successful financing in business requires vision

The second of 3 articles in ‘conversation’ with the report issued by the Business Development Bank of Canadaa study of the top challenges faced by small and medium-sized businesses in Canada.

The first article was about marketing challenges.

The BDC report is well-researched and very much worth absorbing, but misses a key element: the answer to the question “Why? Why are these things challenges?”

In the case of marketing, it is not marketing per se that is the challenge. It is capacity.

In the case of finances, it is not a lack of money that is the problem, it is a lack of vision.

Vision First Financing Afterwards

Not surprisingly, the BDC being a bank they get money problem closer to the bullseye in terms of the ‘why’ question than they did with marketing.

The BDC found the main financial challenges for small and medium enterprises (SME’s) are:

  • obtaining additional financing (57%)
  • managing cash flow (45%)
  • understanding the financing options available (42%)

Later in the report we also learn this:

An important proportion of business leaders who  face finance-related challenges struggle with developing forecasts and budgets (39%) and establishing and tracking key performance indicators (37%).

This gets closer to the why. Forecasts and budgets serve visions.

Financing, capital, and just simple money are not the real problem. The absence of tools for creating a vision: forecasting, planning, directing, and leading are the problem. They are absent in most small businesses. No vision, no plan, no financing.

While financing is never an easy thing (even bootstrapping has huge challenges), the lack of vision makes it a fatal challenge. If not fatal to the business itself, it certainly is to the process of growing the business into a mature enterprise.

In our experience the first question is not “How do I get the money?” but “Why do I need the money?”

If you don’t know what kind of house you are building you will do a poor job of buying the right hammer.

So back it up: get the vision. Then get the tools in place.

Just Fix It or Actually Improve It?

Oversimplified, the search for financing is driven by two motives: to get out of trouble or to capitalize on an opportunity. Too many SME’s are in the former boat, and it skews the whole perception of ‘how hard it is to get financing’.

57% of SME owners might find ‘additional financing’ a challenge, but the question I would love to ask each of them is “What was the financing for?”

Ask any business lender how many of the loan applications they had to turn down were made to fix a negative situation. Ask them how many of the owners who came before them did so with a truly compelling vision for the future of their business?

The struggle started before the financing question was even on the table.

Let’s Turn That Boat Around

We have to work as a country and as a community of SME owners to respond to the real challenge: developing business vision. Let’s stop thinking emergency renovations and start thinking like architects. What the hell are you building that we should care about, that is truly worth investing in?

Business owners have to learn to see what their business could be; even what it must be. To yield a positive ROBST (Return on Blood, Sweat, and Tears) a business must become an independent enterprise, with opportunities for scaling, for sale, for passive income for the owner. There must be a vision for the business in its ultimate form.

The ability to create a vision like that requires education and support. A lot of it. But that vision is the precondition to successful financing.

In a great business all financing is an investment. We need to know what we are investing in before any money hits the table.

At the Great Performances Group we improve the success of small and medium business anywhere in the English-speaking world. Check us out to find out how. Read Clemens’ book “Great Performances – the Small Business Script for the 21st Century.” Leave a comment or question! A Facebook “Like” is sweet too.

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