A Syllabus for Small Business
I was pleased to see an announcement that Goldman Sachs would put aside $500 million to seed “10,000 small businesses,” including $200 million for “practical business education and training programs.”
Goldman Sachs has established an advisory council to guide the investment, with Warren Buffet and Dr. Michael Porter of Harvard as co-chairs. In addition, the deans of both the Columbia Business School, and the Wharton School are members of the advisory council.
When I was attending Wharton, I took a course in Small Business Consulting, and as a course assignment, I was sent to help the owner of the Venice Spumoni company figure out how to expand into grocery stores. At age 22, I tried my best, but did not have a lot of experience to draw upon. I wish I could travel back in time, with what I’ve learned in the intervening thirty years; today that would be a run-of-the-mill consulting problem.
I’d be interested to know what the Goldman Sachs advisory council determines are the greatest learning needs for the 10,000 small businesses they intend to help educate, and seeing how their list compares to the learning needs I’ve witnessed. Specifically, I hope some of these items make their list:
* Decision making – too often business owners just “go with their gut” when making business decisions, when what they should be is determining the size of the opportunities, probability of success, cost to invest, return on investment if they succeed, and which course of action affords the best risk-return trade-off.
* Creating and tracking against plans – business owners should make it a point to create a solid budget at the start of each year, and then track against it monthly.
* Successful selling – something not typically taught at the leading business schools, but a key to success for every small business owner.
* Financial literacy – at two workshops I ran in November, only 10% tracked the gross margin of their small business – how much they earned on each in dollar of sales, in percentage terms, after covering their cost of goods sold. Setting the right gross margin target will inform subsequent pricing and product line decisions and help guide a business to a healthy level of profitability.
* Raising capital – With bank lending down, and equity funding also hard to get, this is obviously a critical skill in the current economy. Small business owners need to thoroughly understand the differences between debt and equity, which is right for businesses under varying circumstances, and how to tell their story in a compelling way to increase their chances of securing loans or investment capital. Comfort Restaurant in Hastings-on-Hudson, NY figured out an innovative way to raise capital for their recent expansion.
