Journey Archives - Page 6 of 8

Simple Maths

Posted on October 20, 2006 by Steve Sammartino

“…I would have, but I’m not very good at maths”. How many times have we heard that? I love quadratic equations and differential calculus as much as the next guy… Good news bulletin; Simple Maths rules the financial world. If you’re familiar with the following symbols you’ve got all the number skills you need.

+ – x / % < >

You only need grade school math. But, you’ve got to be quick with your numbers, know which ones matter, understand industry averages and which ratio’s to look for – top of mind.

The most important of all these symbols is %. Everything that matters is represented as a percentage:

Gross margins

Net margins

Rates of interest

Return on investment

Price earnings ratios

Growth rates

Quick ratios

Debt to equity

Get to know your key financial indicators. Simple tools used on the share market are your best friend even for a small start up. Fundamental analysis is always based on ratio analysis.

Your company will only ever be what it earns and remember these two things that entrepreneurs often forget:

Revenue must exceed expenditure

The crocodile always gets the biggest piece!

De Gearing

Posted on October 17, 2006 by Steve Sammartino

Last week I blogged about risk. Some of my detractors would have come through with the counter punch of something like “I have a family to feed and a mortgage to pay.”

As you can’t really argue with what was proposed as your true risks, I can’t argue with your real commitments. It’s all a question of gearing. What’s your life geared towards? Maybe you have a large mortgage. Maybe you have an investment property. Maybe you take an annual overseas holiday. Maybe you have a car lease.

I know you deserve nice things.

I know you work hard.

I know your job pays for all this.

I know you deserve a reward.

What is the solution? De-Gearing. You need to de-gear your life. You will never get off the treadmill unless you de-gear. Your lifestyle keeps you on the treadmill perpetually. What could you achieve if you didn’t have any debt? What if you didn’t have a mortgage? What if you sold your house banked the net proceeds, quit your job and backed yourself to make something happen in 12 months? What if you used a portion of your money to feed, clothe and house yourself / family for a year, then you focused all your energy on your start up? What if money was not an issue and you worked on something you were passionate about for 12 months? What if you or your partner quit while the other worked?

This is not a fanciful “if”. Work out your net worth if you sold out all things that cost you money every week. How much money, no freedom, would you really have? What if you de-geared your life? What interest would the freed up assets generate for you on weekly basis? $100, $200, $500? It really opens up some options. The mind boggles.

Worst case scenario, it doesn’t work. You go get a job, probably a better one with more pay. You learn more in 12 months than 12 years. You have a great story for any interview. You’re seen as a pathfinder, a leader, courageous. The type of profile companies are searching for. You live the dream for at least 12 months (1% of you life if you live till 100). You have a great pub story. Cool. Tyler Durden

It’s really a choice.

I can’t coin this any better than Tyler Durdin from Flight Club….

“The things you own, end up owning you.”

Risk

Posted on October 15, 2006 by Steve Sammartino

If you’re reading this blog and not involved in your own business, stop for a second and ask your self why?

You’re obviously interested in entrepreneurship, marketing and small ‘start up’ business. You’re smart and capable.

But you’re Risk Averse. We all are to some extent. I am as much as anyone. But isn’t risk relative? Isn’t risk relative to what you have to lose? Maybe you should reconsider what you ‘could’ lose.

Are you risking:

Your Health?
Going Hungry?
Shelter?
Access to medical services?
Your Education?

The fact that you’re reading this on the internet tells me it’s none of the above.

Maybe you’re only risking ‘Status’. Maybe you’re only risking ‘Title’ and ‘Conspicuous Consumption’.

What is your true assessment of the risk? Is starting your own business really that risky?

Empathy

Posted on October 11, 2006 by Steve Sammartino

I was reading in the paper today about the earnings of company executives, city councellors, pollies. Hundreds of thousands if not millions per annum. They’re lives are so far removed from the body of people for which they govern that empathy is not possible. I am guessing Kim Jong il has never been hungry like ‘the people he serves’. I am guessing that the Coproate Leaders living in bayside suburbs can’t really see environmental degradation from their poolside deck. In addition new leaders with good intentions often suffer from metamorphisis as they climb and are influenced by the ‘Good Life’. This makes me angry because what they see influences their decisions, from which WE can’t escape, it affects all of us.

