreneurs need to manage it carefully to avoid or significantly mitigate the accompanying pains. Leadership requires Doing the Right Things!

Ravi Patel

www.patefCFOservices.com

Revenue Concentration Risks

When Entrepreneurs start their businesses, they might depend on one or a few clients for bulk of their revenues. This revenue concentration scenario is acceptable for the very early start-up stage of a company.

As the company’s revenues grow, hopefully the increase is from having more customers rather than only from additional business with the same clients. Diversification of the source of revenues is a critical factor in the long-term success of the company.

The risks of concentration of revenues from only a few clients or one or two big customers could be huge. If a significant portion of the revenues are derived from, say one customer, it could be devastating for the company if such business was lost, reduced dramatically, or even if there were payment problems with such receivables.

Entrepreneurs, at the appropriate stage in their company’s growth, would be well advised to diversify the sources of revenues such that dependence on a few clients does not end up hurting their business.

Entrepreneurs might need to determine a risk tolerance model to determine what is the maximum revenue concentration from one client that would be acceptable for their business. In addition, they need to also assess the acceptable revenue concentration levels from a small number of clients. Such risk assessment would have to take into account not only the business and financial stability of the customers, the length and quality of the relationships, and the competitive situation, but also their own company’s performance with such clients and the level of risk that the company can take without jeopardizing its survival.

Managing revenue concentration risk is a critical component of Doing the Right Things!

Ravi Patel

www.patelCFOservices.com

Confronting a Crisis

Everyone faces a crisis situation once in a while. How do you deal with that crisis?

Some people choose to hide from a crisis and let others take charge. Others thrive on such situations because it gives them a rush and pumps them up. A few get too emotional.

Most successful people approach a crisis in a rational and deliberate manner. A crisis is no more than a high or critical priority management issue requiring situational leadership. Remaining calm and having a realistic plan to address the crisis is of paramount importance.

Input from other managers might be appropriate, but most often quick decisions are required to deal with the issues at hand. It is important to not only to develop a workable plan quickly, but also implement it fast to mitigate the potential damage. Flexible thinking is necessary and required changes to the original plan have to be swift.

Crisis situations always test Entrepreneurial leadership skills, but dealing with them effectively brings satisfaction and inspires employees.

Ravi Patel

www.patelCFOservices.com

 

Which is preferable – Revenue or Profit?

If you ask an Entrepreneur whether he/she would prefer growth in Revenues or Profits, the answer would probably be – both.

However both might not be possible for Entrepreneurs in growing companies. Depending upon the stage of growth of a company, there is a potential for a Catch-22 situation. If I have profits, I can have internally generated cash to invest in growing the top line. Or, if I had more Revenues, I would be able to squeeze out more profits due to certain economies of scale.

Choices have to be made at different stages of growth as to whether Revenue or Profit is more important to focus on. These choices would most probably change over time.

However, have you ever thought about what is better in the long-term – growth in Revenues or Profits? You might be surprised by your quandary!

Ravi Patel

Survival of the Fittest

The law of the jungle is “survival of the fittest.” This law applies to Entrepreneurs also.

Entrepreneurs need to find ways to survive in this economy and business climate. Having the best product or service, superior management, strong processes and so on are not the only things necessary for survival.

Imagine the cheetah – the fastest animal on earth. However if not alert, a lion or other predator will devour the cheetah. Being fast would not help then.

Similar having the best of everything is not enough for Entrepreneurs. Survival requires being alert, adaptive and quick to react to the changing circumstances. Relying on one’s past successes is not adequate for survival in the future.

Being fittest in this environment does not mean being the best. It requires having “street-smarts” to navigate these troubling times.

Are you fit enough to survive?

Ravi Patel

 

Letting Go

Parents have a difficult time letting their children venture out on their own – from the first play date to leaving home for college.

Entrepreneurs are not so different. When their businesses grow and new management is required or when Entrepreneurs need to move on to other things in life, they have a traumatic time letting go.

The successful Entrepreneurs are the ones who foresee such separations and prepare for such. Hiring the right management team, a capable Board of Directors or Advisors, and trust in their people and processes to continue the Mission of the company allows Entrepreneurs to easily transition away from day-to-day operations of the business.

Have you prepared your company and yourself to let go gracefully?

Ravi Patel

 

Yet Another Golfing Analogy for Entrepreneurs

Having previously posted some golf analogies applicable to business, another one comes to mind. Learning how to build a smooth golf swing is similar to growing a business.

Before you start the golf swing, you need to have a proper setup that includes the stance, grip, posture, balance and so on. It is no different for a business. One needs to make sure that you are established properly – the relevant name, legal and tax structure, banking relationships, basic facilities, web presence, initial IT infrastructure are present.

The backswing is critical to the full swing. If the fundamentals of your backswing are not correct, it will be difficult to swing your club on the proper plane for a straight, long shot. Similarly, businesses need to make sure that when they start, the basic fundamentals are in place – a quality product or service with sufficient testing, core group of employees, proven customers and vendors, an organization to support growth, etc. If the backswing is rushed, the total swing is destroyed. When the business starts to run before it can walk, growth will be very difficult to manage.

The downswing starts slowly and accelerates just close to the point of impact to generate maximum power. If acceleration is sooner or later in the swing, optimum power is lost. In business, if one grows too fast without controlling the timing it can be problematic. Business growth has to be synchronized with the capability of the organization. If the orders come in but the organization cannot deliver, it leads to challenges. Timing is critical for the proper growth of a business, as it is for acceleration in a golf swing.

A nice, smooth, balanced finish completes the ideal golf swing. However, if the business is successful a finish is not what we need. Let us end the analogy before that.

Golf has many lessons for an Entrepreneur!

Ravi Patel