You have reached Taking the Helm to take a skipper's view of startup.
A Business Startup article from
by William Keyser
William Keyser is Managing Director of WorkSavvy. He counsels would-be and early-stage entrepreneurs. His Website which can be visited at http://www.worksavvy.ws, is packed full of ideas, information, and tools for the budding businessperson, who wants to start sooner, develop stronger and last longer.
Introduction
Sailing involves passion! You have to be impelled to do it. It's not even like riding a bicycle, which may be fun but will also enable you to get from A to B. Dinghy sailing is not a practical pursuit. You'll only do it if you really love it. Just like starting a business.
Dinghy sailing may not immediately seem to have lessons for starting a business. However, my experience with both convinces me that it offers some valuable learning for entrepreneurs. Read why I think this is so.
Watching the wind
Before you go for a day's sailing in a dinghy, there is a lot to be prepared. It may look like the sailor is fiddling around, looking at the sky, scanning the horizon and seeming to hesitate before getting launched. He's probably going back and forth to the clubhouse, clutching bits and bobs, as well as looking around at pennants fluttering in the breeze, or burgees swivelling at mast heads. He may change his clothes and life jacket. All this has a purpose. Before leaving the shore, he needs to assure himself about the weather conditions, the wind direction and force. It's almost as though he has a checklist in mind.
Watching the wind: business startup version
It's not possible to decide to set up in business without making a careful assessment of the opportunity, the product, and your capacity to meet an identified need. But there is no point in taking the trouble to prepare a business plan if you are not passionate about what you are doing. Even so, you may have to test some things out and a false start is not beyond question.
You'll focus on success, and you'll know what you're doing. You will surely have identified the downside risks. Just like the sailor who needs to decide if he has the skill to sail in the prevailing wind conditions and how he's going to get back to shore, you'll want to consider how you'll cope if things don't work out as planned.
Above all, you'll need a deep sense of purpose. Now is the time to feel what it's like to be in business—your business. Right here, on dry land before you launch your startup.
Rigging the boat
There's the jib to rig, the mainsail to raise, the kicking strap to adjust, the tiller to slot in and the rudder to fix. Are the halyards taught? Is the Cunningham cleated, the outhaul stretched and the clew tied down in a reef knot? Is there a figure of eight knot at the inboard end of the main sheet? This all takes time. The sailor may have announced that he was only going to sail for a couple of hours and since arriving at the club he has already been preparing to set sail for half an hour or more.
Rigging the boat: business startup version
What business model will you use? You'll want to be clear about the value that your customers will get from your products and the most effective way to deliver them. No doubt you'll know what resources and equipment you'll need to set up shop. What business structure is right for you? Are you going to be a sole proprietor or do you need to incorporate? If the latter, which is right form for your business? You'll be deciding how to get sales and orders filled.
The business plan is great, but it's only a plan. Now you have to put all the pieces in place. It's more than walking down Main Street with a bag of samples on your arm. You can't do any of this unless you have already cleared the decks for action.
Setting sail and leaving the shore
The sailor's finally ready. The boat needs to be pointing into the wind with the sails flapping freely so that it does not suddenly take off before the he's ready. He's probably by now knee-deep in the water and and jostling the hull. If he's setting off from the jetty, the method will be different and he may prefer to have the painter held by someone onshore till he's pushed off. Of course, he'll have to determine how he's going to leave the shore, depending upon the wind direction. Then he sets off in a frenzy of activity, with eyes everywhere: sails, rudder, centreboard, other boats...
Setting sail and leaving the shore: business startup version
For the business startup, setting sail is getting the first sale! Now that you have achieved your first bit of revenue, you will also probably get some customer feedback. This is vital information; what's good about the product; how's the price; what does it lack? Just like the sailor who gets feedback from the boat's reaction to the wind. He can adjust the trim and sail more sweetly. At this early stage the startup entrepreneur's attention needs to be unwavering.
This is the point where economy is vital. Keep cash in the business by avoiding spending too lavishly and making sure that invoices are settled on time.
You'll need to make many early adjustments to the business. Reality will be very different to the plan. That's OK and only to be expected. Keep your focus, but be prepared to change the forecast, seek more funding, delay hiring—taking the actions necessary to stay afloat.
Positioning the helmsman and crew
The helmsman always sits on the windward side of the boat. The crew sits towards the bow and has the job of trimming the jib and counterbalancing the helmsman. The two must work together, both reacting to shifts in the wind, especially gusts, and the set of the sails. Both also pay attention to the boat's trim by adjusting their positions fore and aft, as well as pulling in or letting out the sails. The purpose of all this is to improve the boat's performance, sailing more comfortably and faster. It's the helmsman who directs and he uses the tiller to steer an effective course, combined with the set of the sail and the position of the crew.
Positioning the helmsman and crew: business startup version
Now that you're actually in business (sailing) and the planning stage is over, you need to start thinking about growing the business and expanding your horizons. It's more than just staying afloat. The advantage of a small boat or a small business is that you can tweak things easily, but you need to be aware that the business climate can change abruptly, just like the winds on the water.
Your pre-launch expectations will prove to have been wide of the mark. You'll find you've probably too many resources in one area and not enough in another. Products that fared well in tests may flop in the market or the prices that looked right on paper won't wash with customers.
