Ray Garraud

As an entrepreneur, I’ve had the opportunity to be involved in several business ventures over the years; some successful, some at break-even and others total flops.

One of my B-school buddies and I were brainstorming a few business plan ideas the other day and we both agreed on the importance of the S.W.O.T analysis as an invaluable tool in determining the viability of a venture before proceeding.

S.W.O.T stands for Strength, Weakness, Opportunity and Threats. Strengths and Weaknesses focus on the internal aspects of running a company and look mainly at the past and present. Opportunities and threats focus on external factors, such as the economy, competition, distribution channels, market segments etc., and look toward what your company might do in the future.

Ideally the SWOT is used to create inputs that can be used to generate possible strategies. A broad range of perspectives should be included in the process. And the following questions should be answered many times:

1. How can we use each Strength?

2. How can we stop each Weakness?

3. How can we exploit each Opportunity?

4. How can we defend against each Threat?

This type of analysis allows to you to develop a clear and concise picture of your present situation as well as the future possibilities. In fact, lately I’ve been inclined to develop a SWOT framework that I could use to evaluate my own personal life.

Gary Feld shares this interesting analogy by Lewis Jaffe:

“…If there are five frogs on a log and four decide to jump off, how many frogs remain on the log.” Of course - the instinctive answer of “one” is wrong. Five frogs actually remain on the log, as deciding to jump and jumping are different things.

In an entrepreneurial context, intentionality is important, but results are what really matter. Lewis reinforced this in a memorable way - as the point he was making is “just because you decide, doesn’t mean you do.” He stressed that one of the main problems he sees early in his tenure as CEO of a company that is failing is paralysis - everyone has ideas about what to do, but no one is willing or able to do them.

Remember - just because a frog decides to jump, doesn’t mean he will. Be careful not to confuse intentionality with results in your business (or your life.)

Don’t be afraid to embrace change, to do things a little differently than you did before. Trust yourself, that is the starting point.

5 years ago, I developed a five-year plan for my life and career. As I reflect on the past 5 years I realize that along the way, several things happened that I did not expect. However, I embraced these unexpected events in a way that helped me to see them as opportunities rather than stumbling blocks. This has made all the difference.

1. The glue that holds all relationships together is trust, and trust is based on integrity.

2. Decisiveness is a characteristic of high-performing men and women. Almost any decision is better than no decision at all.

3. Character is the ability to follow through on a resolution long after the emotion with which it was made has passed.

4. Leaders are made, not born. You learn to become a leader by doing what other excellent leaders have done before you. You become proficient in your job or skill, and then you become proficient at understanding the motivations and behaviours of other people.

5. There are no prizes for average performance.

Source: http://www.briantracy.com/

Long-term business success relies on continuous personal growth. Achieving that means being better today than you were yesterday, and being better tomorrow than you are today. Always immerse yourself in data and make it your goal to absorb and understand the information  you’ve gathered; turn it into knowledge and then use that knowledge to gain experience.

This is a long-term task, and the main reason most people fail to stay with it is because the return on invested time may not seem apparent. It often takes months of hard work before you start to see positive changes. You may not see the changes as they happen, but rest assured that you’ll look back one day and be amazed at how much your judgment and business skills have grown. You’ll understand more of what you see and hear, and your entrepreneurial vision will become clearer.

The Department at Victoria University at Wellington has compiled an interesting set of reflections by contemporary and 20th-century figures in answer to the Question: What is Philosophy?

My favorite:

Philosophy, though unable to tell us with certainty what is the true answer to the doubts it raises, is able to suggest many possibilities which enlarge our thoughts and free them from the tyranny of custom. Thus, while diminishing our feeling of certainty as to what things are, it greatly increases our knowledge as to what they may be; it removes the somewhat arrogant dogmatism of those who have never travelled into the region of liberating doubt, and it keeps alive our sense of wonder by showing familiar things in an unfamiliar aspect. [Bertrand Russell, The Problems of Philosophy]

“Love anything and your heart will be wrung and possibly broken. If you want to make sure of keeping it intact you must give it to no one, not even an animal. Wrap it carefully round with hobbies and little luxuries; avoid all entanglements. Lock it up safe in the casket or coffin of your selfishness. But in that casket–safe, dark, motionless, airless–it will change. It will not be broken; it will become unbreakable, impenetrable, irredeemable. To love is to be vulnerable.” -C. S. Lewis

A core competence is a proficiently preformed internal activity that is central to a company’s strategy and competitiveness. It can relate to any of several aspects of a company’s business, for example: Expertise in integrating multiple technologies to create families of new products; know how in creating and operating systems for cost efficient supply chain management; the capability to speed new or next-generation products to market; skills in manufacturing a high-quality product at a low cost and the list goes on.

