Small Data, Big Results

It seems like you can’t turn around without reading yet another article about Big Data and how it is transforming our lives as business people and entrepreneurs.  Big Data is everywhere:  page views, visitors, clicks, eyeballs, cookies, the Twitter fire hose,  cross referenced databases – you name it – we are inundated.  A month or so ago there was an article in the Wall Street Journal about Data Scientists – the next Big Thing in occupations you wished you had gone into when you were first starting out.  Companies are paying $200,000 to $300,000 a year for the privilege of employing these people to sift through mountains of data – overflowing warehouses of the stuff – to discern tiny shifts in consumer behavior that can translate into millions of dollars in sales if you get it right.

But first things first.  You’ve got to make sure you are making money and creating cash flow.  It doesn’t matter how good you get at mining data if you run out of cash in the process.  If you haven’t done so already, read Philip Campbell’s classic book “Never Run Out of Cash.”  He’s got a new one in the works on Financial Forecasting for CFOs and Controllers to help you turn financial analysis and forecasting into a strategic advantage for your company.  We at SurvivalWare applaud Philip’s approach, and are determined to help you focus on the Right Data.  Starting with a small amount of data – historical financial statements and a few key drivers – and combined with decent analysis and modeling – can produce big results.  That’s right:  small data, big results.  SurvivalWare is a tool that can help make this happen.

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Look before you Leap

Building a business is about constantly testing and evaluating business models to see what works best.  You often have to take a leap of faith because the outcome of a major decision – such as a project  – or  a new marketing campaign – or an acquisition –  is uncertain and unknowable.  Yet you don’t do these things blindly.  You have certain expectations about what will happen and when you’ll know if something is a success.  “Look Before You Leap” means that you state these assumptions and expectations explicitly, and analyze what might happen from a financial standpoint.

Back of a cocktail napkin is a good place to start.  But then things can get complicated as you learn and pivot and spend and invest and pivot some more.  All of a sudden you have employees and leases and inventory and receivables.  A portfolio of credit cards becomes a major source of working capital.

So how much is this project XYZ going to cost?  Month by month?

What impact will it have on sales?  Margins?  Month by month?  Also: what are the ranges of possible values?  Best case?  Worst case?

Suppose I sell licenses only and not subscriptions?  How about the other way around?

What if customers take 45 days to pay?

How much money do I need?

Look before You Leap with Financial Modeling.

Financial modeling is a tool that allows you to look at different business models “on paper” first.    Unless you have unlimited funds, you need to plan each move carefully.  Over time things get more complex.  There are many moving parts.  You can’t keep track of everything in your head.

You start with the facts. This is where you are today.  Cash, Inventory, Debt, recent sales.  A few years of monthly financial statements if you’ve been around that long.

The financial model is a structure to accumulate this data and make sense of it.  It also allows you to peek into the future

This is what SurvivalWare is all about.   It is a tool to help you Look before You Leap.

The SurvivalWare Experience

You first look at historical performance to inform your decisions about what is possible going forward.

You look at trends graphically, efficiently, with push button ease.

The provided financial models show you everything you need to make assumptions about in order to do a complete financial projection (Income Statement, Balance Sheet, and Cash Flow).

You can base your assumption on history or on judgement.  Or “back of the napkin” sketches.  Days of market research.  Coin flip.  Whatever.

You look at what happens to the cash as the end result of everything else.

The secret about financial modeling is that the income statement and the balance sheet have to be in balance.  Once you’ve got estimates for everything else, your cash balance is the plug.  It is the end result of everything that goes on in the business.  The model calculates cash for future months based on your assumptions about sales, inventory, receivables, expenses, credit cards, etc. etc.

Look before You Leap – try it out for 30 days!

SurvivalWare Simple is a great way to start, and is yours free for 30 days.

If you decide to take this step – do it right!  Call or email to arrange a free consultation.  Let us help you get your data loaded, and give you some pointers on how to peek into the future financially.

custsupport@survivalware.com

703-780-2044

Why does your Cash Flow Suck?

 

Ever wonder why cash seems so tight all the time? Your business is doing well, but it feels like you are riding on the edge when it comes to cash (and cash flow).

Every business owner or entrepreneur goes through it… usually many times along the path to growing a successful company.  Read Philip Campbell’s recent blog entry on what you can do about it.

Why does your Cash Flow Suck?

Peer Advisory Groups for Entrepreneurs

I am a numbers guy through and through.  It’s just part of my DNA.  I like adding up numbers in my head.  My hobby is programming computers.  When I was a kid, I used to accompany my mother on weekly trips to the grocery store, and add up the price of everything she put in the cart.  (I actually got it right one time!)

I also love business.  When I stumbled upon financial modeling early in my career, I thought I had died and gone to heaven.  Here was something at the confluence of the two things I liked most – and I actually got paid to do it!   Back then (late 70’s, early 80’s), large companies were the only ones who could afford to do it.  The market for financial modeling software grew like wildfire because of the huge ROI of breaking free from the MIS department to rapidly develop financial reporting systems and projections.

I also love being my own boss.  I am unemployable.  Rebellious.  Big ego.  A know-it-all.  A die-hard entrepreneur.  Since I’ve had three decades of experience as an entrepreneur, I’ve experienced my share of ups and downs.  I used my financial modeling skills to get through some tough scrapes.  My mission now is to make this big-company technology available to the masses.  Smaller companies need to do financial analysis and projections just as much as the big companies.  They usually don’t have the money or the expertise.  That is where my company, SurvivalWare, fits in.

