Starting a business

Starting a business

Greg, how did you make the decision to start a new business?

I just watched a great story on 60 minutes about babies. We’re wired for bias. That probably means that if you’re reading this, you are looking for evidence that will support your decision to start a new business.

So, I’m here to say “Don’t do it.”

I am working on a book that I’ve tentatively titled “Life as the Mad Gringo: From Riches to Rags in the Apparel Industry.”

In it, I will give all the gory details about the rise and fall of my time at Mad Gringo and I’ll bring in the stories of the many other small businesses that I met along the way. Share our experience so you can ignore it as you plow ahead.

How do I know that you’ll ignore the advice? Because it’s what I did. It’s what all the other entrepreneurs I know has done.

Since you’re going to plow into this venture, I’ll offer this little tidbit.

Cash flow.

No matter what size your endeavor is, cash flow will be your #1 measurable. Get cash in hand quickly and hold on to it for as long as you can.

It sounds so simple because without cash there’s no business, right? I agree. That’s why, like a kindergarten teacher, I’m “strongly suggesting” that you or your bookkeeper/accountant plan out when the dollars come in, when the dollars go out, and what happens when the dollars don’t come in or go out when you expect them to.

Some cash flow hints:

• Credit cards. Yes, it can run 3-4% for the privilege of collecting credit cards, but it gets you your money within 72 hours. Cash in hand.  (side note: to figure cost, take total credit card fees and divide them by revenue – don’t go off the “discount rate”)
• Offer a pre-paid discount. There are companies with accounting policies that encourage early payment if there is a discount involved. It doesn’t need to be more than 2-3%.
• If you find yourself “negotiating” your product/services, make pre-payment on credit card part of your deal.

That’s the tidbit.

I’m all about sales and marketing and business development but knowing your cash position determines how the business flows. The sooner you get into the habit of working accurate cash flow projections, the better your business development activities work.

More info on the book in the coming months. Good stuff.