Even when your startup is a one-man show, you will soon find that you are “out of control,” unless you start organizing and writing down how and when key things need to get done. Like it or not, you are now entering the dreaded realm of “formal business processes.” The right question is “What is the minimum that I need?”

The simple answer is that you need to implement one process at a time, starting with those things that are most critical to your business, until you feel a relief that things are starting to happen naturally and consistently, without the attendant stress and continual recovery mode. If you feel that the process itself is a burden, you have likely gone too far.

Here are eight key business tasks that relate to almost every startup, generally prioritized by criticality. Think about the implications of each to your own business, and the potential impact of getting them done incorrectly, or forgetting to do them entirely:

1. Manage your financials and physical assets. I’m continually amazed at the number of entrepreneurs who go for months into a new business without really keeping a formal record of money spent or assets acquired. Use a simple accounting tool like QuickBooks, get away from co-mingled funds, and you have the first business process you need.
2. Develop your business plan. Write down the key elements of your business plan very early, and keep it current as things evolve. This will include the first version of many critical processes that can be split out later, including market opportunity, requirements, product definition, business model, sales process, and organization.
3. Product development process. Even if you are doing the work yourself, you need to document requirements, features, metrics, and milestones. If you are contracting or outsourcing, this is even more important. Otherwise you will find yourself a year later being no closer to a product that you were yesterday, with no idea why.
4. Funding process. Unless you are bootstrapping everything, you need to have a clear plan on what networking and documents are required to get to friends and family, angel investors, and institutional investors. Measure yourself against a researched plan, or your “out of cash” brick wall will be looming before you know it.
5. Manage human resources. At this stage, you should start recruiting, hiring, paying, and training others to help you run your business. In addition to effectiveness and consistency, you now have a myriad of legal and tax considerations to get right. Don’t try this without a formal process.
6. Leverage information technology. Find an IT person you can trust, and plan how you will acquire, implement, and utilize computer technology to run your business. How do you access the Internet, what servers do you need, applications required, databases designed, and backups scheduled? It all has to be written down and maintained.
7. Billing and revenue collection. Whether you provide an online subscription service, or sell products in a store, you need to consistently and economically sell your product and collect revenue to survive. Here you will likely need to train others to help you, so more detail may be required in this process.
8. Customer service and support. Here is another often overlooked area of process that kills many startups, both in cost and time. Don’t assume that you can fix every problem yourself, or that there won’t be any problems to fix. Even if your business is online, people want a contact, real expertise, and quick response.

If you are a great startup, you won’t just copy the processes of your competitors, even in these basic elements. Innovation is the key, to keep each process small, but make it more effective than competitors and big-company processes.

But having no process does not make you more competitive. In my experience, no process sounds more like a hobby than a business. Hobbies can be a lot of fun, but they usually cost money rather than make money. What is your business objective?

The golf swing is a tricky thing to master. There are countless moving parts that all have to work together in flawless unison, all in the span of a split second.

A flaw in any part of the swing can produce erratic results.

The trouble is, finding and fixing the flaw can seem like an incredible task. It’s humanly impossible to remember – and then do– exactly what’s supposed to happen at every moment of your swing.

So golfers have turned to “swing thoughts” – simple ideas that allow you to focus on one aspect of the swing. Good swing thoughts cause a chain reaction of proper technique, so one thought can influence the dynamics of your entire swing. Golf legend Arnold Palmer’s top swing thought was “keep your head steady,” and this thought alone has transformed the games of countless beginning players.

You can apply the swing thought concept to your entrepreneurial venture as well, and I think it will have a similarly transformative effect. Here’s one you can try:

The concept of “cash flow positive” simply means that there is more money coming in than there is going out. If you pass every major decision through this lens, you’ll be doing just about everything you need to do to build a successful venture.

For example, here are the outcomes encouraged by this one simple swing thought:

• Rapid development of a product that the market needs
• Identification of paying customers
• Careful attention to expenses
• Recruitment of team members who contribute to positive cash flow
• Pursuit of a realistic financing strategy involving equity, debt, and other capital sources

Write “Become cash flow positive” on a Post-It note and stick it somewhere you’ll see it a few times a day.

Every time you see it, take 30 seconds to think about whether or not your actions are consistent with the swing thought.

