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Kacharagadla Featured Article

5 Ways to Validate a Business Idea, Right Now

Don't let your day job or lack of capital stop you from finding and testing a business idea. Here's how.
Last year, I embarked upon a personal challenge to validate a business idea in 30 days. To make it even more difficult, it was a random idea chosen by my readers. They asked me to do it without using my existing website, traffic and business connections and without spending more than 20 hours per week on the project. On top of that, I limited myself to spending no more than $500 validating this idea. The experiment was a success.In just two weeks, I built an email list of 565 subscribers without having an actual website. Then, I reached out to a handful of those subscribers and pre-sold 12 copies of a book that didn't even exist yet, all in less than 30 days. I wrote about the experiment in real-time with in-depth weekly updates, successes, failures and lessons learned along the way, right here in my validation challenge. Today, I want to share with you the five most effect…

The Only Report You Need to Run a Successful Business

I’ve been working with clients for over 20 years and, without question, the most successful of them rely on data to help them run their businesses. But you may be surprised with where the data comes from.
It’s not from a financial statement. For a small-business owner, financial statements are generally useless. They’re prepared months after the fact. They show a snapshot from a historical period that is usually long past. And they’ve been jiggered and reconfigured by accountants to reflect accounting standards that usually don’t have much connection to the real world for most of us. Banks and investors may look to financial statements as part of their documentation to approve financing. But smart business owners don’t. Instead they rely on another report. A daily report called The Flash.
The Flash Report is also a snapshot. Except it’s a daily snapshot. Its one page contains on it the most critical information that a business owner needs to run his or her company. What kind of information? That depends on your business.
But the core numbers are always there: cash in the bank, open accounts receivable and accounts payable, year-to-date revenues. Then there are other numbers that are particular to the business owner: year-to-date purchases, overtime that week, open orders ready to be shipped, backlogged orders, forecasted sales, machine hours that week, billable hours that month, Facebook likes, returns or complaints or leads generated that week.
You should know the numbers. These are the numbers you need every morning so that you have a pulse on your business. If you can’t tell me what these are right now, then consider this a wake-up call.
This is not something an accountant needs to prepare. Most of my clients have an administrative person take ownership of the daily Flash Report. They are taught where to gather the information. Some will come from your accounting system. Other data will come from your customer-relationship-management or service databases. Your warehouse manager may need to email a few numbers from his or her spreadsheet. Maybe it’s coming from one of your social-media websites or another cloud-based system you’re using.
This is not an accounting exercise. It’s an exercise in bringing together data onto a single page of information. Once it's done a few times, it usually only takes a few minutes every day to complete.
The report should be simple. No graphs or charts. No complex systems. Most of my clients either get a piece of paper (remember those?) on their desk each morning with the numbers manually written or typed, or they receive a very simple, one column spreadsheet via email that can be quickly scrolled through. There’s no need to buy expensive “business intelligence” software or other nonsense. Not that these applications aren’t valuable and can provide more detailed information for the manager that needs it. But you? You’re a business owner. You need the executive summary in an easily digestible format. That’s what a good daily Flash Report does.
Benchmarks are always needed. How do you know if your cash balance is good unless you compare it to what you had at the beginning of the year? How do you know if your year-to-date sales are ahead of last year’s unless you were shown what last year’s year-to-date sales were? How do you if your backlog now is as strong as it was the same time a year ago?
A daily Flash Report is useless unless you’ve got something to compare. So whoever’s preparing this report needs to dig out prior period data to show alongside the most recent information. Each year, as long as you’re keeping each day’s report on file, this gets easier and easier.
You know that your systems are not like the big guys. You can’t just generate a reliable income statement at the snap of your fingers. You don’t have a team of internal accountants that are keeping a close eye on your finances. But the good news is that, because you’re running a smaller business, your needs aren’t as complicated. In the end, no matter what business you’re running, a business is a business, so a simple one-page daily Flash Report is usually enough for anyone to keep their eye on the ball.