His book “Business Startup 101: From Great Idea to Profit… Quick!” has helped countless entrepreneurs start, run and grow their small business.
Chris has coached hundreds of entrepreneurs through the start-up process and regularly contributes to articles in national publications on small business start-up and finance topics.
Chris shares his 30 years of experience and expert strategies for taking a business idea to business reality in a short time, while mitigating risk, keeping a handle on costs, and knowing every day how your business is doing.
Scroll down for a complete transcript of the interview or click the Play button below to listen to the interview now.
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Chris Gattis Transcript
Tim Knox: Welcome in to another edition of Interviewing Authors. I’m your host Tim Knox. Got a great show for you today. Chris Gattis, the author of Business Startup 101: From Great Idea to Profit… Quick! is our guest.
Now Chris has a background in corporate finance and operations, 30 years of experience managing turnarounds of businesses and is a financing and entrepreneurial expert. Also a four time Amazon bestselling author with books on such topics as business planning, marketing planning, startup.
He also coaches entrepreneurs through the startup process regularly. Speaker, teacher, author, entrepreneur – Chris Gattis talking about his book, Business Startup 101: From Great Idea to Profit… Quick! on this edition of Interviewing Authors.
Tim Knox: Welcome to the program today. The author of Business Startup 101: From Great Idea to Profit… Quick!, Mr. Chris Gattis. Chris, how are you?
Chris Gattis: I’m doing great. How are you, Tim?
Tim Knox: I’m good. Tell us a little bit about the book, Business Startup 101.
Chris Gattis: Well this book was a sort of a labor of love. Originally I had put together lots of materials that I used for coaching with hopeful entrepreneurs and over the years of working with different folks I had built up a binder full of stuff – templates and worksheets and materials, stories, financial projecting kind of stuff. You know, over a time you get tired of creating something over and over so you eventually get smart and put it together in one place. I went to my book one day to pull out a template when I was working with somebody and they said, “Hey, you know, you ought to write a book with all that stuff.”
Tim Knox: So it’s really a culmination of everything you had put together working with what you call hopeful entrepreneurs.
Chris Gattis: Yeah.
Tim Knox: Tell me what a hopeful entrepreneur is.
Chris Gattis: Well I use that term a little loosely but I’ve coached with literally hundreds of people who have an idea and they want to start a business. Most of them are employed and they have a job doing something else but they dream of being an entrepreneur and they’re hoping that this idea is their great idea and they can start a business with it.
Tim Knox: And this book will figure out if that is the case. You and I both know there are a lot of what these hopeful entrepreneurs would call big ideas but once you examine them maybe they’re not so big. It’s what we call the ugly baby.
Chris Gattis: Right, exactly. Sometimes they are great ideas and, you know, they need a little help developing them. Sometimes they’re – what I call in the book – a harebrained idea. So my hope with the book is to help guide people through how this process works and help people decide this isn’t such a great idea if that’s the case.
Tim Knox: Gotcha. In the book in the beginning at least you talk a lot about family and relationships. Talk a little about that.
Chris Gattis: Yeah, my wife helped me edit the book and she asked me, she said, “Why do you talk so much about family in the first of this book?” I said, you know, you can’t start a small business by yourself. To think you’re going to start this business and it’s not going to have any impact on your family is just insane. When you’re first starting a real business there’s so many hours involved in getting all this work done, especially when it’s just you and you’re going to miss ball games, you’re going to miss dance recitals, you’re going to miss supper, you’re going to miss helping kids with homework. If you’re going to get this business started and done there’s so much time invested that you really need the support of your family and you need to understand the amount of time it’s going to take. I mean you know from talking to folks that people have really unrealistic expectations of how much time a startup’s going to take.
Tim Knox: Do you think they don’t realize how much is involved? I know the family aspect. I’m an old entrepreneur. Even if you’re starting that business by yourself, the whole family’s involved in some form or fashion, right?