I think you’ll be pleased with how a simple swing thought can bring all aspects of your game together.

Do you have any favorite “Swing Thoughts” you’d like to share with your fellow entrepreneurs? Post them here!

Do economic cycles of boom and bust affect the number of start-ups? Most analysts have linked entrepreneurial activity to economic growth as though it was a given … and conversely, believed that when recession struck, start-up activity slowed substantially. A recent study by the Ewing Marion Kaufman Foundation concludes that both theories are pure bunk. And as though that bombshell was not enough, the Kaufman study goes on to explode several other theories about what factors stimulate new business formation.

Do start-ups increase in proportion to the availability of venture capital? Nope. Kaufman Foundation researchers Dane Stanler and Paul Kedrosky dispel that myth as well. The authors note that the doubling of start-ups from the period 1960-1978 to the decades since may indeed have been due to the advent of the personal computer and the expansion of the venture capital sector. (One wonders if the baby-boomers coming of age may not have contributed to this step-change as well.) However, the constancy of recent start-up data belies the influence of venture funding. Start-up activity fluctuated by only 3% to 6% each year between 1977 and 2005; but the data shows that venture investment varied by as much as 500% during the same period.

Do tax or bankruptcy law changes, technological advances or entrepreneurship education affect the number of new ventures? No again! The report, Exploring Firm Formation: Why is the Number of New Firms Constant?, also finds no correlation between start-up activity and tax policy or any of these other factors; so much for the theories of our most vocal politicians. Instead it documents the same steady half-million start-ups per year, give or take a 3 to 6 percent. The authors discuss a few possible explanations for the unexpected constancy, some rather arcane, but they do not seem to buy into any of them.

Common sense suggests that certain of the factors discussed in the Kaufman report must have at least some influence on the number of start-ups, even if they do not affect substantially the total for a given year. For example, limited amounts of available venture investment must surely delay some particular start-up decisions. I have been involved in a few such decisions. Similarly, high interest rates and tight credit must also have an effect on many decisions, especially those involving sole proprietorships and mom-and-pop operations. So perhaps a study with greater granularity would reveal that while the total number remains relatively constant, the mix of start-up types changes, maybe even substantially. Perhaps in recessions when venture funding declines, a fall in interest rates turns entrepreneurs toward credit sources. It could also be that more innovation-based entrepreneurs test their business innovations when the economy is booming, and that more laid-off workers start enterprises when unemployment is high during recessions. I suspect that the “mix” of different kinds of start-ups changes a great deal even though the total number may not change much.

The Stangler and Kedrosky study does not encompass the current Great Recession, of course, it is too soon. Yet surely this anomalous economic epoch will surely add some telling figures. The investment portfolios of the wealthy individuals and institutions that comprise the limited partners of venture firms declined substantially since 2007 and venture investment has fallen by 40% or so since then. At the same time, credit tightened historically and unemployment soared into double figures. Will start-up totals for this period continue the constancy that Kaufman reports? And if not, how will it vary? Will the limitations on available capital drive start-up numbers down, or will necessity and cheap assets power them up? Or will past constancy persist despite alterations in the mix? Only a study based on more granular data could reveal that. I doubt that such data is available or could be economically derived, though that information could prove useful to an economy so reliant on small businesses to create jobs.

Idea stage entrepreneurs are told by many sources that they need a business plan. When they ask for loans, banks tell them this. When they seek advice, mentors or advisors ask to see their plan. And certainly when they speak with many companies or individuals who write business plans for a living, they will hear the same.

However, there are situations where writing a business plan is simply premature and can be a waste of time and money. It may be more appropriate to start by taking a hard look at the key financials, market or the intended business, and your own situation. This is what business planners refer to as a feasibility study or feasibility analysis.

For example, a new client I recently spoke with told me of her need for a business plan. Upon deeper examination, I found that she felt uncertain about some of the fundamental elements of her idea. Questions remained such as: “Is there a sufficient potential market of people to sell to?”, “Will suppliers provide products at a price that makes the business model work?”, and “Will key partners be interested in signing on?”

The fact is that most of these questions can and should be answered before a full business plan is created. The entrepreneur can save a great deal of money by doing this legwork early on. The strategy is then fine-tuned based on the answers. Sometimes he or she will realize that the idea should be scrapped altogether!

