Entrepreneurs represent a different and exciting twist to the Herman S. Cage & Associates mantra of having the money you need to do the things you want. Being an entrepreneur gives you the ability to have the money you need while doing the things you want. Profiting from your passion. Being your own boss. Doing it your way. Etcetera.
Like his financial planning practice, Herman Cage’s work with entrepreneurs grew out of his desire to bring additional value to his clients and to fill a void. He witnessed the decline in the number of middle and upper management jobs in the American workforce. As this trend continues, individuals will no longer be able to depend on the security of a job. Viewing entrepreneurship as a way for individuals to exceed income expectations and build wealth, he implemented the Cage Entrepreneur Development Initiative (CEDI), a business consulting and financial planning program for start up businesses.
Definition of Entrepreneurs
For CEDI, an entrepreneur is defined as an individual who establishes a business with the express purpose of operating that enterprise on a full-time basis. Because our success is inextricably tied to CEDI clients’ success, we serve only those who are willing to commit their time and financial resources to establishing and launching the entity. We do not serve freelancers or individuals who are seeking to supplement full- or part-time employment income.
There are two types of entrepreneurs. The first is the voluntary entrepreneur—an individual with the proverbial new or better mouse trap. These entrepreneurs have identified a particular niche or opportunity in the market and have developed a product or service to meet the need. While they are motivated by financial reward, they have a knack for innovation and creativity and welcome the challenges and the risks of a new undertaking.
The second is the involuntary entrepreneur—an individual who has years of experience in a particular industry or profession as a full-time employee and is “forced” into business as a result of layoffs or cost cutting measures. While involuntary entrepreneurs often have a particular market or niche to fill, they may be motivated by fear as much as financial need. Involuntary entrepreneurs may also lack the intangible qualities of voluntary entrepreneurs, with risk taking being the most notable and critical.
CEDI Increases Entrepreneurs’ Likelihood of Success
The mission of the Cage Entrepreneur Development Initiative (CEDI) is to minimize risk factors and increase the chances of its clients’ success in launching and operating a viable business. CEDI helps both voluntary and involuntary entrepreneurs:
- Bring clarity and focus to the business venture
- Implement practical approaches to business operations
- Learn from and avoid the mistakes of others
- Benefit from best practices of both Fortune 500 and small businesses
- Use the tax code as a business ally
- Cultivate partnerships that provide human and financial capital
CEDI engagements end with a written action plan that guides entrepreneurs through the first year of operations, helping them to avoid many of the pitfalls of starting a new business. It has four components:
- Strategic Positioning (Who you are)
- Strategic Thinking (How you make money)
- Strategic Resource Management (How to manage that money)
- Strategic Alliances (Who can help you make money)
1. Entrepreneurs Need Strategic Positioning
Strategic Positioning (SP) is a front-end assessment of the strengths of your business concept and your entrepreneurial skills. It serves as a foundation for a solid start. Strategic Positioning answers three questions: who you are, what you do best and how much, if anything, anyone will pay for it. In this first phase of CEDI, our team members get to know you and your business—your company, its proposed products or services, the industry, your core values, risk tolerance, and most significantly, your financial goals.
Strategic Positioning consists of:
- Pinpointing a need and positioning the company to meet that need
- Creating a brand or identity that differentiates the service or product from others in the market
- Identifying a customer base and formulating consistent messages that resonate with that base
- Establishing short and long-term business goals
- Putting together a personal development and coaching plan to bolster entrepreneurial skills
At the end of the Strategic Positioning Phase, you’ll have a clear vision for your business and a clear understanding of what you bring to the table.
2. Entrepreneurs Need Strategic Thinking
Strategic Thinking (ST) is a critical step because it quantifies business activity for optimum use of time and money. Strategic Thinking is process mapping for revenue. It’s outlining the typical sales cycle, including what happens and how long it takes to complete a sale, and then building your daily activity around those functions.
Strategic Thinking consists of:
- Establishing feasible revenue goals. (This number is based on the product or service and the industry. A revenue goal for the first year might be $100,000.)
- Isolating the source of the revenue. (Billable hours, customers, product sales, etc.)
- Quantifying the revenue. (The business may need to bank 1,000 billable hours, obtain 100 customers or sell 10,000 widgets per month to meet the hypothetical $100,000 a year.)
- Identifying the activity needed to reach the magic number. (A business might have a sales cycle of 1 week, requiring 3 leads, 6 phone calls, and 1 meeting to secure one customer worth $500.)
- Allocating resources accordingly. (In theory, this business must generate at least 12 leads each week and allocate time and staff for 24 phone calls and 12 meetings per week to secure 4 customers worth $500 each: 4 customers X $500 = $2,000 per week; $2000 x 4 weeks =$8,000 per month; 12 months X $8,000 = $96,000 per year.)
Once entrepreneurs know what activities generate cash flow and revenue and what activities don’t, they can focus on their scarce resources squarely on those that do.
3. Entrepreneurs Need Strategic Resource Management
Strategic Resource Management (SRM) is creating a plan to manage operating capital and expenses so that entrepreneurs have a blueprint for effective money management.
Strategic Resource Management consists of:
- Determining capitalization costs
- Using traditional and non-traditional sources for acquiring operating capital and assets
- Projecting cash flow, as opposed to revenue
- Developing an operating budget for the business and personal/living expenses
- Identifying and controlling costs
Strategic Resource Management for an entrepreneur means estimating and controlling both personal and business expenses. Taking both into account gives entrepreneurs a realistic understanding of available resources for business operations, increasing the chances of surviving and even thriving during the startup phase.
4. Entrepreneurs Need Strategic Alliances
Strategic Alliances (SA) are partnerships, informal or formal, in which both parties benefit. Some call it a win-win situation. Others call it symbiotic relationships. We call it making sure that the river flows both ways.
Strategic Alliances is the process of identifying and cultivating relationships that bolster one or more of the following:
- Company Brand
- Market Visibility
- Sales Leads
- Customer Base
Strategic Alliances are powerful because they bring additional resources and goodwill that accelerate and support the growth of the business venture.
A Customized Business Plan for Entrepreneurs
CEDI engagements span approximately four months and consist of a series of interactive sessions with members of the CEDI team. In addition to the sessions, it requires research, time and effort on the part of the CEDI team as well as the CEDI client. The result of this collaboration is a practical and doable plan of action tailored to the skills and personality of the entrepreneur, the type of company or industry and income requirements.
Specifically, the CEDI plan includes:
- Branding and integrated marketing communications plan
- Soft skills assessment and personal development plan
- Short- and long-term financial goals
- Quantitative analysis and benchmarks to reach your financial goals
- Cash management tools and techniques
- Prospective partnerships
Once the initial engagement period is complete, CEDI team members are available to serve as advisors, mentors and coaches to support your overall business growth and development.
CEDI clients also benefit from tax planning and preparation services offered by Herman S. Cage & Associates. The goal is similar to that of Herman S. Cage’s individual clients: Keep more of your cash flow to begin with so that you have more capital to reinvest in your business, your retirement and other goals.