Chris Gattis: Yeah, absolutely. Typically they’re going to be involved in some form in the business but even if it’s just you and not them you’re going to need their support because you’re going to be gone a lot. That’s sort of what that message is. You have this dream but you better make sure your family’s onboard or it’s going to lead to an unhappy home life and that’s disaster for an entrepreneur.
Tim Knox: Is that what you suggest? If you’re thinking about a business, before you do anything sit down with the family and discuss it with them. Sometimes the family is not going to be onboard and sometimes they are. How do you handle that?
Chris Gattis: Yeah I think you realistically got to have the family onboard and if they’re not then I think you have to start a conversation over time. To suggest that you’re going to go into this and your family doesn’t like what you’re doing, they don’t support what you’re doing that’s just a recipe for disaster in my mind.
Tim Knox: Right, exactly. Let’s talk a little about risk because that’s, you know the old adage, ‘business is risky, risky business’. That holds true to a degree but what’s the most important thing that you pass on in the book about how to reduce that risk, how to mitigate it?
Chris Gattis: Well I think the way that you reduce the risk is to use what I call this viability, the three tools of financial viability. It doesn’t eliminate risk but if you go through this process you can have a pretty good idea of what to expect. That model is first you, you know, after you think about the business model and how you’re going to market the business then you do a profit and loss or an income statement kind of projection. If that doesn’t result in a viable business, and what I mean by viable is that you have real people paying real money in a quantity that meets your needs. If that’s not viable then you need to go back and look at your model and say how can I change my model, not how can I tweak my financial statements, but how can I change my model so that I get different results?
If you can’t tweak your model enough to get sufficiently different results then this business doesn’t work. If you’re satisfied with the income statements that yeah this works then it’s time to do a cash flow. Does the cash flow create enough cash to support the business startup? This is one of those areas, and we won’t get into all the technical calculations because that’s a couple hours’ worth of discussion there but you know cash flow is the thing that sinks most businesses. That’s really an integral part of that. Then the third piece is just to break even. This is a pretty simple calculation. The hard question is once you do the break even and you say I have to sell X number of widgets to break even, the question is is that reasonable? Do you think the market will really support that level of sales?
If all three of those things are a go then you can have a reasonable probability, with no other catastrophes, that your business can possibly make it. If any one of those three things is a negative then I say you’re not ready to start yet.
Tim Knox: Do you think most, especially these hopeful entrepreneurs, are they realistic? When they run the numbers… you and I both know businesses revolve around numbers – cash coming in, cash going out. It’s kind of been my experience, and I’d like to hear your thoughts on this too, a lot of hopeful entrepreneurs, if the numbers don’t say what they want to see they do exactly what you said not to do. They tweak the numbers rather than tweak the concept.
Chris Gattis: Sure. No, I think to answer the first question, no. I don’t think they’re realistic. Number one, they assume they’re going to sell way more than they’re really going to sell. They get caught up in the greatness of their idea and haven’t really done any market research to suggest whether or not other people might share that idea.
Tim Knox: I think your book, Business Startup 101: From Great Idea to Profit… Quick!, means let’s get some money coming in the door quickly to get this business sustainable. Is that the thought behind the title?
Chris Gattis: Well it’s, that’s part of it. The other part is let’s make a decision pretty quick whether or not this business makes sense. One of the things that I find, especially in a town like Huntsville where you have lots and lots of engineers, they love data. You can collect data on a new business forever or a potential startup forever and never actually do anything. I have talked to so many people over the years who were hoping to start a business as soon as they get just a few more pieces of data. That’s a never-ending cycle. You’re never going to get every piece of data that you need to make the perfect decision. You have to make assumptions and you have to, you know, you have to do it or not do it. That’s why I think having some kind of a basis to make that decision’s important. That’s the whole idea behind this viability model is, you know, if we put a business plan together that works in a particular way, what do we think the result will be? You probably need some mentor help. You probably need to talk to some other people in your industry or at least some people who have been around a block a time or two who can see through some of the gaping holes that maybe you don’t have enough experience to see yet.
