Expand to New Facility?

Our business is growing. When should we move to a new facility? How to get financing?

Our business is growing steadily. When is it right to move into a new facility? How do we find funding?

We are getting close to capacity at the kitchen we rent but we are at a point where we (2 people) might not be able to meet the new volume without a new facility and more employees. The business isn’t grossing that much yet, but won’t unless we can increase output. Asked on MosaicHub by Eric Martin

Mike’s response

How can you increase capacity without increasing overhead?

— Find an “as needed” contract kitchen for the time being. A restaurant I frequent is open for breakfast and lunch, and is going to rent out its kitchen in the evenings for people like you.

— Do a second shift. Hiring a “night crew” is a lot cheaper than opening a new facility. Utilize your existing facility and equipment to the max.

Raise your prices! If you have increasing volume and you’re not yet profitable, you’re not charging enough. Unless you can demonstrate profitable operation, you’ll never be able to raise growth capital.

Get more efficient, and thus boost your labor productivity. I have a bakery client who started tiny, and now she’s at $3 million. It has been very hard for her to make the production more efficient. “We’re an artisan bakery!” she proclaims. But now she’s getting productivity religion, and it’s going straight to the bottom line. And quality is not slipping; if anything, the greater consistency is increasing quality.

Schmooze your bankers. Everybody’s first suggestion for raising money is crowdfunding, but I doubt it could work for you. You want permanent capital–perhaps $50,000 or more. You can’t crowdfund that much. You’d spend a huge amount of time and effort, then probably not make it.

Focus on getting profitable by getting the most from your current facility, get help putting a plan together, impress your banker, and get a legitimate capital loan.

 

 

The Power of Negative Thinking

Why bother planning? There’s so much uncertainty! Here are a few guidelines

Why bother planning? There’s so much uncertainty!

Good article in Wall Street Journal! Will make your blood boil! Or maybe you’ll say, “Hmmm, I see the value in that.” A few key ideas that excite me:

“Many successful business people reject the idea of setting firm goals.” They reject the value of setting big, audacious SMART goals—“specific, measureable, attainable, relevant, and timely.”

Things are too uncertain for this. Instead of choosing a goal and then making a plan to achieve it, look at the means and materials at your disposal, then imagine the possible ends.

Use the “affordable loss principle.” Instead of focusing on the spectacular rewards from a venture, ask how great the loss would be if it failed. If the potential loss seems tolerable, take the next step.

Use “defensive pessimism.” Just thinking in detail about worst-case scenarios can sap their anxiety-producing power.

Since I lead planning workshops, why would this excite me? We try to accommodate these ideas in our planning:

— Get your plan done on just one sheet of paper. If you can’t write it on a page, you can’t do it in a year anyway.

— Focus on your toughest challenges, uncertainties, dilemmas, choice points. Any plan that ignores these is bound to fail.

— Balance between business and the rest of your life is a key goal. Build it into your plan.

— Plan for how you will deal with uncertainties. The more uncertainty, the more flexibility.

— Be steadfast pursuing your goals—until it’s time to shift. When a goal has been left behind by events, change it. It’s deadly to stick with it.

Our Small Business Success plan workshop helps you get your plan for the year done and presented to others for their feedback.

Planning for Small Business Growth

Five tips for getting your 2013 business plan done

5 Tips for Getting Your 2013 Plan Done

Business owners have a love/hate relationship with planning. We know that regular planning Small business success workshopboosts our chances of success. But it’s hard to carve out time to get it done. Here are five tips for getting it done without making a big deal of it.

Tip #1. JUST DO IT! Get it down in writing. “I’ve got my plan right here in my head” just doesn’t cut it.
Too many business owners let planning slide. Do it every year, or more often if need be.

Tip #2. Be concise. I tell people in our plan workshops that if you can’t write it on a page, you can’t get it done in a year anyway.

Tip #3. Be practical. Write a plan for yourself, that you can follow and achieve. Don’t write a plan to look good for others. Don’t set blue-sky goals just to “push yourself.” Set no goal without doable action items that will get you there.

Tip #4. Tackle your biggest dilemmas, choice points, uncertainties–not just the positive stuff. Any plan that neglects how you will handle these challenges is bound to fail.

Tip #5. Follow up. Build in a plan to review your progress periodically. And it’s best to involve others in this, so you can’t fool yourself. My clients present their action plans to each other and get feedback. This forces them to think things through and clarify their assumptions, so they can defend their goals. Thus, they achieve their goals!

And one bonus tip:

Tip #6. Stick to your plan–until it’s time to change it. Things change during the year, and you need to shift your targets and strategies to accommodate. Balance steadfastness and flexibility in your planning.

