Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9 pm ET. This is excerpted from my recent interview with Shahara Wright an experienced and highly sought-after business law attorney and business strategist. She is the author of From Entrepreneur to CEO and host of the CEO Collaboration Circle. Shahara founded The CEO Effect, LLC to work with small business owners who want to implement a strategy to build capacity. For more info: www.theceoeffect.com
SmallBizLady: What does it mean to be scalable?
Shahara Wright: Various meanings in the business world. Mostly means that your business can increase and expand efficiently when the demand becomes greater. If you got all the business you wanted to have, could you handle it? How easy would it be to take on 50% more customers right now? If you are still contemplating that thought, your business needs scaling.
SmallBizLady: If I want to scale where do I start?
Shahara Wright: I always tell my clients to think about where they want to be in 5 years and plan for that. What do you need to have in place to make that 5-year goal work today? Planning is key! What systems do you need in place to handle increased volume? Do you need more employees? Do you need better cash flow? What funds do you need to make that happen? The answers to these questions will help you know what you need to plan for. Once you have that, you are ready to implement.
SmallBizLady: How do you implement?
Shahara Wright: I knew you would ask that! It all starts with you! You need to focus on growth and that does not simply mean more marketing. Grow your partnerships and connections. You will need more vendors or better vendors. You will need to increase your distribution partners and channels. Start educating yourself on things that affect your market and how others in your industry work. You also need to start standardizing processes. It will take a lot of trial and error, but once you find something that works well, you should see an increase in efficiency.
SmallBizLady: How can I compete with those bigger companies?
Shahara Wright: It is not about competing, it’s about the best you can where you are. That means you must know what you are the best at. Understand what is your company’s strength and how can you increase that area. It also means you should look at your weaknesses. You need to know what keeps your business at the level that it is on. Most small business owners say money, but most likely it is something else. It is rarely the lack of financial ability that kills a business. The majority of time, it is the lack of management skills.
SmallBizLady: Why should my business be saleable?
Shahara Wright: Many business owners don’t think about what will happen to their business when they are ready to retire or just wanted to leave the business altogether. The financial documents are not in place; tax returns reflect little or no income and the bank account is constantly in the red. If you think you may want to sell your business one day or even have investors, you need to make sure it is positioned correctly.
SmallBizLady: If I want to sell my business, what should I think about?
Shahara Wright: Naturally, there are lots of things to think about. I think one of the most important things is structure and organization. What type of entity do you have? If you have a corporation or LLC you can sell the business intact as a whole. If you have a partnership or sole proprietorship likely going to have to do an asset sale. These are very different types of sales that can make a major difference in the amount of money that you receive for your business. In addition, you want to think about your employees and their ability to run the business without you. If the success of the business only depends upon you, the business may be less valuable.
SmallBizLady: What advise can you give when someone approaches them about selling their business, but the offer was too low?
Shahara Wright: May I give the cautionary tale of Pebble. If you don’t know, Pebble was a tech company first of its kind with the revolutionary watch which synced to your phone, tracked your life style and allowed you to do all kinds of things from your wrist. Its chart-topping Kickstarter campaign is what put crowdfunding on the map. Over the years, many companies tried to acquire it and were rejected. Last year, Pebble closed its offices with barely a blip in the newspapers. No one cared because the technology had been usurped and the business could not keep with bigger named brands i.e. Apple. This is not to say that every offer you get is the best offer you will ever get. But don’t over value your business because you think it is worth more than it really is.
SmallBizLady: What if I don’t want to sell my business?
Shahara Wright: If you don’t want to sell, what is your plan? Do you expect to just close it when you retire? If you haven’t thought about that, it is okay. However, this is an important part of doing business. Making your business saleable adds value to your business. I always try to encourage business owners to think past, right now. You may not want to sell your business right now, but you may have to at some point. Even if you don’t sell the business itself, there should be assets that are worth selling that can yield substantial income. If you pass away without considering these issues, how will your heirs deal with your business? Don’t assume that they want to take over, especially if they have never been trained or made a part of the business.
SmallBizLady: What does it mean to have a sustainable business?
Shahara Wright: I always say it is easy to start a business, but it is difficult to sustain one. Sustaining does not mean just existing for a long period of time. There are many businesses that can survive even with minimal profits. They typically limp along doing whatever it can to survive. That is not sustaining. Sustainable means that it can function without a constant influx of cash from outside sources. In other words, it should pay for itself. It also needs to be forward-thinking and ready for future changes in the market.
SmallBizLady: I have had a business for a long time and I want to expand. Does that mean I have a sustainable business?
Shahara Wright: Not necessarily. There are many businesses who have scaled but have been unable to sustain the growth. It’s about planning (as everything is). You must be aware of the inside and outside forces that affect your business. A SWOT analysis helps with giving you a better understanding of those forces. Your business and yourself, should be able to deal with change and make the necessary steps to continue doing business. Being able to adapt is more important than growth when we are discussing sustainability. With your growth, can you still adapt to the changes in the market?
SmallBizLady: With all the changes happening in business, how can one keep up?
Shahara Wright: It is all about value. In the end, that is what it comes down to. Businesses change their models all the time. Companies like IBM have managed to stay in business despite the rapid changes in technology. However, many others have gone by the wayside. Your business may not look the same today as it did yesterday. The question is, are your offerings valuable to enough people? You have to be innovative and prepared to excel in a particular area. You do not have to be and should not be everything to everyone. Do something well enough that you can continue to do it well, even when the market changes.
SmallBizLady: This is a lot to handle, is there any simple way to deal with this?
Shahara Wright: Yes! First, you just need to start the process. I always tell my clients to start thinking about what makes their company work well and what makes it difficult to run. List the good the bad and the ugly. From there you want to see what you can do better. Of the things you do well, what you be exceptional at? For the things that are challenging, what can you do to make them less challenging? For each thing you write down, determine what resources you must improve. What is keeping you from improving? These things go into being thoughtful about your business and helping you to make better decisions. To have a sustainable business, you have to be on top of your game!
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