If I had to summarize what the start of a new productive venture requires for a micro, small and medium-sized company, based on texts aimed at entrepreneurs, recommendations from many gurus, bank suggestions, various models in business initiation, etc., etc.., etc., would arrive at the following list:
1.Find credit media or investors
2 infrastructure implementation
3.Income statement, balance sheet and budget cash flow
4.Rights, patents, taxes and authorizations
5.Specific advice
6.Office and computer implementation
7. Product development
8.Salaries and payment of taxes
9.Machines
10.Raw materials and intermediate products
11.Vehicles or means of distribution
12. Marketing measures
13. Lease or ownership of the physical place of operation
14. Market size
Why can I never find the list of clients or potential clients where the company and its products are appreciated as unique?
It is obvious that the greatest liquidity bottlenecks arise during the initial phase of the venture. This happens because the “ideal clients” for the business have not been defined and analyzed in advance and therefore, the income of money is irregular and the level of sales is still low because the gestation of the client portfolio can take time. What do you do during this initial phase?
1. Request advice
2. Losses from bad sales
3. Pay interest
4. Try to correct strategy
5. Try to pay off loan principal
6. Pay salaries, taxes and suppliers
7. Customer service
8. Pay taxes
9. Pay rent
10. Take marketing measures
11. Collections
12. Search for new clients
According to the summary of recommendations that we can find, the factors that affect the "profit or profit zone" of the business are the following:
1. Many clients
2. Bad sales
3. Interests
4. Salaries and taxes
5. Customer service
6. Taxes
7. Lease
8. Inventory turnover
9. Collections
10. Marketing measures
The joke is that many "wise men" clearly warn: "Beware: most entrepreneurs fail in the first 5 years for financial reasons." Proceed in a traditional way and based on well-known standard recommendations, even performing SWOT analysis and other tools of various kinds, failure in management is assured for 80% or more of the ventures. Where do you want all those clients necessary for success to suddenly come from and improvise?
But it is also possible to proceed differently .
How do you think banks or investors will react if you could present good orders, contracts, and good customers from the beginning who pay their bills on the agreed date?
On rare occasions it is possible to reach the "profit or profit zone" after a long period of drought and an initial "slowly but surely" phase. How to minimize that initial phase prior to profitability? Do it better than others:
Do not produce if there are no orders! There are no lucrative long-term orders without "ideal customers"! Only if too much money is not given away from the start through low margins due to price wars in customer circles where products are easily substitutable, will there be a real chance of establishing a truly competitive and profitable company.
The same is true for the introduction of new products for established companies.
What is to be done?
As I mentioned above, it is about the following:
1. First, find enough real - ideal - and non-theoretical customers for your company and products.
2. Depending on the product, service or sector, reach prior agreements regarding orders that are clearly distinguishable for customers, even if in a first and short stage you do not produce them yourself.
3. Just with it in hand, start the implementation of the company and the production itself.
Very few companies can afford to do otherwise. For this reason I am sure that this is also valid for you, for your idea, for your venture, your future business and livelihood! If you want to contradict me, I am already happy to have a conversation with you to deepen the concepts.
My experience for more than a decade applying in different types and sizes of ventures the methodology TOP 5 Clienting-Profit-Strategy © based on ESC ©, has shown that the path outlined above in a general way is the most effective and least risky.