Ok, maybe a bit off the track for a start up blog, but I had to get this off my chest. Just remember to think beyond money and consumtpion. Think of why you want to run a company, who you’ll serve and provide some true leadership. With mad men like Kim Jong il around, right now the world needs you.

Be a Good Payer

Posted on October 10, 2006 by Steve Sammartino

It’s a well documented strategy in real estate to pay your tradesmen up front. That way you develop a reputation for being worth working for. When you want something done, you get it done quick. And in business speed is a massive advantage.

It is the same for your start up. We pay for things as soon as the bill arrives. Electronic transfer, bang! Then email them the receipt through to them. Beside the fact that we have little choice, we’d do it any way. You see, this is how we are building our team – our heavy gauge supply chain. Suppliers know we pay quickly and we’re good for it. Next time we are in a hurry to get something done, or we’re asking to cut lead times, who are the suppliers going to help? The slow payers or the quick payers? Silly question really. But the reason it is relevant is that most start up’s supply chains are full with SME’s. And SME’s suffer as much as you from the cash trap.

cash i hand

If you have a promising start up proposition, speed might be the key to beating another entrepreneur to market. Don’t reduce your chance of success by paying slowly.

Success vs Perfection

Posted on October 8, 2006 by Steve Sammartino

We are planning to run a test market in the next two months. We will need to make compromises. Our widget wont be perfect. A contradiction given we know that we must be remarkable or fail.

I have struggled with the balance of this in my mind and within my marketing philosophy. To us every component counts. A friend reminded me of the following:

“You are aiming for success, not perfection. If you limit your process to perfection, you’ll never be a success.”

Perfection is in a constant state of flux. To refuse to compromise in the pursuit of perfection and you’ll never, make, sell or ship anything.

There is a catch. Although this a test market, you never really exit your test market.

We know what our perfect product looks like today, we might get there tomorrow, after the test market. By then perfection will have moved on. But we’ll keep chasing it, while we’re already making it.

Test Market

Posted on September 29, 2006 by Steve Sammartino

Test Markets are very unfashionable in global marketing and large conglomerates. What would they know? Many large consumer goods firms won’t exist in a few years (especially FMCG in Australia). The retail duopsony will kill the majority as they perform classic backwards vertical integration. Large firms tend to have large national, if not global customers. Their customers demand homogeneous ranging. They desire scale and total geographic coverage. It’s all or nothing. I’m getting off the point here a bit….but the point is being nimble and without infrastructure can create a massive advantage.

Seth Godin’s latest book Small Is The New Big, espouses this clearly, because when you are small you can do things they can’t. Like test markets.

Test markets can:

– iron out production problems

– prove product with users

– improve version 2.0 of your widget

– prove revenue

– facilitate supply contracts

– assist in 2^nd stage financing

– recruit sneezers

The cost of failure often morphs into a test market. If you build an effective test market with a foundation customer, it may well be the leverage you need for a significant contract to scale up.

Flip your thinking from a minimum cost per unit, to a minimum total cost. So long as you know the profit margins will be there when you scale up at V2.0.

We did this and found we could do a test market for 10% of the cost of a full scale launch. If we fail we save 90% of our cash, or the ability to fix why it failed. We succeed even if we fail.

Ask your ‘believers’ (people in your value chain putting in time and effort to make this happen before they get money out of you), how cheaply they could trial this concept. Could they do it manually instead? Get your supply chain working for you. Shift their minds from quotes, and capital required… ..to temporary methods that will make do. This isn’t about compromise. It’s about bridging, and the bridge must lead to your final ‘remarkable product.’

This works because your changed focus will change the thinking of your ‘believers’. That’s when they will think of ways how to. It worked for us.

How can you run a test market?