Tim Knox: Right. It’s always good to have another set of eyes and another brain. Let’s talk about lessons learned. In the book you talk about the most important lessons for business owners to learn. What are those?
Chris Gattis: Well I think the most important thing for people to understand about their business is what does my cash flow look like? You can run a business at a loss from a profitability or a profit and loss standpoint for a long time without actually going out of business. The day you run out of cash is the day you’re out of business. So that’s really the thing that I think is typically a big surprise for this group of hopeful entrepreneurs because they don’t really understand the math behind the profit and loss and the cash flow. That’s sort of a slap in the face of reality for a lot of these guys. They assume that if the profit and loss statement was black they were good to go.
Tim Knox: That’s just not the case.
Chris Gattis: No, that’s not the case. It really has nothing to do with whether you’re going to stay in business or not. I tell people when I teach some of the classes, I typically teach this module on creating financial projections. I tell them that the profit and loss statement is not real. It’s made up of estimates and tax law and what the Congress is pushing this year and all of those kinds of things come into play. The P&L statement is really not real. It’s make-believe. The cash flow is real.
Tim Knox: Yeah, you can’t pay your bills with made up stuff. You’ve got to have some cash, right?
Chris Gattis: Exactly.
Tim Knox: Here’s a good question for you addressing the book, and I get this all the time from folks. What’s the best kind of business to start?
Chris Gattis: I do get that a lot. In my mind the best kind of business to start is one that you have a little bit of passion for. You’re going to be spending a lot of time in this business, in this industry. You shouldn’t start a business that you really don’t care for. Often I get the question, I really want to start a business but I don’t know what to start. People are sort of ashamed of that. I don’t really know what to do but I want to work for myself. I want to have my own business but I don’t know what to do. Generally when I hear that I’m like, hooray! Now we can go out and look at the market and look in their area of interest and find some areas where the market’s not being served, where there’s a demand but not adequate supply. Maybe there’s a big market with a niche that people can come in and fill. If you start from that end, if you start from a supply and demand side and you find where there is real demand but not adequate supply then that’s a much better position to be in than “Oh, I’ve just invented this new thing. Let me see if I can go sell it.”
Tim Knox: I just invented this new thing. There’s nothing like it on the market. I’m going to make a million dollars. How many times have you heard that one?
Chris Gattis: Yeah, I hear that frequently and you’re saying, hm, well does anybody actually want that thing? Frequently the answer is well maybe a handful of my friends do but that’s it.
Tim Knox: And they want you to give it to them. They don’t want to buy it.
Chris Gattis: No, they don’t want to buy it.
Tim Knox: We’re talking to Chris Gattis, the author of Business Startup 101: From Great Idea to Profit… Quick! A lot of great business advice in this book. What is the worst advice you’ve ever gotten as far as business goes?
Chris Gattis: The worst advice and I hear this from so-called experts out on the internet all of the time, and they say just do it. Just do it. You’re never going to get anywhere if you don’t just do it. I’m saying well that might be fine in some instances but it’s never fine for a new business startup to say just do it. At some point, once you’ve proved your models and all that and you’re just scared, that’s a different question. Generally you can’t just start something until you’ve done the proper amount of market research, figured out who your customers are, what do they really need, what do they want and how are you going to adequately service them. What does your model look like to take care of these customers? If you haven’t done all of that work then suggesting somebody just do it is a little insane.
Tim Knox: Nike aside.
Chris Gattis: Nike aside.
Tim Knox: Do you find that a lot of entrepreneurs ignore the market or ignore what other people tell them? They’ve got on these rose colored glasses. They’ve got this idea and they’re going to go for it no matter what.
