I often get asked the question “Ami, what is your goal for MultiFunding?” People want to know “how big” I want the company to be, who do I think will “buy it” one day, is this a “lifestyle business”, or do I “want to take it public one day?” My answer is that our goal for the first year was to survive, which we did. My goal for the second year is to be able to keep the company growing at a pace where we can maintain excellent customer service, and to be able to make a good living while I do it.
Many people are perplexed by my answer. I think they’re used to hearing “the big goal.” When they ask my goal for next year, my answer is “I am not sure yet, I want to get through this year first.” I am not sure if I'm right or wrong with my approach (if there is such a thing), but it works for me.
I think that entrepreneurs sometimes get carried away with focusing on an “artificial big goal” and miss a lot of fundamentals along the way. I recently met with an entrepreneur who was a few months into his business, and had his “exit strategy” in sight. Maybe he will get lucky, but while he was focusing on charming big customers to get there, there were fundamental bugs in his product, and he didn’t have any resources focused on fixing them. He runs the risk of his long term vision blowing up on him along the way.
Why am I writing this post in a blog about business debt and finance topics? The reason is that we often see a pattern of small business owners determined to get a financing round or a debt structure that supports the “long term” vision, but doesn’t account for the reality of their current situation.
When I started my first company, it took me three months to get my first meeting with investors. To get ready for the meeting, I pulled three all nighters preparing spreadsheets and forecasts showing how I needed 2 million dollars to get started. Within two minutes of arriving at breakfast and before reading my plan, they told me I needed 200 thousand dollars. I didn’t fight them, and I got some money to get the company going. If I had fought them, it would never have gotten off of the ground.
In another example, we had a client at MultiFunding who has been factoring since they got the company going. They hired us because they wanted a “line of credit” from a bank. We tried many banks, and could not get them what they wanted. But meanwhile, we found them a new factor that would have cut their interest rate in half and doubled their profitability. They passed on our offer, determined to get their “line of credit”. I think they’re still looking.
The financing structure that you choose for your company should deal with the reality of where you are today, and focus on getting you to achieve your goals for the next six to twelve months. If your company outgrows your financing, and you need to revisit it down the line, that’s a quality problem to have.
In summary, I think that if small business owners and entrepreneurs spend more time focusing on short term, clear goals and objectives versus the “end goal,” in the long run they will build healthier, stronger, and more stable companies.
Very accurate positioning of how entrepreneurs and small business owners can get “Long Term Vision Myopia” that impairs their ability to pursue and achieve their long term goals by neglecting the steps that need to be taken in the near future.
March 21, 2011Ami, you nailed this one on the head! Agree 100%
March 22, 2011You are so right Ami, that what may seem like an obvious clear decision to an outside observer is often missed by the insider. I always like to tell people to pretend they just bought themselves out, what would they do Monday morning? I bet that client you reference would reconfigure his factoring, and probably fix some other problems right in front of his eyes but too close to see.
March 23, 2011Peter Drucker, in my book, has about the closest thing to an unimpeachable perspective on management that you will find. I think that he would enbrace your perspective.
“The question that faces the strategic decision maker is not what will happen in the future. It is, ” What do we have to do TODAY to be ready for an uncertain tomorrow?”
Bravo Ami for Channeling Drucker and continued good luck to you and your clients!
Jim
March 24, 2011I too have been guilty of focusing on the “big goal” side of the businesses I’ve started. Being an entrepreneur is hard work. It’s the dreaming that keeps a person focused, motivated, energized and on course. Having said that, boundaries can make or break a starry-eyed entrepreneur because boundaries keep the work going hard. Not getting 2 million dollars upfront forced the kind of discipline and resourcefulness that lead to good decision making. In the end, working with less money and using more sweat is (a lot of times) what makes businesses succeed and leads to the euphoria found in passion-based success.
In a nutshell, I thinking being an entrepreneur without dreaming big is just impossible. But dreaming big and being financially resourceful (and realistic) is just plain smart.
Nice post.
March 26, 2011So true! Many have asked me what my exit strategy is and how long until I get there. I am in the business because I like what I am doing and want to grow it not end it. I just need help with financing the growth
November 9, 2011