A feasibility study is a way of asking “Does this business idea really make sense?” before creating an investor-grade or loan-ready business plan for it. Most feasibility studies for small businesses require at least three components, each answering the following questions:

1. Market feasibility: Is there a true need in the market for the solution the business will provide? Is there room for the business to create a competitive advantage against the existing competitors and substitutes?
2. Financial feasibility: Can the product or service be produced at a price that covers costs and allows for sufficient profit? Can the business be launched for an amount of capital which can reasonably be raised and recouped?
3. Personal feasibility: What time commitment must the entrepreneur put in to get the business off the ground (or even planned successfully)? What skills or experience does the entrepreneur lack? Can these be lacking skills made up for by bringing on a partner, employee or consultant?

To study market feasibility requires some preliminary market research and competitor research, as well as consultation on the differentiation strategy for the business. A carefully written, presentation-quality report is not needed at this time as it is only the entrepreneur and his partners that must be convinced at this point. The work can and should be carried out by the entrepreneur and consultant as a team for the best results.

To study financial feasibility requires basic financial modeling with rough, top-down estimates and some research on some large, actual costs. It does not require a full set of financial statements yet. However, this work lays the groundwork for those statements to be developed later on.

And to look at personal feasibility, the entrepreneur needs to think clearly about his own strengths and weaknesses. The entrepreneur must be objective about himself and a trusted advisor can be a great benefit to him in this process.

If you are at a loss as to how you should study these three areas, a consultant can set you on the right path or partner with you in the process. When you get these questions out of the way first, the business plan you eventually create will be more compelling and less expensive than it would have been otherwise.

Summer is winding down and Labor Day is behind us. Although the recession technically started in December 2007, many of us did not feel the full effects of the financial crisis until the sudden collapse of 158-year-old Lehman Brothers one year ago today. This has been a year that none of us will soon forget. The outlook remains uncertain, but the future seems brighter than our immediate past.

Many economists are seeing signs of a so-called jobless recovery. A jobless recovery is a situation where the economy resumes growth, but employers remain reluctant to hire. The pattern could be similar to the aftermath of the 2001 recession, which was followed by two years of low employment. As of August, the unemployment rate was at 9.4%, and the underemployment rate – which includes part-time workers who cannot find full-time work – was at 16.8%.

Historically, high unemployment has translated into forced entrepreneurship. To paraphrase Plato, necessity is the mother of invention. Indeed, many successful companies such as Microsoft, Hewlett Packard, GE, FedEx, and Trader Joe’s were started during recessions (for more, see 14 Big Businesses That Started in a Recession and Defying Gravity).

With this in mind, we’ve collected a few resources to help entrepreneurs succeed in this tough environment:

1. The Best Industries for Starting a Business Right Now: As consumers and businesses cut back in some areas, they continue to spend in others. Here are brief profiles of 18 markets with great potential for today’s entrepreneurs.
2. Starting a Business When the Economy is Down: This talk by serial entrepreneur Michael Jones discusses several key issues that startups must address.
3. Is Starting a Business Brave, Smart, Stupid or Nuts?: It depends on who you are and who you ask. People are different, and it has to be right for you.
4. How We Got a Loan: Banks have tightened their lending standards, and many are turning away small businesses. This story of how one company managed to get a loan may give you some ideas. The key lesson learned is that it isn’t going to be easy, even if you are thoroughly prepared, but it can be done.
5. Startup 101: How to Build a Startup: Bernard Lunn, another serial entrepreneur, has published an online book that covers a lot of the important aspects of entrepreneurship. Although geared towards web technology startups, the majority of the information here applies to any technology venture. Lots of excellent advice for first-time entrepreneurs, and quite a few important reminders even for folks with several startups under their belts.
6. Finding the Path to Success by Changing Directions: When what you’re doing isn’t working, it’s time to consider new strategies. It’s all about staying responsive to the marketplace. The best line in the article: “It was like people were smacking us around with a fish trying to get our attention about this high cost of storage problem.”
7. Meeting Short Term Cash Needs: If your business is generating revenue but is facing a short-term cash crunch because your revenue can’t keep up with your existing debts, the SBA has a new program that can help. The American Recovery Capital, or ARC Loan Program, provides up to $35,000 to help you stay current on the principal and interest payments on your other existing loans. The ARC loans are interest only for the first year, and amortizing over the next five years. To be eligible, you must demonstrate that your business was profitable in one of the past two years – this is not a program for startups.
8. Six Ways to Speed Up SBA Loan Approval: The American Recovery and Reinvestment Act made SBA loans easier and cheaper to get, but these special provisions will expire by the end of the year. If you’re thinking about applying for one of these loans, you need to act quickly.
9. To Slim Down, Businesses Team Up: Creative alliances can mean lower costs while allowing everybody to focus on their core strengths. This is a simple strategy that any entrepreneur can employ.