Chris Gattis: Yeah that’s almost always the way it works. Sometimes people get lucky. I talked to a business owner a couple of weeks ago at a networking event and they had come up with this product that they thought was really outstanding. So I started asking them about who their target customer was and how they were going to go about promoting their product because I love to talk this stuff with people and see what their rationale was. After we dug into the conversation a little bit it was very clear they had never even thought about the market. I talked to him about doing some sort of a survey or group or anything like that where they talked to real people who might be in their target market to see what their opinions were. “Uh, well, we really didn’t put any effort into the marketing side. We figured we would build this and then it would be easy to sell.”
Tim Knox: This reminds me of someone I know. They have no restaurant experience, never worked in a restaurant but they went into a restaurant in New Orleans and loved the food and they’re convinced it would work here. They’re ready to invest $100,000 in this restaurant without having a clue and they’re not listening to anything anybody tells them.
Chris Gattis: One of my favorite quotes by myself is, “I’ve eaten at a restaurant is not market experience.”
Tim Knox: Exactly. Just because I have feet that doesn’t qualify me to sell shoes.
Chris Gattis: Exactly and this is probably the most common mistake. I’m sure you’ve had the same experiences. People eat at restaurants all over the country and they say, “Wow, this is a really cool idea. I want to do that here. This is sure to be a big hit.” Well maybe it will or maybe it won’t. It may be a big hit because of the local market and the type of food people eat in that market. It may be a big hit here too, then the question becomes do you know how to run a restaurant? Everybody thinks they do.
Tim Knox: Eating at a restaurant is a lot different than running a restaurant.
Chris Gattis: Yeah, because the problem with restaurants is it’s not about the food, you know. It’s about running the business of a restaurant and most of these people are clueless on how to do that part.
Tim Knox: That’s a great point. It doesn’t really matter what kind of business you’re going to start but I think it is vital that you at least have some kind of experience, not necessarily owning the business but working in a business in that particular industry.
Chris Gattis: Yeah I think it’s critical that you have some experience actually working in that industry, at least working for a business that’s in that industry. The intricacies of the different industries and the different markets are the things that make people successful or unsuccessful. The basics of business like creating a product, selling their product, invoicing the customer, collecting your money, managing your inventory… that kind of stuff is fairly similar among different businesses. It’s the subtle differences between businesses in different industries that really make or break. If you’ve done everything else right, you know you’ve got the right product and the right approach; if you don’t understand the little things about that industry then you’re still not going to be successful.
Tim Knox: Chris, let’s talk a little about funding because that’s often the roadblock to starting a business. Banks aren’t really loaning money anymore, are they? So unless you’ve got a good personal credit history or you’ve got collateral your odds of getting a bank loan really are slim to none. Talk about that.
Chris Gattis: No, no you don’t. The first thing you better do is make sure that your personal finances are in order. If they’re not then you should put the business on the shelf for awhile and get your personal finances in order. In this day and time a new business is not going to get a bank loan that’s not secured by your personal credit.
Tim Knox: And don’t make the mistake of thinking that you can start a new business and immediately get credit for that business because that business has no credit history. So you’re probably going to have to rely on your own credit and if you’re not creditworthy you’re not going to get money from the bank.
Chris Gattis: Yeah, if you have average credit then you’re going to have to have collateral. If you have exceptional credit you might be able to get a signature loan but you’re going to have to have exceptional credit and some good payment history to back that up. Most people aren’t going to fall into that category.
Tim Knox: One thing you talked about in the book is you need to know exactly how much money you need to start the business as well as how much money you need to actually run the business for six, nine, twelve months or until it’s profitable. It’s not just startup costs; it’s ongoing costs as well.
Chris Gattis: Yeah, absolutely. It’s amazing how often that question is not answered first. I was teaching a class just a couple weeks ago and there was about, I don’t know, 10 hopeful entrepreneurs and some already had started their business. But I asked them how much money are you going to need to start your business? They all had all this blank look on their face and they clearly didn’t know. I said, well do you know how to find out because it’s really pretty easy to make that determination. No, they didn’t know. So we walked through how you do that by taking a look at your startup costs, by looking at your first couple years of cash flow projections and they’re like, oh, I had no idea that’s how you did this. There were a couple of them in there, only a couple out of this group who were going to need a bank loan. I said, well how much money did you know to ask for? It just hadn’t even crossed their mind yet how they were going to make that determination.