When you launch and for a while you will be keeping your hands firmly on the tiller, but soon it’ll be important to let your crew take a hand on it. They watch you for a while and then you need to get out of the way and let them feel what it’s like to take the helm. You are not handing over control, for you remain the skipper, but they get to share responsibility and learn the ropes.
Points of sailing
Reaching involves the wind blowing at right angles to the boat from behind the helmsman's back and is generally a good steady state. The secret of it is to keep the sail trimmed to sail a straight course. A dinghy can't go straight into the wind, so you use beating, with the sails forming a kind of wedge to the wind at about a 45º angle to the wind to propel the boat forward—tacking from one side to the other.
Going about can be hazardous because the boat has to have good speed to effect the change of direction. There's a dead point when facing directly into the wind, where you can lose momentum and direction, making the boat is unstable. When the bow has swung around, both helmsman and crew have to change sides, readjust the sails and their balance to pick up speed again in the new direction.
Running is sailing with the wind directly behind you and the mainsail fully out to one side or the other. You pull up the centreboard and for me, this is the scariest, though often the fastest kind of sailing. The boat becomes very skittish.
It's very exciting, but it's at these moments that you risk uncontrolled gybing - i.e., when the sail flips over from one side to the other and the boom travels almost 180º. Even a controlled gybe I find hard. You are travelling fast and need to pull in the mainsheet fast to avoid the boom hitting you on the head.
Points of sailing: business startup version
Of course, the business will not be plain sailing, either. Marketing campaigns will not only change according to available budget, but the focus and type of promotional activity will need to be adapted. If you are picking up speed, you should not assume that sales volume will get rid of all your problems.
Chances are that hikes in sales will require more finance in the short term, rather than less. Bear in mind that if revenue is, say, $50,000 a month, for example, with an average settlement of 45 days you'll need cash of $75K in the business, just to cover those sales. If settlement stretches to 60 days because you're so busy chasing other things, you'll need $100K. If your sales double at the same time, so will the cash need—to $200,000.
Seasonality or the business cycle may mean sometimes sailing as near to the wind as possible, cutting variable costs and maintaining fixed costs at a minimum. In periods of rapid expansion, you may need more hands on deck. It could be wise to subcontract rather than adding to the permanent payroll that could sink you when things slack off.
Dealing with surprise—the capsize
Everyone capsizes. If you don't, you not really trying. You get wet and you may panic, and even with your life jacket on you'll be flapping around in the water with lots of decisions to make. The water's cold and you'll tire quickly.
Experienced sailors don't have to think about capsizing, but the nervous newbie tends to develop mental pictures of flipping over. This is a mistake. A positive image of successful sailing will most likely have you returning to shore exhilarated and dry. The inner game plan will have a strong effect on the real outcome. If you picture capsize, that's what you'll surely get. I know this from experience.
It is most important to stay with the boat, not attempt to swim ashore. You'll have some uncomfortable actions to get the boat upright and to scramble back aboard. You may scrape your limbs and find that your ropes are in a tangle.
Dealing with surprise—the capsize: business startup version
Small business survival rates are notoriously low. Most startups fail and some capsize very quickly. Even good ones can keel over, which is why it is wise to consider downside risks and have back-up plans. What if the sales don't come in as quickly as hoped, what if it takes longer than expected to get into full production? Having a fall-back position is not to be pessimistic. It is rather to be prudent.
There are very few startups whose business plans work out to the letter. That's why, when you are learning to sail, it pays to stay near the shore, where getting help is easier than in open water. If you grow too fast, you may get out of your depth. Having a life jacket makes sense; it doesn't mean you're a greenhorn. Organize a line of credit at the bank before you need it; if you wait till you're on the verge of capsizing, it'll probably be too late.
If you sense you are getting into trouble, take early action. Like the sailor who can luff up (point the boat into the wind) to relieve wind pressure while he makes alterations, the entrepreneur can rein in expenditure and focus on the essentials while he figures out the best course of action.
Landing
I have a friend who built his own 40ft yacht, launched it and started sailing away from the quayside without ever having sailed before. He had picked up the rudiments of navigation from a book, but had overlooked the docking procedure. Getting back ashore was very tricky!
The difficulty is that you'll be dealing with the wind and wanting to bring the boat to a stop at the right place. If you're aiming at a jetty, you may have some manoeuvres to accomplish before coming along side. It's not at all like stopping the car; it's more like stopping the car with the gears engaged, or if you drive an automatic, stopping with the car in drive!
Landing: business startup version
Setting up the business in such a way that you can work towards less than ten-hour days is very important. A startup will produce an adrenalin rush. Maintaining those high adrenalin levels will be bad for the business and your own health.
This is the time to be sure that your management controls are giving you the information you need. Maybe it's the end of the quarter, or the year. Of course you'll have been monitoring performance as you navigated the shoals during the period, but now you'll be wanting to compare out-turn to what you'd put in the business plan. You want to finish the quarter or the year in a way that bodes well for the future, even if the variances are considerable. Like with feedback from customers, as you prepare to land, you'll be evaluating all the figures to see how you can better come ashore next time around.
Most startups don't make profits from the start. Early on, a positive cash flow is the vital measure of success—survival. In the second phase volume will probably matter more and only in a third phase will profitability will be key.
If you would like to quote or make use of the material used in this article, please do let me know.
William Keyser • 2006 • will @ worksavvy.ws