Leveraging Fortune 500 Business Practices for your Start-Up Business: Reduce the Need for Fire Fighting

What if when you started your business you understood that you’d make mistakes but made the decision to make each mistake only once?

What if you also decided to do your best once to insure any employees you (eventually) hire could learn from the mistakes you’ve made?

Fortune 500 companies understand how this mindset and discipline can significantly reduce the amount of time, energy, rework, and money they spend dealing with unexpected problems and issues.

In large companies, the process – typically called Root Cause, Corrective Action (RCCA) – begins with whoever is accountable in the organization for leading these events working with the manager in that part of the organization where a problem occurred to write out a succinct description of the problem.

The next step is to convene a group who has knowledge of the problem area to identify the root cause, brainstorm corrective actions, develop a corrective action plan, and implement the change.

One of the most important attributes of successful RCCA processes is that the operating change is then documented in a way that whoever does this the next time has the benefit of the analysis AND the process change is communicated to all affected employees.

This is even more essential for the micro-entrepreneur who hopes to grow his business.

By completing a RCCA every time there is a procedural problem, an entrepreneur is developing a best practice for his business, one that he’ll follow and one that can be followed by his future employees.

Root Causes to Problems and their Corrective Actions are not often rocket science, even in organizations that produce rockets. They typically address some of the most common issues:

  1. I forgot to … (create a checklist for that process)
  2. I did THIS before THAT and … (create a process chart for that process)
  3. I couldn’t find or I spent an hour looking for … (a place for everything)
  4. I didn’t know who to call when … (point of contact list)
  5. I forgot to verify … (process checkpoint)

Remember YOU made this mistake and it’s a business you started and probably know more about than anyone you’ll hire. Is the impact of having every employee you every hire make the same mistake more or less costly to your business than the time it takes to document the learning and make it available at the right place, at the right time?

$1,000 Start-Ups has a host of ideas on how to get your business started and operating successfully.

Leverage Fortune 500 Business Practices: Understanding and Reducing Your Cost of Goods Sold

Regardless of how long you’ve been in business and whether you’re building your first or hundredth unit, understanding what it costs to produce your product and producing it profitably is one step in assuring your business is profitable.

Fortune 500 Companies live by the numbers. They know the optimum sales price, what it costs to produce each unit, and the profit from each sale. As an entrepreneur, borrow this practice from their playbook and be sure you understand your numbers.

You’ve no doubt done your market research to determine the optimum sales price – often the price the competition is charging for a similar product. Your costs should follow the rule of thirds: 1/3 cost of goods sold, 1/3 sales and marketing costs, and 1/3 overhead costs and profit.

It’s that first 1/3, the cost of goods sold, we’re focused on at this point. These costs are made up of labor and materials.  Even if you’re not paying yourself for your labor at this point, it goes without saying, your time is your businesses most valuable resource.

Reducing Labor Costs through Brown Paper Mapping:

When working with a Fortune 500 client one of the processes management consultants use is brown paper mapping. Using a roll of brown paper that’s typically three feet wide and the length of whatever free wall is available we affix a sheet to the wall.   We then work with the client to lay out the process sequentially and prepare it for analysis by gluing a rectangle on the brown paper for each step in the process and annotating the current time it takes for each step.

Fortune 500 companies typically have a small team of people map out the process and then bring in different groups to identify the problems and brainstorm solutions. Each idea is recorded on a post-it and affixed to the brown paper. The team then gets together and puts it into an action plan.

As a micro-entrepreneur you can replicate this by creating a brown paper of the current process, analyzing each step for problems and opportunities, and developing a plan.  For each subsequent unit select which of the process changes you’re going to implement and keep track of the time reduction as you’re building.

Reducing Material Costs by Understanding Demand:

Fortune 500 companies understand the demand for their product. They have the ability to estimate how many need to be produced to satisfy demand each week, each month, each year. They also know the peak periods and slow periods.

As a  micro-entrepreneur you might not yet have the sales history to know your long-term demand; however, you can still reduce your material costs by buying the optimum material quantity to get the lowest price possible without tying up too much of your working capital, yet insuring you have the material on hand when you need to build the next unit.

As your sales and sales channels grow you’ll have the opportunity to further understand your material and inventory demands.

Learn more about low cost business start-up strategies in $1,000 Start-Ups.

Setting Yourself Up for Success: Identifying the Skills You Need to Succeed … and Learning Those Skills

Understanding the knowledge you’ll need when you start your business can prevent the “I didn’t know what I didn’t know” phenomena that stalls and derails many start-ups. Factoring in the time it will take you to learn the new skills necessary for launching, operating, and marketing your business also leads to more realistic expectations and can keep you from getting frustrated while learning the new skills. The first step, of course, is to think through what you will need to know in order to produce and market your product or service and get your business started.

