SAVING THE BIG 3 AUTOMAKERS : LESSON FROM A SMALL BUSINESS OWNER

Each business has its own individual requirements for funding in both the short and long term planning process.  Forecasting for these requirements is a key portion of the business plan.  Failure to accurately plan for these requirements will in all probability and at the very least stall the expansion and/or growth of the business. Before the meltdown in the gas prices this summer, a financial analysis through a predictive statistical tool was performed at one of our business locations (St. Augustine, FL).

 

The best laid out business plans are just that… plans. Plans need fluidity in order to serve as a conduit for change. Based on the analysis, the business model was not productive and the sacrifice was made to close the location. Pride could have prevailed and we could have kept the location open. However, pride will get you nowhere. The case can be made that failure allows you to improve. In essence this provides a buffer so that you do not make the same mistakes in the future. The case can be made that this is the truth for all budgets and hence is at the crux of our current financial meltdown. There are a plethora of conspiracy theories about why our economy and our finances are in their current schizoid phase with depressive mood swings. I’m not a conspirator, so I will leave that to the pundits. Having gotten that off my chest, these companies cannot learn from mistakes if they do not fail or at a minimum realign business strategies.

 

External funding is broken down into two main categories:  Debt funding and Equity funding.  Both systems have a time and a place when they are useful.  Debt funding is the preferred method if it can be accomplished.  Some endeavors require so large an investment that it makes this process unviable and at that point the entrepreneur will need to look at Equity funding where other individuals have a recurring interest in the company over a long period of time. This is discussion can be thoroughly discussed by the financial gurus. I have but a meager conceptualization of the nuances involved in budgeting.

 

Debt funding allows the entrepreneur to hold control of the assets that a company accumulates as well as the profits that are generated.   So if your company grows to several million dollars over time you retain all of that growth (within reason).

 

 In An Applied Approach the Equity funding is explained as allowing outside investors to purchase a portion of the company and therefore a portion of the proceeds from that company’s growth.  This means if your goal is to grow a company to a certain size, then sell (exit strategy), you have to grow it beyond the point of exit by the amount that you funded with equity.  This is further convoluted by the terms of the investment, which could bring that total to a much higher ratio than the Equity purchased in the early stages.

 

In order to avert problems with funding an entrepreneur needs to forecast the needs of the company with both short and long term assessments. Reasonable and ethical assessment of the current and projected cash flow of what is needed to both start and fiscally maintain the company and sustain it for the long term is not an easy task.  There will always be anomalies and emergencies that will change the landscape of a person’s business, plan from the written concepts. If you run a business during these economic times and you have not adjusted your short and long term assessments with judicious prudence, you are headed for trouble. The case can be made, that many individuals have failed to realize these adjustments. The gambit runs from the solo entrepreneur to the big 3 automakers. Imagine if you will, the Three Little Pigs and the Big Bad Wolf trying to blow the little houses down. The three houses had the names GM, Ford, and Chrysler. The only surviving house was the house the third pig worked diligently to build and restructure. Each pig stated “not by the hairs of my chinny, chin, chin”. Many of my students quip that I can take any complex task and break it down to a simple analogy. This is no exception. However, in the above video, the three members were able to overcome the external forces of the wolf by using everything at their disposal to stop the threat.

 

Money management is always a subjective subject, and there are no hard fast rules that ALWAYS work. However, if you surround yourself with sage guidance, honest friends, positive forethoughts, may difficult decisions (like closing a location that is crippling the overall health of your company), and practice writing SWOT analysis, your business will start off on the right foot and if it does not, you will not end up on the wrong side of the financial fiasco wondering what went wrong when the house comes crumpling down.

 

Cheers,

Dr. Judy

 

 P.S. who thought the big bad wolf was the victim in the pot? Did it cross your mind that it may have been an innocent victim called Santa? If you thought the person in the pot was the wolf we need to work on analyzing perceptions.

Enjoy Life

     On a recent trip to a large retail store, I witnessed an exchange that perplexed me. The cashier was flustered at the customer, who was flustered over the higher prices of food. The exchange was comical if not down right sad. The cashier told the customer that she had a bachelors degree in math and a masters degree in chemistry and was working as a cashier. The customer told the cashier that the three gallons of milk wouldn’t last the week.It was my turn. I smiled at the cashier (for those who know me, know I smile alot) and she began her tirade about how she hated her job. She was literally turning red as she spoke to me about her loathing for what she did. I then asked, why are you here? To this she replied, “I woke up one morning and my husband was disabled. No one would hire me because I have no real life experience. I needed a job just to eat, not lose my home, and the health benefits were a must”. To this I replied, “is it healthy that you obviously dislike and resent what you are doing. Is your health better because you are here? Why not look at teaching on-line so you can stay home and care for your spouse. With a masters in chemistry, you can definitely teach. Best of all, if you still want to work here while you are searching for your job, you can. Who are you networking with who can help you out”?Reference
American Psychological Association. (1999). How expectancies shape experience. Washington, DC.

Response expectancy has the capability for one of those ah-ha moments. More aptly, it is called a paradigm (not twenty cents). In psychology there is a relevance to a theoretical concept called expectancy theory. How expectancies shape experience determines how one automatically (through overt behaviors) or involuntarily (through negative self talk) respond to situations. If you expect that only Walmart will hire you, then Walmart is what you will get. The vicissitudes of life require that you set your goals as high as possible. Never ever give up. And for pete’s sake, if you are not happy with your life, do something positive (POSITIVE) and not destructive, to change your expectancies.

Cheers,

Dr. Judy Halliday

 

First Things First

     Are you fast and fizzle or slow and deliberate? Imagine if you will how you are today. Now imagine how you were 2 years ago. Jump to the future and imagine yourself in 2 years. Don’t think about anyone else (kids, spouse, friends, etc.). Focus on yourself. Are you happy? Are you wasting time doing things that are not productive? What is stopping you from achieving what you want to achieve? Do I hear -

• I have way too much to do, and not enough time in the world to do it all.
• There is no balance between my personal life and career. It is like robbing from Peter to pay for Paul.
• Deep down inside, I feel empty.

     Where you are headed is more important than how fast you get there. It took me 10 ½ years to complete my B.S. Remember; I was a HS drop out. However, I never gave up and although career and family came along, I vowed to slowly and steadily complete my B.S. That was accomplished and 10 months later I had a Master’s degree. I was still under 30 and life was going good. But I was still empty inside and yearned for more. I questioned whether I would be able to pursue a Law degree or Doctorate degree. I had excuses- my career with the Department of Defense was flourishing. Why would I need a higher degree? Then I attended a Stephen Covey seminar “The 7 Habits of Highly Effective People”, and I was never the same.

     Stephen R. Covey (with Roger Merrill and Rebecca Merrill) published “First Things First” a book that covers key strategies for your life compass. Remember, where you are going is more important than how fast you get there. No one on his or her deathbed ever said “I wish I would have spent more time at work”. I’ll continue blogging about simple strategies you can use to move from the abyss of your fragmented live, and into areas of happiness. And the best part is – it’s free.

Have any questions? Please feel free to ask.

Cheers,

Dr. Judy

ISBN 0-671-86441-6