Get Your Plan Done in one day at our annual planning workshop. Get 2013 started off right! First session is coming up–Monday, December 17, in San Rafael. More sessions in January–including a virtual session available to people anywhere.

Save 50%! If you’ve taken the workshop before, you get a 50% discount.

Recruit a colleague and both you and they get 25% off. Please forward this to your friends.

Growth Plans for Small Business–Some Rules

A successful plan is brief, dog-eared, marked up, covered with coffee stains, because it gets regularly reviewed and revised.

Plan for what you can. Then plan how you’ll deal with all the things you can’t predict–i.e., the uncertainty.

Dilemmas, choice points, open questions. Any plan that does not address these is bound to fail.

A successful plan is brief (just one page), dog-eared, marked up, covered with coffee stains, because it gets regularly reviewed and revised.

Targets must be achievable–and changeable.

Be firm on your vision, but flexible on means. (Steve Jobs)

Create a practical plan of action for your business in our annual plan workshop “Success in 2012.”

Lessons From a Gawdawful Year

“What if I was this cost-conscious in the good times?” “I saw how arrogant I had been.” “I let myself get discouraged.” “I only kept half an eye on the books.” “We lost sight of our goals.” “We should have laid people off sooner.”

Some people have told me that ’09 was not their best ever year! But what doesn’t kill you makes you stronger. What lessons have you learned from this tough year? Here’s what people in my Success in 2010 plan workshop sessions have been saying:

“We’ve had to cut costs to the bone. We’ve managed to save 10%. It struck me, what if I had been that ruthless in good times and not just bad? I’d have 10% more bottom line. Money to put in my pocket, to create a cushion for future tough time or to create a growth fund.”

“2009 was humbling. I saw how arrogant I’d been. We assumed that growth would just keep going. But when the phone stopped ringing, we had to relearn Marketing 101. For example, setting targets for number of new clients, and tactics how to bring them in. We should have been doing this all along.”

“I let myself get discouraged by telling and retelling the same old story of woe about how bad 2009 was. This was killing the business. During the plan workshop, I wrote it all out in excruciating detail, took one last look and then tore it up in little pieces. Now the slate is clean for 2010.”

“We kept people on way too long. We should have laid people off sooner. I was afraid that we’d never get the good people back. I’ve learned we cannot guarantee jobs. We must retain labor flexibility. From now on, our scheduling must go along with revenue—not just shop people but admin as well.”

“We saw our employees perform better in tough times. They’re more friendly, supportive and team-oriented. Is this fear of unemployment? I think they just saw the trouble the company was in and it focused their thinking. As a result, people are doing better client work than ever.”

“I watch the books like a hawk now. During good times, I only kept half an eye on the books. I’ve got to track how we’re doing—even day-to-day. I can’t wait till the end of the month to see what we did a month ago.”

“We hunkered down and lost sight of our goals. We’ve had to get in touch all over again with our long-term vision. It’s the source of our direction and inspiration. Without this we’re just wandering around.”

“Tough times force us to make better decisions. In fat times, we get lazy; let bad decisions slip in; spend too much on marketing and keeping poor employees, etc.”

“We laid off 40% of our people and kept the best 60%. Now that business is picking up, I’m giving more hours to our remaining people—even overtime—rather than rehiring. I see that paying overtime for existing people is cheaper than paying health insurance, workers comp, etc for extra people we hire.”

“We got a lot less picky about our customers. We’re going after smaller clients we would have said no to before. And without these, we’d be dead now.”

“A key employee left unexpectedly. This threw us for a loop. The lesson? Cross-train. Don’t be put into a position so that the company is held hostage to whether one employee stays or leaves”

What lessons have you learned? Add ‘em below.

Sample short business plans

Q: I’d like to see some sample short business plans to use as models

A: Shorter is better. My rule: “If you can’t write your plan on a page, you can’t get it done in a year anyway.”

We conduct plan workshops every year, to help business owners complete their Action Plan for the coming year. They devote a day to review their past year’s performance, clarify their long-term business trajectory and how business fits into their life goals, what they must accomplish in the coming year. We use a 70-page workbook with questions about every aspect of running a small business, but by the end of the workshop people reduce it to one sheet.

Note that this is an “action plan” that guides your action. It’s not intended to convince someone else they should put money in your business. Once you have this brief, basic plan, however, it’s much easier to convert it to a strategic plan needed to attract financing. My rule: Plan of action comes first.

If you ask me, I’ll email you several pieces:

– Template showing how it looks

– A handful of questions you can answer to get your plan started

– A Project Tracker that helps you add detail to central goals of your plan

While this plan is aimed at guiding your actions for the coming year, it can also serve to show a potential financier.