Want to be successful in your small business startup? In this episode, I sit down with my personal coach, Tim Fulton, to discuss the 5 keys to a successful small business startup. Tim drops some serious knowledge bombs, so stay tuned!
He shares with us his thoughts on having a business plan. Quoting a study that pointed out that there is a larger than expected number of small businesses that have any type of plan, he puts the absence of a plan down to a fear factor – the fear of being held accountable, the fear of this becoming real when it’s in writing.
He also emphasizes the fact that growth sucks up cash – Unfortunately, many business owners don’t realize that until they’re in the midst of it and all of a sudden, cash is getting scarce.
Another pearl of wisdom for a business startup – Find some advisers, and be humble enough to ask for help.
He also talks about the significance of being clear about your “why” when looking to be successful in a small business startup.
Tim feels having a growth mindset is important. Individuals having a growth mindset almost look forward to making mistakes because mistakes are learning opportunities. In this episode, I sit down with my personal coach, Tim Fulton, to discuss the 5 keys to a successful small business launch.
Stay tuned to know and learn more.
Key Points of Discussion:
- Having a business plan (7:59)
- A study found less than 20% of small businesses have a plan (8:19)
- Why do so many businesses not have a plan? It’s a fear factor, feels Tim (8:40)
- Be adequately capitalized. Growth sucks up cash (11:33)
- Find some advisers, and be humble enough to ask for help (15:42)
- Have a strong “why”; figure out your purpose, your mission (18:03)
- Tim feels having a growth mindset is really important (24:54)
- Those with a growth mindset almost look forward to making mistakes… (26:21)
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Mentioned in this episode
I’m proud to introduce my buddy, good friend, great business coach, Tim Fulton. Tim’s got a laundry list of accolades and backgrounds. No better person to be addressing the needs of a business startup. He has owned and operated several businesses. One of the great things about Tim as a business coach is in the latter part of the last decade or so, he has done a lot of coaching. Which is as important as you know. Also, he was an entrepreneur himself, started and sold many business ventures. In Tim’s words “Made every mistake imaginable.” We have come to find that mistakes are the best teacher.
Tim’s coaching led him to Atlanta including one of his companies being an internet software company. He started Small Business Matters and that’s still running and going. Tim’s a great writer. He’s an author of a couple of books as well. “Small Business Matters” and the second book was “Small Business Matters and All That Jazz”. Going back to my New Orleans days. Tim is in the midst of writing the third book. He was also a Vistage Chair for three groups over 16 years.
I sat on one and that’s how I met Tim, as a joined Vistage and he was my Vistage chair. So again, that’s 15 or so different people from different industries all sitting at a table meeting, monthly discussing best business practices. It was Tim’s sort of role to guide and coach all of these folks through the meetings and then individually as well. Tim also started GrowSmart in Georgia.
The time that Tim started as a Vistage Chair, the small business development center network in Georgia, which is an arm of the SBA, the small business administration was looking for a training program for existing business owners in Georgia. Much of their work historically has been with startups. They wanted to start working with existing businesses and came to Tim and said, “Hey, can you help us put together a training program?” And it turned out to be a 40 hour, five full-day training program on all the key aspects of growing a business. Everything from strategic planning, marketing leadership and management, understanding financial performance, and then organizational design. They then asked Tim to be the trainer and facilitator of that program. Tim traveled the state over again about a 16 year time period.
He had over 2,500 business owners that went through the program and it actually got expanded outside of Georgia into Alabama and to Kansas several other states that were all also interested in the program. It was just a lot of fun for Tim to be able to work with so many different business owners. All were excited about growing their businesses, like a sponge, taking in as much information as they could. Then he transitioned that program into what he currently does now. It’s called small business matters Bootcamp, essentially the same content. Now doing it through the small business matters a banner. This program is not just Atlanta based.
Tim has also walked the 500 mile El Camino Santiago twice over the last five years, which I’ve learned a lot about from different folks.
Tim reflected on his experience, “It was great. The first time I did it, I did it on my own. Went solo 500 miles from the France Spanish border, the Pyrenees mountains, all the way over to the Western coast. Santiago Capistrano. It’s a historic walk. It’s been around forever. Going back to the apostles and you meet people from all over the world. It’s a spiritual journey. Then the second time I took my youngest son, he asked me if I would go with him. We did it as a duo, as a pair. That was great to be able to spend that much time with my son, a family member and see him enjoy it and take it in and in his own way was just fantastic.”
In the context, especially since we’re moving to a franchise model, there’s a lot that happens in the startup of a business. I want to walk through what Tim has already given me, which are really the five keys to a successful small business startup,
- Business plan
Less than 20% of small businesses startups have any type of plan, a marketing plan, a finance plan, an organizational plan, a business plan less than 20% and less than 20% of all small businesses ever get to their fifth year of existence.
