Ep 24 – Cracking the Cash Code



Donna Rockin is a successful small business owner with an M.B.A. from Loyola University-Chicago.  She is the Managing Partner of Rockin Enterprises, Inc., a full-service consulting firm specializing in helping start-ups and early-stage businesses launch and grow.  Previously, she was Executive Director of the Knapp Entrepreneurship Center at IIT, and prior to that position, she was the Director of the Illinois Small Business Development Center at JVS Chicago. 

Today, at Rockin Enterprises, Inc., she provides technical assistance and helps early-stage businesses: access capital, refine their business model(s), go-to-market strategy and define multiple streams of income.

Ms. Rockin works closely with entrepreneurs to help ensure their business plans are realistic and achievable.  She has over thirty years of product development, marketing and communications experience in the for-profit sector.

Donna received a B.A. from Knox College in Galesburg, Illinois and is fluent in Spanish as a result of studying a year at the University of Barcelona, Barcelona Spain.


What invisible traps lurk in the shadows that could trip you up as a new entrepreneur? How can you stay grounded in reality and uncover all the predictable but hidden reasons that might cause your startup to fail? What’s the one thing you MUST do to ensure you stay in business long enough to start making money?

In this episode, seasoned entrepreneurial educator and mentor Donna Rockin taps into her experiences with countless entrepreneurs to discuss the make-or-break factors that many entrepreneurs miss in building their startups, the surprising, non-obvious ways to give your startup its best shot at success, sources of startup cash that most entrepreneurs never learn about, and much more

Episode Highlights

  1. The top 3 mistakes entrepreneurs make when starting up a business
  2. Why entrepreneurs significantly underestimate cash needs starting up, and how to avoid this error
  3. The critical outside factors that determines if your startup will be successful
  4. How to estimate your market size for free
  5. Common sense methods many entrepreneurs miss to assess if the business is viable
  6. The simple tool that significantly increases the odds of your startup’s survival
  7. Revenue enhancement levers many entrepreneurs miss
  8. How to rent space the smart way – things your relator never tells you
  9. How the production cycle can drain your cash, and one tool that can help you retain cash
  10. The secret to finding and maximizing free grant money
  11. Sources of cash-saving services most entrepreneurs don’t know about
  12. How to reduce revenue risk
  13. How to hire and fire talent
  14. Inside tips on working with vc’s and investors
  15. The one document you should never do without when starting up

Links and Resources

SBDC – America’s network of Small Business Development Centers that help entrepreneurs start businesses

PTAC: Association of Procurement Technical Assistance Centers that help businesses succeed in public sector marketplaces

SBIR: The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are highly competitive programs that encourage domestic small businesses to engage in Federal Research/Research and Development (R/R&D) with the potential for commercialization.

USPTO Patent Hubs: The Patent Pro Bono Program is a nationwide network of independently operated regional programs that match volunteer patent professionals with financially under-resourced inventors and small businesses for the purpose of securing patent protection

Interview Transcript

Shubha Chakravarthy: Good afternoon, Donna. We’re really happy to have you today on Invisible Ink. Welcome.

Donna Rockin: It’s a pleasure to be here, Shubha. Thank you for having me.

Shubha Chakravarthy:  We have a lot to talk about today. So you’ve had a pretty impressive career. You’ve advised a lot of founders. You’ve established entrepreneurship departments.

You’ve just done a ton of work. So what have been the most impressive or standout moments in your career as you look back?

Donna Rockin: I spent many, many years of my career in advertising and sales promotion. And it was fun. And I did everything from packaged goods to really unromantic, durable products and I enjoyed that.

But then through a fluke, I wound up running an entrepreneurship center and it was really rewarding, helping entrepreneurs get launched, get off on the right foot because it really takes a lot of effort and planning and it is much cheaper to plan your business on paper where paper is relatively cheap, a couple pennies a sheet, versus spending the money and, blowing through a lot of cash and not having a lot to show for it.

I had a heartbreaking call last week where a woman was struggling with her business and it was an online, cannabis edible business. And I said, no matter what you do, don’t finance your business on your credit cards. She said, I wish I would’ve called you 18 months ago. And so then the rest of the call was helping her dig out of a hole.