I joined NetCito, a peer advisory group for entrepreneurs about a year ago.  This was despite my disdain for touchy-feely stuff.  I think I was motivated by wanting to understand my target market better.  If I had to sit through a zen-like moment of silence at the start of each meeting, or learn about the Johari window for understanding the relationship to self and others – I figured that was the price of admission.  I was also motivated by loneliness.  I thought it sure would be  nice to interact with other entrepreneurs experiencing the same types of problems.  Living in the Washington D.C. suburbs, most of the people I encountered day to day had some connection to the government.  And I never have considered government contractors (“Beltway Bandits”) feeding at the federal trough to be real entrepreneurs.

My brother Hank had been a Vistage member for several years, and he seemed to get a lot out  of it.  He never misses a meeting.  But the cost of Vistage ($1,000+ per month?) is prohibitive for the smaller enterprise.  I never considered Vistage to be a realistic option for my company.

I have been blown away by the NetCito experience.  The comraderie, the accountability, having to think each month about what I am really trying to accomplish – have all been priceless.  In addition to the monthly meetings of our small group, there are network-wide events such as SummerCito this past week, and an annual retreat in January.  I thought I’d never utter or write words like this – but the opportunity for personal growth by stepping outside your comfort zone is real and tangible.  For a numbers guy, you can imagine how far outside my comfort zone the experience has been.

Peter Mellen, the founder, is passionate about making available the considerable benefits of  peer advisory groups to the masses of entrepreneurs.  These are people who may be just getting started, or are simply too small to afford a group that is professionally facilitated every month.  He has done it in a way to keep the membership fees affordable ($95 per month).  His method really works.

I share Peter’s passion for wanting to help entrepreneurs succeed in business and in life.  My approach has been to help with the numbers.  His is deeper and touches more on personal relationships and the meaning of life.  Both can contribute to your success.

Whether you are a startup or a veteran entrepreneur, a peer advisory group can really help.

Perseverance, Perseverance, Perseverance

Football season is about to start here in the U.S., and there is a lot of space to fill by the sports columnists during preseason.  In the Washington D.C. area, we can’t get enough of our new star quarterback, Robert Griffin III.  Every interaction with head coach Mike Shanahan is dissected and discussed.  In this morning’s Washington Post, Sally Jenkins wrote about the Quarterback / Head Coach dynamic, and quoted head coach Mike Shanahan on his reflections on what made John Elway, the star quarterback of the Denver Broncos in the 80’s and 90’s so great:
John Elway
A part of experience is how to deal with setbacks.  One of the best attributes Elway ever had was his perseverance.  People told him for 14 years he couldn’t win a Super Bowl, but his drive enabled him to win in years 15 and 16.  All he heard for 14 years was that he didn’t have the touch.  There were so many things people would say.  ‘You can’t win the big game.’  He never, never gave up and was always the leader of the team despite adversity.  With that drive and perseverance he was able to win back-to-back Super Bowls.  To me, what I admired the most was that he would never, ever give in.  He was just relentless.  Anytime you have that willpower, to never give up, that separates people.
From dictionary.com, the definition of perseverance:
steady persistence in a course of action, a purpose, a state, etc., especially in spite of difficulties, obstacles, or discouragement.

Amen.

Over the hump, and gathering speed

I think that was the punchline for a birthday card my older brother got a few years back.  But I think it says a lot about our generation (I’m 58, he recently crossed a scary threshold).  We’re not slowing down.  I’m working harder now than I did in my 20’s, and 30’s, and 40’s – and continue to learn new things at a breakneck pace.

So as I was catching up on my Economist reading earlier this year (February 25th issue), I was nodding my head vigorously at the Schumpeter column on page 81, “Enterprising Oldies – Founding new businesses is not a monopoly of the young, even if it seems so nowadays”.

Some quotes:

The rise of the infant entrepreneur is producing a rash of ageism, particularly among venture capitalists. Why finance a 40-year-old (with a family and mortgage) when you can back a 20-year-old who will work around the clock for peanuts and might be the next Mr Zuckerberg? But it is not hard to think of counter-examples: Mark Pincus was 41 when he founded Zynga and Arianna Huffington was 54 when she created the Huffington Post.

It’s not just anecdotal evidence, but research backs up the idea that enrerpreneurship is alive and kicking among us greybeards:

Research suggests that age may in fact be an advantage for entrepreneurs. Vivek Wadhwa of Singularity University in California studied more than 500 American high-tech and engineering companies with more than $1m in sales. He discovered that the average age of the founders of successful American technology businesses (ie, ones with real revenues) is 39. There were twice as many successful founders over 50 as under 25, and twice as many over 60 as under 20. Dane Stangler of the Kauffman Foundation studied American firms founded in 1996-2007. He found the highest rate of entrepreneurial activity among people aged between 55 and 64—and the lowest rate among the Google generation of 20- to 34-year-olds. The Kauffman Foundation’s most recent study of start-ups discovered that people aged 55 to 64 accounted for nearly 23% of new entrepreneurs in 2010, compared with under 15% in 1996.

Here is a link to the full article:  Schumpeter Feb 25, 2012 Economist

The column concludes on a positive note about the implication of this phenomenon on our economic future:

The evidence that older people are if anything becoming more enterprising should help to calm two of the biggest worries that hang over the West (and indeed over an ageing China). One is that the greying of the population will inevitably produce economic sluggishness. The second is that older people will face hard times as companies shed older workers in the name of efficiency and welfare states cut back on their pensions.