Raising money is easy. Paying it back is hard.
More specifically, the initial building of the project is the easy part. It is a finite process that includes creating your food or farm business plan, obtaining the funds, and building the physical location.
Even raising money is relatively easy. Kitchen Table Consultants has helped our clients raise more than $70 million in debt, equity, and donations. Those who can’t raise funds likely haven’t put together an effective, well-thought-out plan. After all:
“Vision without execution is just hallucination.”
This saying and variations of it have been attributed to Thomas Edison, Albert Einstein, Soichiro Honda, and a Japanese proverb. Regardless of who coined it, the vital core message is clear: A vision is nothing until you put it into action.
Execution is the activity, the actual doing of the work. It’s the rubber hitting the road. Execution requires far more work—and so has a much higher rate of epic failure. This, in turn, relates to the strategy not being deep enough.
Remember, well thought out means well executed. So, it only follows that poorly executed means poorly thought out. Make sure you put the required time and effort into the plan from the start. As you do, keep in mind these four truths:
- Vision without patience is painful.
- Strategy without execution leads to failure.
- Execution without strategy also leads to failure, forcing you into a reactive state.
- Strategy requires time and planning.
The elements of a solid business plan are:
- A clear opportunity in your market
- A financial plan
- A marketing plan
- An operations plan (including a staffing plan)
- A clear owner (i.e., someone who will get it done, regardless of the obstacles in the way!)
Developing a detailed plan and getting your new operation off the ground requires some hefty lifting upfront, but it has an endpoint.
Once you open your doors is when the hard work actually begins. Successfully running and managing a business is challenging. You now have to worry about sales, labor (i.e., people), and raw materials. How will your company generate a profit so that you can pay back the initial project funding?
Too often, I have seen aspiring entrepreneurs who lack an understanding of the actual cost of running a business. They spend too much money too early, realize their error too late, then find themselves out of funds and unable to pay it back. They also fail to focus on their people to ensure they feel valued and have a stake in the business.
With the right foresight and planning, you can avoid these mistakes and set up your team for success. As you create a business plan and work on getting the funds for your new endeavor, it is critical that you:
- Establish and stick to a budget.
- Open your books and empower your staff.
Let’s explore these two critical steps in more detail.
Establish & Stick to a Budget
Good business management starts with solid financial management, which begins with creating a budget that includes your profits, margins, and spend. Next, you have to stick to it.
You and your team should regularly refer to the budget to ensure you’re meeting those metrics and goals. This practice is crucial to staying on track and catching any issues early.
Building a budget ahead of time also forces you to make sure you’ve thought through your business plan thoroughly. Consider your sales, labor, and marketing. How do they affect your bottom line? How long will it take you to become profitable?
A comprehensive financial plan creates a baseline against which to measure your performance. You’ll have a clear insight into where your business is succeeding, where it needs improvement, and how to adjust accordingly.
Open Your Books & Empower Your Staff
How can you get each employee truly invested in the business? Make open-book management part of your farm business plan from Day 1. Rather than hiding the financials from your team, practice transparency to generate both emotional and financial buy-in.
Celebrate successes together. Openly address concerns when you’re not hitting specific numbers and involve your team in the problem-solving process.
There is a marked difference between sharing financials with your team and not. Across the clients we work with that have opened their books to their team, we have seen as much as a 35% increase in key financial metrics—simply because the people have a goal, an understanding, and the ability to make relevant changes in real-time.
Here are some tips for practicing open-book management with your team:
- Share key numbers (not necessarily all numbers with all employees). Key metrics include financial goals, budgets, income statements, and forecasts.
- Train employees to read a profit and loss statement, sales projections, and costing standards so that they’re equipped to participate in relevant meetings.
- Show employees a clear link between their performance and the company’s success with financial rewards like a bonus plan or stock ownership tied to an easily understood metric.
- Hold employees responsible for their own budgets, which will drive them to have a much deeper understanding of the core metrics. This will also challenge them to develop more robust metrics and move the numbers in a positive direction.
- Share the business’s financial performance regularly via team meetings (both the good and the bad).
This practice allows you to create a team that is accountable to the company’s budget and goals, not just to “the boss.” You’ll show employees that the work they do is important and impacts the numbers. Simply put, your staff will see that you respect and trust them.
When you fully understand these two essential steps and put them into action from the beginning, you will manage your business more effectively while making the profits necessary to pay off initial funding and thrive.
Whether you’re putting together a food or farm business plan and funding or your new venture is already underway, Kitchen Table Consultants can help you get your financial management on track. We are experts in coaching budding business owners to manage their finances and their people. Contact us today to learn how we can help you.