Part 2 - Entrepreneurs Should Seek to Control Minimum Resources
Now is the time to start a business! Right now because during economic recessions, when credit and capital markets are tight, entrepreneurs have to do more with less, they have to develop a lean-and-mean machine, and that behavior will help develop a frugal and disciplined approach to the use of resources.
Thanks for joining me as we continue to assess business opportunities using the "Timmons Model," by Jeffry A. Timmons, an entrepreneur, author and professor. Timmons assessed business opportunities from three criteria: the opportunity, the resources and the e-team. In my last blog, we looked at the opportunity, and if you read it, you know that it was driven by the numbers. Here we consider the resources.
The entrepreneurs resources are grouped into four areas when starting, re-thinking, or growing a business. It also happens to be the one area where the goal is to control a minimum amount of resources. Resources include 1) people, 2) financial, 3) assets, and 4) your business plan.
"An example of this approach is a company that grew to $20 million in sales in about 10 years with $7500 cash, a liberal use of credit cards, reduced income for the founders, and hard work and long hours." Jeffry A. Timmons, "New Venture Creation, Resource Requirements."
The word control is used counter-intuitively here. Instead of owning the resources, the goal is to not own, rather you want to minimize your "control" so that you can dump a resource, when and if necessary. By minimizing your control you have that flexibility. Think lease versus buy. Borrow versus lease. If market conditions change you're not locked in.
Here are examples:
1. People Resources. Instead of hiring and paying benefits, you contract your people. Lawyers are retained, not hired. If you need expertise, get a board of directors, one will do, as long that person, can be objective and provide invaluable advice. By the way, only 25% of all companies have a board of directors.
2. Financial Resources. Instead of taking out a loan, bootstrap. Maybe you borrow from family and friends. They are certainly less forgiving than your local bank. Instead of accepting venture capital, use credit cards, or delay payment on accounts as long as possible.
3. Assets. Instead of purchasing an office location, you might start your business from home. Instead of buying that computer or company van, lease it.
4. The Business Plan. Your business plan should be thorough and reflect a complete analysis of the market and its potential, along with your company's mission, the industry, the product or service, customers, competition, marketing and sales plan, facilities, operating plan, labor, management, risk analysis, and financial statements and projections. Again, your business plan should reflect your judicial and creative commitment to resources, with the goal of minimizing the resources invested and required in each area.
The bottom line, entrepreneurs should seek to use a minimum amount of all resources at each stage in their business' growth. The key is to have the resource available, if and when needed, and the flexibility to dump it, when that resource is no longer needed.
In my next blog, we will consider the e-team.
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