So that is a really big mistake that many entrepreneurs make of all types, and there’s no shame in it – if you really want to work on your business, and I understand they want to work on it when there are other people working available. So daytime hours when they can contact, partners and possible users or funders.

But then take a job, any job that’s an honest, respectable job with a W-2 form, do it. I told this woman, get a job at Walmart or Target, not because I have any stock in those, I don’t, but I said, you’ll get a discount probably on food and in time for Christmas gifts.

She had children and I said, you’ll earn extra money so that you can start paying down your debt. Or, it can be so that you can work on your business and not get into credit card debt because you’re keeping up with your rent, you’re keeping up with your utility bills and the car insurance, et cetera.

So there’s really nothing wrong with taking any job that’s legal to help you further your business and you can work on your own business during the day and somebody else’s that’s paying you during off hours.

Shubha Chakravarthy: So it sounds like helping entrepreneurs, like the one you just talked about, is one of the things that really keeps you excited about this job.

What are some of the other top three mistakes that pop into mind that you’ve seen entrepreneurs make over and over?

Donna Rockin: They consistently – and it doesn’t matter if it’s a brilliant coder who’s making the best app or technology breakthrough ever, or somebody who’s up running a flower shop, or a dry cleaner.

But they underestimate startup costs and they underestimate the time it takes to open their doors and really the length of the sales cycle and not understanding cash flow. Cash flow is critical and they often just don’t get it and they don’t understand how vital it is because cash is king. And it’s not the same as accounts receivable or credit cards that may be stolen.

And so those are some of the real biggies.

There’s another, not really defining a target audience. And if it’s a regular sort of storefront business, not looking at the other traffic in the neighborhood. And is there parking? Is it convenient? So there’s lots of mistakes they can make, but those are some of the biggest ones.

Shubha Chakravarthy: I can understand the premise of cash and pretty much every other mistake you can recover from if you have the right amount of cash. What do you think is driving this mistake around underestimation?

Donna Rockin: I think the biggest thing is there’s sort of in “not reality” land. They think if they build it, they will come and they haven’t,  something that drives me nuts is when, especially if it’s a new product and they say, “Well, anybody can use it”. Yes. If it’s a cosmetic yes, women, 14 to 80 plus can probably use it, maybe 90 plus.

But you have to know your heaviest users, your next heaviest users. So saying everybody can use your product, and I don’t care if it’s a cracker. Yeah, we all eat crackers, but who’s going to be buying the most crackers? And that’s a problem too. And so they don’t really focus on who they have to attract, so they underestimate the sales cycle and sometimes they haven’t really defined even their product or their service.

And sometimes it is your customers who redefine your business because they tell you. You think Service A is what’s going to put you on the map, but it’s really a small service that maybe some customer asks if you can do, and you can say I can do it.

And then it’s really Service B that everybody wants. You have to be able to recognize it and do a pivot. And so it’s really understanding what you’re offering and really what you need to open your doors. And people think that it is very easy to get private investors’ money. And it is not, it is not.

They typically want to see that you already have users or followers or customers. If it’s a more pedestrian product, like I do a lot of work with food startups. They want to know that you have sales and that you have repeat sales. They want to know how often Whole Foods restock your item and, puts it on the shelf. Just getting it slotted once is not the whole story. It’s really users and repeat users and loyal users. So, underestimating the startup costs and the length of the sales site till you’re known in the neighborhood or till you’re known in the marketplace, if it’s a digital product.

Shubha Chakravarthy: So, on the one hand, you do have to have cash, and on the other hand you have to make sure that you’re really clear that what you’re offering is something that the market needs.

So before you spend all this cash, what can somebody who’s just starting up do to make sure that she’s on the right track, that it’s really service B that has the market demand and not service or product A, what are some of the basic steps that you would recommend someone take?

Donna Rockin: I just had a client do this too, he is developing a new digital product and he thought that one class of users was going to biggest and heaviest users, which is great, his target audience, and I thought it could be.  But then he did some market research and he said, you know, they really weren’t interested. And so now it might be that other mid-size business owners are a much better target audience

Also, they don’t think through of everything they need to get to make that first sale. But focus groups can be an invaluable tool and don’t use your family.

