Entrepreneurs: The Two Top Priorities For Your Start Up Company And Business Plan
As an entrepreneur with your business plan in hand, what are the two top priorities you have on every day’s action list as you start up your start up company?
Starting and running a company can be overwhelming. Endless new action items seem to appear magically on your To Do List as you day develops - with all of them either whispering or screaming to be your top priority. And, when the day is done, it often seems that one or more of those unanticipated priorities won - and the most important action items you originally had on your list when you walked into your office this morning did not get done - again.
So, how is an entrepreneur to decide on their priorities - especially when there is so much that needs to be done? The answer is surprisingly easy.
- Priority 1: Absolute top priority for the CEO of a start up company: maintaining a comfortable cash balance. That’s what is in your checking account. It cannot go to zero or go negative. Period.Every morning, everything on your priority list has got to focus on either maintaining or increasing your cash balance so that, as a minimum, it exceeds your comfort level. Everything else is secondary.If this is not your top priority, you greatly increase your risk that you will go out of business.
- Priority 2: The only thing that is close in priority…but that is still second to Cash Balance…is generating positive cash flow from operations. If you have this, a lot of #1 is automatically taken care of. Remember, even the smallest of cuts that never stops bleeding will eventually kill you.Get above break-even as quickly as you can and stay there. There are two basic ways to do this: increase sales and cut costs. Running lean and keeping costs low by cutting all fat but no muscle is almost always a good idea.However, you can only cut so much and still have the infrastructure that you need to be in business. That leaves sales as the primary way to get above break-even and stay there. Every day, your Priority 2 should be driving sales - including short-term and long-term revenues. For a start up company, I recommend that the CEO spend half of every day on action items that directly relate to marketing and generating sales.
- Priorities 3 - 101? See Priority 1 and Priority 2. Yes, they are that important.
- Priorities 102 - 1,001? Items that at least indirectly, but positively, help Priority 1 and 2. Period.
- Priorities 1,002 - 10,000? Everything else required to run and grown your company.
Ignoring this pecking order of priorities is why most start up companies fail…so slay those dragons every day by focusing on Priority 1 and Priority 2.
How do you know what a comfortable cash balance is for your company? How do you know where real break-even occurs with your current products and services?
You have a realistic business plan - and you measure actual versus budget every month.
Too many entrepreneurs make a huge mistake throwing together their business plan with sweeping generalizations that skew their projection so badly that their whole plan really is a case of GIGO - Garbage In / Garbage Out. The only thing worse than going the wrong direction based on Garbage Out - is to go the wrong direction, enthusiastically.
A bad business plan usually gets you going the wrong direction, often enthusiastically. The result is that most entrepreneurs don’t recognize this problem until it is too late to change direction and save their company.
What makes much more sense is taking the time to generate realistic and meaningful start up, revenue, personnel and operating cost numbers for your new start up company. If you need help, get experienced mentoring from someone who has the expertise you need - someone who can ensure your underlying assumptions make sense for your company in the real world.
Then, you can use your business plan to know how much start up capital you will really need, where your cash balance will be each month and each year…and when you will get to sustained positive cash flow from operations.
With this knowledge, you will know how to best invest your Priority 1 and Priority 2 time on your start up company to get you maximum results.