Tim “When I look at those two statistics and I’m convinced there’s a connection between the two, that very few businesses have a plan. Very few small businesses make it to their fifth year, and what’s interesting to me is I think every business owner has a plan in mind. It’s up here. The question is how does it get from here down to here, down to something in writing, and as I’ve talked to a lot of business owners, you know sometimes they’ll say, well, I don’t have time. I don’t have time to write a business plan, or I’ve not read a book or go to the workshop. I don’t know how to write a plan or I don’t know. I need a plan. You know, I’ve been in this business for up to 10 years. Why would I need a business plan? But the real reason I found, I think it’s something very different and I think it’s the fear factor because you know when it sits up here, there’s not a lot of accountability.
Reason for the plan
You can’t see my plan up here. You can’t hold me accountable for it. You can’t ask me questions about it, you can’t challenge me on it. And so it’s kind of a weak plan when it sits up here. But when I write it down, something different happens. Now you can see it, my team can see it, I’ve got to share it with the bank. So now there’s a level of accountability that isn’t there when it resides up here. So I think it’s a fear factor. The fear of being held accountable, the fear of this becoming real when it’s in writing. I think that’s what keeps most small business owners from having a written business plan. And yet it’s so important because once it’s written down, this now becomes my roadmap. Like you’re talking about the El Camino. Every day I had a book and every day it said, okay, you’re going to walk this far, you’re going to stay at this and here’s where you should go for dinner and here are a few things you should see while you’re in this area.
So I had a plan for that. El Camino, the same thing for a business. I need to have a plan that says, okay, this is how far I want to take this business this year. Here are the strategies, here are the tactics. Who’s going to be responsible. It’s all written down for me. It makes for El Camino, the worst thing that could happen would be for taking a wrong turn. I came pretty close a couple of times. The same thing is true in business, dangerous taking a wrong turn, going in the wrong direction, making the wrong decisions. And Rick, I think that’s where the business plan comes in handy.”
- Adequate capital
Tim explains, “There is a lot of small business startups that get started in kind of a bootstrapping mentality. Having just enough money to get the doors open, buy some stuff, some inventory, hire some people, do a little bit of marketing and then everything should be rosy. I won’t need any additional capital. However, the reality is, particularly for a growth business, that growth essentially absorbs cash. As we’re growing, we need to hire more people, we need more space. We’re going to expand our marketing efforts, we’re going to extend credit maybe to our customers. I need more inventory. Growth sucks up cash. Unfortunately, many business owners don’t realize that until they’re in the midst of it and all of the sudden cash is getting scarce. And then instead of being able to grow as I’d like to, it’s going to have an impact on my growth and now I may even have to go backward in terms of the growth of my business.
So in the Bootcamp that I do, Rick, when we talk about financial performance, we look at a variety of different ratios, numbers, key performance indicators, and one of them that I show people how to calculate. It’s called working capital requirements, working capital requirements. Essentially it takes into several considerations, but it helps you calculate how much cash you need to have access to when you’re in business to make sure that you never run out of cash. Cause you know when you run out of cash, it’s game over, right? You may have the best product, the best people, but if you can’t write a check, if you can’t make payroll, it’s game over. It’s like driving your car and running out of oil. You know the engine locks up and you can have a great looking car, but it’s not going to move from that point on.
How to calculate
So we calculate this working capital requirement as a function of, of the size of your company, how much revenue you’ve got. Then it’s also a function of the financial model for the business, how much receivables you have, your payables on a monthly basis, how much inventory you’re keeping. So essentially your working capital figures all that in. For the average small business, it usually works out to between 50 and a hundred thousand dollars that the business needs to have access to and access to could be your line of credit, cash in your company, checking account, Tim’s cash, the amount of capital that I have personally, credit cards, essentially it’s how much cash can I get my hands on within about a 24 hour time period. And again, for his most small businesses, it works out to about 50 to $100,000. That is the worst-case scenario, I’ve got to have access to that cash. It’s a very important number, an important calculation to make sure, again, I never run out of cash.”
- Have a board of advisors
Tim details, “When I first got started in business. I came out of a business degree, had an MBA. I thought I knew everything there was to know about business, why would I ask for help, why would I seek out a coach of a mentor and advisor? Yet once I got going, I found out it was the opposite. I knew very little about operating a business. I began asking, you know, people that were already in business and I was lucky. I had some mentors including my father when I first got started. My first business startup was a tire store. He had been in the tire business his entire life. And, and again, early on I was hesitant to ask. I didn’t want to look foolish. I didn’t want to look like I didn’t know what I was doing.
He would just start asking me questions like, like, what are you doing when this happens and how are you handling this situation? He was smart about that. By doing that he would then, you know, help provide me with resources and information and guide just to asking good questions. So that was where I kind of introduced myself, to have an advisor. And then I had multiple people that I could go to. I had an informal advisory board with that business. Then the next business was a travel agency and the same thing. I began assembling an informal board of advisors and flash-forward, you know, when I got involved in Vistage, Vistage essentially is an advisory board for each of the members of the group. They have 12-15 other business startup owners that they can bring their toughest challenges to and, and get good questions in some cases get good answers.