So don’t ask family or friends, but you can get focus groups together, especially if you belong to a workplace like 1871 or a WeWork workplace, or even in the neighborhood.

Not if you know them real well, but the church groups or other nonprofits, if you say, I want to come in here after you close the doors one day, they have a bunch of adults, not in your space, not anything. And you’ll say, we’ll have a pizza party on me, but I need 10 adults, 18 and older, or whatever your target audience might be.

And then you have a prepared script and have them talk about do they want what you’re selling. And they may not, but if you’re just doing it on paper, you can pivot and figure out, because maybe they like the germ of the idea, but it needs something else. It’s something that’s critical to its success is missing.

Shubha Chakravarthy: So it sounds like a, a combination targeted focus group, but also allows enough openness for them to say, well, my problem is really X, Y, Z. This is all fine and dandy, but what I really need is A, B, C.

Donna Rockin: Absolutely. Because one of the other problems that especially big tech ideas fail is that somebody invents an app and they think it’s the greatest thing since sliced bread.

But it takes a lot for people to give up what they’re already doing and how inconvenient or how much better is the new idea versus what they’re doing. For example, they have all these shopping apps, and maybe they were all necessary during the pandemic when nobody was leaving their house and Instacart and whatever other ones there are, was important.

But now that mercifully Covid is more in the rear view mirror a lot, you’re not afraid to go to the shop. Personally, I use some of those apps and delivery services. Some were better than others, and sometimes you got exactly what you ordered and sometimes it was not even close to what you ordered.

So you have to say, how much better is it than what I’m currently doing to solve the problem. Even with all those parking apps, sometimes you can have one or two or even three competitors years and years ago, and you can tell by the gray hair, I’m no spring chicken. Harvard Business Review did a big research study and it said if you were number one, two, or three in the marketplace, you could survive and really be successful.

But once you got lower on the totem pole, it was really near impossible to make it that effective. And if you’re making an app or something that’s digital or technical and you need lots of money, your investors want 10 times return what they’re giving you. And so it really better be a better mouse trap, not just a little bit better.

Shubha Chakravarthy: So we talked about customers, we talked about the idea, we talked about how you get funded, what all of this is really building up to is what’s your business model. And when you talk about a business model, the entrepreneurs I’ve talked to, they’re in two buckets.

One is what you could call your traditional small business or traditional business, which is to your point earlier, the local food business, the dry cleaner. But then there’s this whole other genre of entrepreneurs or startups where the business model is not known. It might be like Uber in its earlier stages, although not a unicorn, but you really don’t know and you’re working your way through it.

So what would you suggest? Is there a big difference in the journey in terms of where you start and how you proceed? Depending on whether you’re one of these defined model startups or an unknown business model startup?

Donna Rockin: I think sometimes they’ve more in common than you think. You still need to really define the target audience.

And personally, I love when I’m working with a client and there’s a huge target audience. If you think food, we all eat three or more times a day. Great thing. And depending on what the item is, can you eat it for lunch and eat it again at dinner. And I can’t think of the woman, but the woman who put underprivileged foreign women together, making the red threads, saffron.

She imported saffron and she is a Chicago woman and she made a big business because, I want to say they imported it from Iran, she put really people who were starving to work and it was like a good deed and it was a really good product. So that was saffron importing.

But even if it’s high tech, it’s how many people have the problem when they invented Spot Hero? Lots of people had the problem. If you were driving and you lived in a city, I don’t know if you have the problem in rural America, but in major metropolitan markets, parking –  I live downtown, trust me –  parking is a big problem.

And this is where the US Census Bureau and your fingers and the public library can do a lot, because those research librarians really want to help you and I will say the US census is a great document. It’s not the easiest document to you. So go a big library with a good research assistant.

But if you can find out how many people in America, or even in your test market, whether it’s Chicago or Illinois, have cars and you realize how many there are and you only need a really small percentage to start getting to break even, which is the first point where break even is where your total expenses equal your total revenues.

