Isn’t it weird that this post on small business innovation survival is Chapter Thirteen?
I didn’t plan it that way, but folks who go belly up usually didn’t plan that either. One of the most telling statistics about starting a business is that the longer you can hold out the more likely it is you’ll survive and do well. The literature will tell you that many fledgling new companies die due to lack of capital. Fair enough, but the reason behind that reason is that there was not a survival strategy that worked. A start up is a bit like that journey across the desert in Lawrence of Arabia — you know it’s going to be a brutal trip. Pack water — pack cash, contacts, advance orders, the skill of pivoting on a dime, and a lot of patience. With grit, luck, and skill, you just might make it to Aqaba.
And by the way, there are lots of reason companies fail beyond capital, like not having something with a point of difference, or a real proposition, but we’ve covered that already. This post/chapter of Guerilla Innovation is about money and the concept of survival.
First realize that survival is not just about money exactly. Survival means you get creative about ways to avoid spending money, ways to trade instead of buy, ways to fund operations. A big pile of cash is great, but if you’re not very stingy about holding onto it, it will disappear faster than you can blink. It can easily be gone before the cash starts coming in, and that means you’re dead.
Let’s get very basic here — you have to live. You have to take care of the basics in your life in the lean start up years of a new business. You have to pay rent, buy food, pay dentist bills, put gas in the car, and maybe tuition, you get the picture. I’ve seen some great people with amazing ideas fail because on the cusp of big success they had to get a salaried job in order to make ends meet. It’s heart breaking to see and experience. I’ve been there. My very first business, Point Blank Media, I was forced to sell my share to my partner because I just couldn’t make it another month. My partner hung on and made a success — it took him two more years. I didn’t try a business of my own again for 20 years.
I didn’t have a survival strategy. Point Blank could have focused on photography work that would have kept the lights on and its two founders in pocket change. Instead we tried to act like a big ad agency and make money on media buying. We’d spend all the cash we had to buy some radio spots, and then wait months to get paid back. It killed us. We should have changed our business model sooner. Fear and a stupid inflexibility kept us from doing this.
If you’re in an existing small business looking to do something new and innovative, realize that your new idea could kill you. Your new idea could destroy your already existing prosperous business. It could be that you need to reinvent to survive and you have little choice. If you move forward you simply need to find a way to manage cash until such time your new gizmo income replaces the old gizmo income.
Money, funds, CASH are essential to keep going long enough to get established. I’m sure you’ve all heard the old adage about real estate, the three most important things being: Location, Location, and Location. Small business survival is about Cash Flow, Cash Flow, Cash Flow (even after a successful start with an innovative offering).
Guerrilla Innovation Survival Guide:
- Assess your current situation and get a realistic sense of how long you can survive with things just as they are, that is, with no money inbound. This assessment goes beyond your new business (or new wrinkle) it’s about You and what you can realistically manage.
- Slash everything you possibly can, now. Don’t wait until you’re cash poor and desperate to take these measures. Slash early and often, preserve cash. Save money for the most essential move-things-forward expenses.
- Brainstorm ideas around ways to bring in more cash in the short term. This might be something like renting out space in your office or warehouses, a second job, selling something you don’t need like a second car. These are very obvious examples. More creatively, is there a way to sell pieces of what you have? Components? Quick Hit service offerings? Even shares of your newco (last resort). Think low hanging fruit.
- Be realistic with your family, friends, and significant others from the start. Those around you will pressure you to quit if they think you’re failing. If you paint too rosy a picture (and this is very easy to do) at the start you’ll be building up unrealistic expectations. If you think it will take a year to succeed, say 2 years. Show them (and yourself) milestones you need to achieve. You’ll buy yourself time before you get the worried looks, serious talks, and lectures.
- Get orders. You can’t start selling too soon. In fact, one creative way to survive is to sell, collect a payment, and then make it to order. In some industries big companies understand this is how they build a supplier base, and so, they might be willing to help with orders and flexible terms.
- Look for partners that add value and get their skills and investment money.
- As a last resort, borrow money. Avoid this if at all possible, but it’s an option.
- Think about raising funds through the new online fund raising tools like KickStarter. It’s a whole new world in funding this way.
- Be ready to change. Use Creative Problem Solving to think up ways to change your offering if it’s not getting market acceptance. Ask yourself questions about what you might do, brainstorm options, test the idea, and adjust, adjust, adjust.
Sorry for this extra long post, it’s not a simple subject.
This post is the 13h chapter/module in an online innovation book tailored for small business. The working title is Guerilla Innovation. If you want to start at the beginning and read the entire book, start at the introduction, here. Chapter 14 is the next and final chapter in this online book.
The pre-cursor book to this online book on small business innovation (aka Guerrilla Innovation) is Jack’s Notebook, a business novel about creative problem solving. This is a great story that blends all the concepts of Guerrilla Innovation into one fast-paced, thriller type book. Yes, Jack does Notebooking and a form of Scaffolding as part of the story. Stories are a great way to integrate learning!