Whether it’s an informal board of advisors, man, my neighbor, my best friend, my college roommate, a parent, a sibling, or it could be a formal board of advisors, I sit on two advisory boards for companies that meet on a quarterly basis. And our job is, is to ask the tough questions, is to look at their business plan, look at their financials and ask questions and, and, and point out where we think there may be some trouble ahead. And so I’m, I’ve become naturally a strong proponent of having that advisory board again, either formally or informally. It’s okay to ask for help.”
- Have a strong why
Tim reflects, “A couple of things come to mind. You know, being a small business owner is really hard and sometimes we don’t. One doesn’t understand that until you’re in the seat and you’re making tough decisions and not every day is rosy, you know, with every good day there’s maybe a couple of bad days. And I think what helps many businesses, her severe, particularly early on, is having a good understanding, good grasp of why am I in this business? What’s the purpose of this business? What is our mission? And so often when I ask someone either starting their business or maybe they’ve been in business for a short period of time, I’ll ask them that question. So what’s the mission? What’s the purpose of this business? And, and you’ve probably had the same experience. I don’t know, it just seemed like the right thing or you know, I was looking for something different or it’s a job maybe for some, unfortunately, the law, you don’t get that answer.
When I find the most successful businesses that I can think of, they have a strong purpose, a strong why. Why having a strong purpose is so important, not only for myself but for something for my team to rally around me. I’ll give you a quick example of course. I was working with a painting company. They do commercial painting out of South Florida and I had the owner, Frank, get together with them to do some planning a number of years ago. And I asked Frank, I said, so remind me what is the purpose, the mission of this painting company? He pulled out a sheet of paper and it had about a paragraph on it that some consultant had read and it was awful. Everybody needs painting. The painting’s important. Everybody should love painting.
So I asked him, I said, so how did you get into this business? It was called brother’s painting. I said I don’t remember ever seeing a brother before. He said, yeah, it was me and my brother that started this practice and he said, after about six months he decided to go in a different direction. I kept the name because of all the employees, they were all men in the business painters. He said they all called each other brother. He said, I couldn’t give up, because that’s what they say, brother, could you do this brother, could you help me with this? Hey, they may or may not have known each other’s names, but they called each other brothers, so we had to hang on to the name.
Then he said, so that’s where the name of the business came from and he said, before I started the business, I worked for Sherwin Williams big paint distributor and he said they used to come into our warehouse and the big painting companies, they would order their paint every day. They’d come in while they were waiting for me to pull their order, he said they would sit around and talk to each other about how they were taken advantage of by their clients because people don’t understand paint. They don’t understand the cost of paint, paint per square foot, whatever. So they would laugh and joke about how they took advantage of their clients. Then said, Tim, I decided that day that when I started my own painting company, I was going to figure out a way and help people understand painting. I wasn’t going to take advantage.
All of a sudden
I said, Frank, I think we’ve figured out your purpose, your mission. He said, what? I said, what? I just heard it’s brothers working together to change the game of painting. Frank looked at me, he was a big guy, played professional baseball and his eyes got a little red, got a little teary, and he said for the first time he understood why this business existed. Brothers working together to change the game of painting.
It was really, it’s a cool moment for me, and I’m sure you’ve seen this before, when the light goes off for somebody and he said, that’s it, that’s it. And funny story, he went back to Miami, I was in Atlanta about a week later, I got a package in the mail. White long-sleeve painters t-shirt. Well, what a nice gift. And on the front of the part, on the front of the T-shirt, it said, brother’s painting of South Florida turned around on the back of the tee-shirt. It said in quotes, brothers working together to change the game of painting. From that day on, I know it’s had a significant impact on his bet on him and his business because now there’s clarity around why this business exists. When things get tough as they do, that’s when it’s time to resort back to “why are we in this business.”
- Growth mindset
Tim “This one I think is a really important one that I think the most successful business owners have. What’s termed a growth mindset. There was a really good book that came out, it’s probably been 8 to 10 years written by Dr. Carol Dweck, Stanford professor. The book is called Mindset. In the book, she makes the point that there are two different types of mindsets that everyone has. One is a growth mindset. A growth mindset is an individual who says, you know what? I know this much of this and I may never get here, but I want to learn. I want to read, I want to go to workshops, I want to grow, I want to get better. And on the flip side is a fixed mindset. And it’s not good or bad, a fixed mindset. As someone who says, I’ve been doing this for a while and I’m not sure there’s much more to learn here, so I’m just going to keep doing what I’m doing. I don’t need to grow. I’m happy. I’m satisfied with where I am.
If I have a fixed mindset and I’ve learned all there is to learn, heaven forbid I should make a mistake. Individuals with a growth mindset almost look forward to making mistakes because mistakes are learning opportunities. When you make mistakes, you want to make little mistakes, bullets. I don’t want to blow up the universe, but I understand that the only way I’m going to learn and get better is by taking chances, taking risks, and I’m going to fail from time to time. I’m going to learn from those mistakes. I think that’s so important for a business owner, a small business owner, to have that growth mindset.