Tim Knox: Chris, talk a little bit more about that. What is the best way for people to actually figure out how much they do need to start the business and to keep it going for a while?
Chris Gattis: Well what I suggest people do is just sit down and do a little brainstorming to start about what kind of expenses are involved in starting a business like this and what kind of expenses are involved in running a business like this. The first one is a matter of, okay, we’re going to need to some cash registers, we’re going to need a computer, we’re going to need some inventory. Those kinds of answers are really just math. How much do you need? What does it cost? I’m going to have some legal fees and some other miscellaneous stuff to get started. So you add all that stuff up and that’s just really a simple list that you add up and get a number. Here’s how much it takes to get started. Then the how much does it take to survive the first few year? How much resources do you need availability for? That comes from your cash flow. You take a look at your cash flow projections.
What I have people do is after you’ve done your financial projections, your income statement and your cash flow, just chart your cumulative cash flow and see what that chart looks like. Whatever the lowest point on that chart is, that’s by definition how much cash you need to survive the first few years. Then of course you need to take into consideration what happens if everything doesn’t go exactly according to plan. So you might want to build in a little cushion there. Typically I have people take their basic model and say what happens if I only sell 60% of what I thought I would sell, which is probably still high. Say will my model survive that? Can I still make a profit? Can my cash flow still survive that? If not then you’re probably not ready to start yet or it may mean that you’re going to need a whole lot more cash to survive that initial period.
Tim Knox: So basically what you’re saying is to actually sit down, make a list of all the costs, all the expenses, everything you’re going to need to start that business. Put a dollar figure to those needs. At least that will give you a ball park and then you also got to think about how much revenue are you going to bring in. It’s been my experience that people always overestimate the revenue, underestimate the expenses.
Chris Gattis: Yeah, and I encourage people to talk to other businesses that are in their same industry. Maybe find somebody in a different market in a different part of the country who would be willing to talk to you about their experience starting a business like yours. Entrepreneurs love to talk. We love to tell our story. So I tell people to find a business that’s going to be about like yours in another part of the country and call them up and setup an appointment just to have a chat with the owner about his experience or her experience starting that business, to give you some idea of what to expect. Talk to other people around who are respected advisors, people who have been in business for a while that can give you a little bit of street smarts that they gained by doing lots of stuff right and wrong over the years. Just be really conservative in your projections.
One of the other things I tell people is these projections are for you. These are tools for you to use to determine whether or not this business makes sense. This isn’t the bank’s financial statements. These are your financial statements. These are your financial projections. They’re tools to help you determine if this business is a good business or not.
Tim Knox: We’re talking to Chris Gattis – author, entrepreneur. His book is Business Startup 101. Chris, let’s talk a little bit about business planning. You and I have authored more business plans than we care to remember. I saw a book the other day called The One Page Business Plan. Can you really write a great business plan or even a fair business plan in just one page?
Chris Gattis: Well here’s the problem with the one page business plan. Most of the time people think, oh it’s a one page business plan so I’m going to do the amount of research necessary to write a one page business plan. That’s the issue. The whole deal here is not about the document. The deal is about the planning, the activity of business planning, not writing the document. The document is just a summary of all your research and plans. So I don’t have a problem per se with a one page summary of your plan. We typically call that an executive summary. The problem comes in when people think they only have to do a little, tiny bit of research in order to write a one page plan. That’s where the issue is. That’s just not the case.
Tim Knox: Well it’s like if you say, okay, you only have room to write one page that’s what you’re going to get back, one page. It may not be thought our or they may not have done the homework that they should have done for the entire business plan. Last question here. Let’s talk about financial projections because I think this is where a lot of entrepreneurs – the hopeful, the new really drop the ball because they don’t understand or they are intimated by doing financial projections. Is that something the entrepreneur has to do? Can they get their accountant to do that?