We can measure success in many ways. In business, one important measure is the value of the company. That’s because a company’s value is a composite of all of the quantitative and qualitative factors that comprise a company: revenues, expenses, risks, growth prospects, quality of the management team, competitive advantages, strength of the intellectual property, and so forth.

In general, we want to do the things that increase the value of the business, and we want to avoid doing the things that reduce it. The problem is that we often lose sight of the big picture, and get mired in everyday distractions.

One useful technique for keeping your eyes focused on what really matters is Cayenne Consulting’s Venture Value Scorecard™. It’s human nature to prioritize the metrics that get measured, so the simple act of keeping track is often enough to have a significant positive impact.

The Venture Value Scorecard is a one-page summary of your company’s achievements and assets: the factors that contribute to the value of your organization. It should be updated monthly so that you have a regular reminder of where you’re making progress, and where you may have become complacent.

You can structure your Venture Value Scorecard any way you like, but I suggest organizing it into the following sections:

• People: A strong team is obviously central to value creation. Your Venture Value Scorecard should highlight your recent successes in recruiting highly qualified team members to fill the most important gaps in your organizational structure. You can also use this space to keep track of innovators (R&D personnel) and rainmakers (sales & marketing personnel).
• Products: You obviously can’t create value without a viable product (or service) to sell. This section of your Venture Value Scorecard should summarize the important advances you have made recently in research and product development.
• Customers: A company’s only sustainable source of cash is sales, so you need to keep track of your business development efforts. You should inventory your best accounts and prospects, as well as the status of any pending major sales.
• Partnerships: Relationships with larger firms not only confer legitimacy to your business; they can be an important source of intellectual property, distribution channels, and marketing clout. You should document the status of your partnership negotiations so that you can easily gauge progress.
• Competitive Advantages: Your ability to create value depends on your ability to grow and protect your market share. This requires the continuous development of competitive advantages, whether through intellectual property, new innovation, exclusive distribution partnerships, key endorsements, brand building, corporate culture, or other factors. Keep track of what you’re doing to develop and enhance your sustainable competitive advantages.
• Net Income: The five factors listed above all contribute to something that is directly measurable: net income. Part of your Venture Value Scorecard should be devoted to summarizing your income statement. Detail isn’t important; tracking your progress is. Items that paint a big picture include revenue by major product area, cost of goods, and operating expenses by category. If you have a lot of non-cash items such as amortization or depreciation, or if you have unusually long receivables cycles, you should also include adjustments to reconcile net income to cash flow.
• Assets: Your assets add to your venture’s value, so any recent or pending changes in your assets should be recorded in your Venture Value Scorecard. These assets include things like cash (say, from a pending investment), facilities, inventory, and other property.
• Liabilities: Your liabilities detract from your venture’s value. Any recent or expected reductions in your liabilities should also be recorded in your Venture Value Scorecard.
• Risks: Unexpected events can kill a firm (of any size), and can therefore detract from its value. This is an opportunity to demonstrate that you recognize the greatest sources of risk facing your company, and that you’re taking prudent steps to mitigate the greatest hazards. Use your Venture Value Scorecard to summarize your major risk management initiatives.
• Other: Every company is different, so you’ll need to customize the Venture Value Scorecard for your own circumstances. I suggest you try to figure out the 3-5 key metrics that are used to judge the health of companies in your industry, and keep track of these somewhere in your scorecard.

As noted earlier, your Venture Value Scorecard should be updated monthly. Keep an archive of your old scorecards. That way, you can go back and review the progress you’ve made. I think you’ll be pleased by the momentum you maintain by keeping score.

© 2009 Cayenne Consulting LLC. The Venture Value Scorecard™ is a trademark of Cayenne Consulting LLC.