Cultivate Advisors CEO Casey Clark Answers Top 8 Questions For Small Business Owners
1. What is the number one reason small business owners fail or succeed?
Inability to manage a cash flow. Cash is the health of the business and most owners could benefit from more efficient cash management. A few areas that most owners could improve are:
- Creating a cash threshold in the business – Defining the minimum amount of cash the business owner must retain in the business
- Using historic reconciliation for forward planning – Learn from business’ historic cash use to better plan for future cash needs
- Establishing accurate pricing to enable margin through growth – By using accurate pricing, owners can earn a greater margin as they grow
- Properly use debt, to leverage cash for future scale – Employing debt in strategic areas can help owners leverage cash to scale quickly
- Strong cash management eliminates complete owner dependency – Creating a cash management system removes the need for owner dependency in funding and liquidity
2. Nowadays there is more capital, more technology, more resources, but why do small businesses still face worse failure rates than ever before?
This question is the #1 reason I co-founded Cultivate Advisors, to make the world better for entrepreneurs.
Many would state the high failure rate is because the barrier of entry continues to lower for individuals to start a business, which may be part of it, however, I believe it’s because there is not enough attention on the skill of the business owner. The business often is running its owner when it should be the other way around. Fortunately, these skills can be developed once you look a bit deeper and see the skill set, drive, and ability of the owner, – it will tell you the story behind a company’s success or failure.
3. Why do over half of small businesses fail within the first 5 years?
Not to be a broken record, but it’s often a cash issue. Business owners often share other symptoms that also occurred in the business’ ultimate fall to failure, but the underlying cause was most likely cash all along. Entrepreneurs start off on the wrong foot and it leads to owner dependency. That leads to massive stress and burnout, which ultimately leads business owners to give up on their business. This isn’t every situation, but is the most likely story of over 70% of failing businesses.
I would remind owners that cash isn’t just the balance in the bank account. It’s how finances work throughout the organization and sometimes the business is just not getting enough cash upfront and the owner does not take the proper amount of risk that is needed to get the business off the ground to be extremely sustainable.
4. What is the difference between ‘scaling’ and ‘growing’ a business?
Growing – This is about moving a metric forward and seeing growth on what you focus on in the business. For many, there is a focus on growing top line revenue or some leading indicator that will show the health of the business moving in the right direction. At Cultivate, we love to create rapid growth for businesses we partner with, but we keep a higher focus on bottom line growth (also known as profitability). Why try to double the business to double the profit, if you can move a few other elements to create a 30% growth rate that allows you to retain a majority of the bottom line to achieve the same profit outcome?
Scaling – This is about building the organization in a sustainable way that can continue to grow using its organizational structure and utilizing guardrails that allow more people to enter the business and limit human error. This is about giving owners a quality of life and feeling in control while allowing teams to have a strong work life balance with the right incentive structures. When you build a scalable organization, it can organically grow. I encourage owners to focus on scale first before growth, its a much more fun ride to the top.
5. At what stage of growth should a small business engage with Cultivate Advisors?
We work with businesses of all sizes. Our premier 1 to 1 advisory service that we’re best known for is really great for owners that have a business beyond $500K in revenue. This ensures they have enough of a start and already have a team member or two on their staff. We work with revenues at a very high range as well. In those situations it’s more about the owner still being active in the business for us to do our best work.
The best question for business owners to ask themselves is if you think there could be a better way and you’re curious to get an outside perspective from past entrepreneurs that have walked in your shoes, connecting with Cultivate could be a great opportunity. You don’t know what you don’t know.
6. What does Cultivate focus on when working with a small business owner?
We get into the nuts and bolts of the business to build infrastructure and scale, create turn key systems, develop predictable performance indicators all while helping skill-up the owner and the team. We break the business down into two areas: Growth & Capacity. Often owners have one or the other going fairly well and we help show them how to create more balance between the two. We dig into many things as we do a full assessment up front for free to understand the health of the company and where to focus our energy. To do this, we look through our proven methodology called the propeller. The financials are the engine. Sales, Marketing, Leadership, and Recruiting as the blades of the propeller. Finally, productivity including tech enablement and systemization incases the others to symbolize the guardrails. You need a large enough financial engine to get your business to the desired location. You cannot have any holes or gaps in your encasement or the propeller won’t stay together while on your journey. Lastly, if the blades are not symmetrical and built out in a balanced way, you’ll hit extreme turbulence in the business. We help solve these things and more for owners looking to get to the next level.
7. What can NEWITY and Cultivate provide small business owners in partnership?
The partnership between NEWITY and Cultivate is a great one. As shared, a large reason for issues in the business is cash flow. NEWITY helps support that. Debt can be a very good thing if approached and leveraged the right way. Like anything, there is a balance. Cultivate helps owners see when and how to use the debt effectively and trusts NEWITY to support the owners in getting the best opportunity for debt when that cash burden hits or the additional investment opportunity is needed. Together, the two companies are helping support owners and help their businesses thrive.
8. If you could give one piece of advice for small business owners, what would it be?
“No one said it would be easy, they said it would be worth it.” Running a business is hard. Growth in a business is expensive. No one can be great at every aspect of running a business. Don’t run it alone, raise your hand and take mentorship and advisory if it be from Cultivate or someone else. The biggest reason owners cannot get to the stage desired in their business is because of themselves. Get out of your own way and realize that if the business is built around you, you’ll never realize its full potential.
NEWITY members can schedule a free two-hour session with Cultivate with no obligation.