Chris Gattis: You know, you can get the accountant to help you but if you’re starting a business I think you really need to understand how your income statement and your cash flow work. If you don’t understand that then I think you’re in trouble. You can have your accountant help you put the statements together. If you need a startup balance sheet or some balance sheet projections, you’re definitely going to need your accountant to help you with that if you’re not an accounting person. Those balance sheets are difficult to create. So a startup entrepreneur without that experience probably can’t do that but you can do an income projection and a cash flow projection. I think that’s really one of the key activities incumbent on a business owner is to understand how what you’re doing in the marketplace transforms into income and cash flow. If you don’t understand those relationships you’re in trouble.
Tim Knox: You’ve actually written another book on business plans, right?
Chris Gattis: Right, yeah. I wrote a book on really just how to write a business plan. It’s a quick and dirty sort of template idea. Here’s the template. Here’s what goes in these different sections. It’s just to sort of help people through that process. If you sort of understand the overall idea but you need a little help with the business plan and what things you should think about then that’s what this book is all about.
Tim Knox: Let me just run down the list of your other books here. Of course the book we’re talking about is Business Startup 101: From Great Idea to Profit… Quick! The one you just mentioned is Business Plan Template: How to Write a Business Plan. Marketing Plan Template: Writing Marketing Plans for Small Business. I love the title of this one, Chris — Law Firm Marketing: How to Promote Your Law Firm without Looking like an Ambulance Chaser.
Chris Gattis: Yeah that book came out of research. We’re doing research for an attorney client and as I got to doing research for them and looking at how successful law firms typically market themselves, it became very clear that there was a void there. These guys didn’t really understand how to market themselves. They were scared to death of looking like an ambulance chaser. So their reaction was just to do nothing. When I did a little Google keyword analysis, one of the most highly searched for words was this idea of marketing for attorneys. A light bulb just went off and said, hm, how about if we just take our basic idea, our basic plan for how we market a business and just write specifically how an attorney or a law firm might take this template and apply it to their business. So that’s what Law Firm Marketing’s all about. We just took the basic template and applied it to specifically a law firm.
Tim Knox: Do you have plans to take that template and apply it to other industries? Is that something you can go across platform?
Chris Gattis: Yeah, I think we can. Very likely the next one I do will be about strategic planning because the research involved in doing all of these activities, whether it’s marketing or business plans or strategic planning, it’s all the same stuff. The kind of research you’re doing about the markets and your customers and the trends and a swat analysis – all of these things are similar across platforms. So probably the next one I do will be about strategic planning but then I’ll probably come back and start applying different markets, the idea of marketing for a specific industry.
Tim Knox: Super. Chris Gattis, author of Business Startup 101: From Great Idea to Profit… Quick!, what is your final piece of advice to entrepreneurs?
Chris Gattis: Wow, the hardest question you’ve asked me all day.
Tim Knox: I was waiting for you to say ‘just do it’.
Chris Gattis: That’s what came to my mind. Starting a business is tough. Do your research. I guess that’s the real key advice is do your research first.
Tim Knox: Excellent. Chris, if they want to learn more about the book, more about your services, where can they find you?
Chris Gattis: They can find the book on Amazon. I quit trying to sell those myself. It’s too much trouble. They’re all available on Amazon cheap. You can find me, you know, pretty much all over the web – on LinkedIn or you can find us in our marketing world at ad4group.com.
Tim Knox: Alright and I assume are you also doing social media, Facebook?
Chris Gattis: Oh absolutely. I do a little bit of Facebook. I’m real active on Twitter and LinkedIn. Ad4 and my partner, Felicia Sparks, are both pretty active on Facebook.
Tim Knox: Very good. If you are just thinking about starting a business, I highly recommend this book, Business Startup 101: From Great Idea to Profit… Quick! with my friend Chris Gattis. Chris, we wish you well.
Chris Gattis: Thanks, Tim.