Most often, a core competence is knowledge based, residing in people and in a company’s intellectual capital but not in its assets on the balance sheet.

An Annuity is a method in which structured payments or equal payments are made regularly, like every month or every week.

Let’s say you are given a choice between getting $ 1,000,000 now in one lump sum, or in structured payments of $ 50,000 a year for the next 22 years. The million dollars up front may sound enticing but so does the other option if you do some basic math, so which do you take?

Money is generally worth less in the future. So the $50,000 payment you get in 22 years is not going to be worth as much as it is today. So first, we need to guess an interest rate, in this case, the rate of inflation for the next 22 years. Lets say 4% as an example. Now, we have to figure out the present value of the $50,000 times 22 years discounted by 4% and then compare it with the million bucks.

We’ll use a financial calculator to calculate the present value (PV) of an annuity for this scenario:

1. Enter n (the number of compounding periods - in this case the number of years). Press 22 and then push the N button.
2. Enter i (the interest rate per period - in this case the number of years). Press 4 and then push the i button.
3. Enter FV (the future value). It is zero. You want to know the Present Value, not the future value, right? Push 0 and then push the FV button.
4. Enter PMT (the payment). You are not making a payment, you are getting one. So you have to show a negative number. Press 50000, then the CHS (change sign button), then push the PMT button.
5. Push the PV (present value) button.
6. Answer = $722,555. This means 22 annual structured payments of 50,000 each is worth only $722,555 of today’s dollars. So you should take the million bucks in one lump sum

It is understood that money today is worth more than money tomorrow. Why? Because money today is a certainty, money tomorrow carries some risk. $100 today can be invested. Money tomorrow just sits until it is today. Time Value of Money (TVM) is an important concept in financial management. It can be used to compare many different types of investment alternatives.

The signs are mounting that the United States has entered a recession — is entering a recession, or else will very soon.
I see plenty of cues in recent business news indicating that lots of business decision-makers are acting as if we’re in a recession already and rightfully so, especially with statistics such as these:

In December, the US unemployment rate rose to a two year high of 5.0%, the worst since 2005. That increase was also the largest one month increase since April of 1995. A scant 18,000 jobs were added to payrolls in December, per the US Department of Labor. 2007 was the worst year for US job creation since 2003.

During periods of economic decline, small businesses and entrepreneurs are more likely to bear the brunt. Yet the fact that conditions are changing also opens up opportunities for resourceful companies to outsmart larger competitors who, during a downturn, carry on business as usual or are unable to adapt quickly — except to layoff employees and cut costs in areas that actually end up hurting the company in the long term.

The key to success lies in being aggressive and innovative. Managers and entrepreneurs who survive and even prosper during hard times must be able to look beyond the present, to overcome the constraints of tradition and approach the business from new perspective. Here are a few strategies to focus on:

• Monitor your cash flow very diligently, and forecast it monthly to ensure that expenses and planned expenditures are in line with accounts receivable. Make sure your financial statements provide information that is timely, relevant and accurate.

• Eliminate nonessential expenses as much as possible.

• Take a closer look at capital spending. Consider delaying both the purchase of high ticket items and expansion plans that take a long time to pay off.

• Actively seek out new business. The importance of good service cannot be overstressed — especially as consumer buying power or willingness to spend is lessened during tough economic times.

• Re-examine your marketing mix to ensure it is the most cost effective.

• Get employees involved in policy choices as well as tactics and implementation that can help decrease costs. Meet with staff regularly to exchange ideas on boosting productivity and other issues. Create an incentive for good suggestions and foster a team spirit for survival.

• Develop new marketing techniques to gain market share from competitors unable to adjust to shifting market conditions.

• Maintain a strong cash stream throughout the downturn, in contrast to other companies that may have liquidity problems.

• Become a leaner, more cost-effective and more efficient operation, better positioned to do well when the market improves.

While economic downturns are difficult and increase the obstacles a business faces, it is not always a requirement that companies have to slash earnings and compress market share. That recourse occurs when companies that take too long to realize what must be done, or resist change. Resourceful business leaders capture all available opportunities and take steps during tough times to lay the groundwork for tomorrow’s prosperity.