There are at least three types of knowledge an entrepreneur needs:

  1. Basic Knowledge: This is the knowledge required for any business of the general type being launched. Some examples:
    1. If the business provides a service such as appointment management or any type of administrative support, knowing how to use a computer and office software is basic knowledge that’s needed.
    2. If the business produces a product or product line, understanding supply chain and inventory management is required.
    3. If the business relies on social media and the Internet for product sales, the business owner must have enough basic Internet skills to be able to communicate effectively.

Basic knowledge is readily available at a low cost. You can buy or borrow a book, take an online tutorial or a community college course, or both.

  1. Specialized Knowledge: This is the knowledge required for the specific type of business. Some examples:
    1. If the business involves writing and self-publishing books, the business owner will have to learn how to format books for publication, where to publish, how to do order fulfillment, and the skills necessary to market the book.
    2. If the business involves cookie baking or cake decorating, the business owner will need to understand the best ingredients to use, how to produce predictable results, how to price their products and where to sell them.
    3. If the business targets seniors, the business owner will need to understand the issues facing that population, what programs and services are available, and the best approached for marketing to seniors and their families.

Specialized knowledge is also readily available. With the wealth of information available on the Internet today it can be time consuming to sift through all of the information. Organizing your approach, then breaking it down into steps helps you target what information you’re seeking.

You can also gain a host of information by taking a part time job in a business that offers the same products or services you’ll be offering or by starting or joining a networking group for people in the same business.

  1. Start-Up Knowledge: This is the knowledge needed to start-up the business. Some examples include:
    1. The registration and licensing requirements for the business selected.
    2. How to write an effective business plan.
    3. The insurance that is needed to protect the business.

This information is readily available often at a low or no cost. In the US you can start at the Small Business Administration’s website:   www.sba.gov.

Once you’ve learned a new skill, the best way to master it is to teach it to someone else, maybe another micro-entrepreneur who’s starting a business.

In $1,000 Start-Ups I’ve provided a list of the Basic, Specialized, and Start-Up information you need for each of the 60 businesses. I hope it saves you some time and frustration when you launch your new business.

Start Your Business Without Leaving Your Job: Ideas for an Admin Assistant

Yesterday I enjoyed a conversation with a brave woman from England who moved to the states with her husband. She left family and friends to move for his career, only to have the marriage dissolve when she’d been here long enough that it made better sense to start over here than go back to England.

She found a job as an administrative assistant with a good company that she can’t afford to quit, but is really was looking for something more intellectually and financially satisfying.

After a few minutes of brainstorming, here are five ideas she can try:

Appointment Setter: She could contact tradesman who have small businesses and offer to schedule their appointments and do make the telephone calls every evening,

Editor: She could articles for local periodicals or writers (and advertise on Craigslist).

Non-Fiction Writer: She could select one of her many interests, develop a set of articles and market them to magazines and websites who are looking for that content.

Personal Assistant: She could spend two hours each evening running client’s errands.

Transcriptionist: She could transcribe the dictation of medical report or court proceedings.

Many of us who want to start a business have that same dilemma. How to start our business, get it up and running, build a client or customer base, but keep our fulltime job until there’s enough income from the business to make the transition.

I’ll bet you can come up with five ideas of what you could do to get your business started.  Please share them with us.

Setting Yourself Up for Success: Overcoming Inertia and Procrastination

Sometimes when I need to buckle down and ‘just get it done’ I find myself doing everything except the one thing that would help my business most. My first book, $1,000 Start-Ups has just been released and I need to execute the excruciatingly detailed marketing plan I developed to go with the book.

I think about all I have to do and feel overwhelmed. Because I feel overwhelmed I render myself incapable of doing anything (except perhaps playing spider solitaire, or getting on Facebook, or EMAIL, or cleaning something, anything – I can find many ways to procrastinate). I find that before I can actually get to the business of my business I have to move past that feeling.

For me what works (most of the time) is to reason it out. My “self-talk” sounds like this: “Leah, it’s logical that you have a lot to do and feel overwhelmed.” (This is followed by a few deep breaths as I consider the thought.) “Take the first thing on your list and work on it for an hour.”

This is particularly true when I’m trying to do something I haven’t done before or haven’t done enough times to master. Then I have to remind myself, “You have started a business you haven’t done before and don’t know much about. You have to take the time it takes to learn these new skills. Once you learn them they won’t take as long to do.”

It’s not unusual for owners of start-up companies to find themselves having a difficult time overcoming inertia.

Please share your tips on what you do when you’re faced with this.