You’re not making money, but you’re not bleeding cash. It’s a great thing. So you have to estimate the size of the audience, and then you can talk to different age groups of drivers because maybe young drivers are much more likely to adopt an app like Spot Hero than older drivers who may not feel so, accustomed to downloading apps and using them and linking it to a credit card.

I was really embarrassed once because I think we had Zelle on the phone, but I hadn’t activated it. Or I had one of those banking apps. And I walked to, there’s a grocery store near me and it was last winter and it was dark already. So I didn’t take a purse. I took a phone and a $10 bill because all I was buying was bread.

So I get to the store and they only take credit cards. And I didn’t have one. But because I am an entrepreneur I convinced a man there with another man, in their early forties, late thirties. I convinced him to buy my bread and then take the cash and give him change of beer. So I left with the bread but shyer women maybe wouldn’t have approached total strangers, but it wasn’t like I was trying to rip ’em off.

I had $10, I just couldn’t buy the bread. So, sometimes early adapters are the group that you want to go over because that’s going to start getting you cash flow. But you have to decide who are the early adapters and for different products. Like the woman who developed, and she’s a Chicagoan, SitterCity, which is an app on how to find babysitters.

She needed people who were a little more mature, but young enough to be comfortable using technology and to be willing to trust that an app would provide a vetted babysitter.

And so, mom is probably in her late twenties or early thirties because, women are having children later. So then it’s a different targeted audience than the 18 year old who’s looking to score a cheap parking space. So you really have to understand that, when you’re opening up the floral shop, you don’t want to open one in a strip mall that has really incredibly low rents.

Because if you’re in a neighborhood where they can’t afford to buy impulse flowers, if you’re next to a laundromat and you’re next to maybe the post office or a currency exchange you’re not in a strip mall where people have  eight, nine, ten dollars to blow on a bouquet to maybe get out of the doghouse or just to say, I love you. You have to really understand what kind of foot traffic and what kind of area do they have the open to buy whatever it is you’re selling.

Shubha Chakravarthy: So a couple of interesting points on that, that I took away from what you just said.

Number one was this need to blend both the macro view, which involves a lot of wearing out your shoe leather, as they say, going to the library or online or whatever the case might be.

But then blending it also with the micro level of understanding how will this play out almost blow by blow in the real world when something is happening in real time and just leading to and including the transaction. To your point about the bread, and everything else.

Donna Rockin: That’s true. So as soon as I got home and told my husband the story he activated it and now I never leave the house without a credit card either, just because I’m of an era where you used to pay cash for small purchases, you weren’t going to bother charging.

Now I will say Covid really helped that along when people did not have change and they didn’t even want to touch money if they had change. So that was a really seismic shift that nobody could have foreseen.

Shubha Chakravarthy: So all of this brings up this interesting question of cash. You talked earlier on about the fact that you do market research, but you kept harping on and I think appropriately so the need to generate cash sooner rather than later for the entrepreneur.

Donna Rockin: This was a trick and I learned this when I worked at the entrepreneurship center, I was teaching a class that’s called Core Four, and it hinges on four components: your product and the marketing and the finances and the legal aspects.

But it was when we were getting trained on how to use the curriculum that the instructor said, “when you are doing cash flow”, and it was like light bulbs going off. Because honestly I had a graduate degree. I had had my own successful corporate communications and it never dawned on me to do a cash flow. They said start with the expenses first because you are more likely to know your expenses and then back into your revenues and then test, are the revenues realistic?

Can I really make those revenues? And it is better, especially if you’re going for investors money or even a bank loan –  It is better to say we will be in the red ink for X amount of months and then lo and behold, if it’s a real small business, a traditional one, but then in month five we get to break even and by six we’re slightly positive cash flow.

It is better to know what the bad news is and you’ll be more believable to a banker or an investor. Even if you tell an investor, look at how many years Jeff Bezos didn’t make money. But an investor or a banker would rather see a realistic cash flow that says,  because you have a reasonable number of sales.

I once worked with a candy maker and he made gourmet candy. Not only did the location he first wanted to pick was a terrible location for foot traffic. But it was gourmet candy. It was not inexpensive, but he had to sell a box of candy at $39 a pound about every minute I said that he was open.

I said, it’s just not realistic. You might have great foot traffic for Mother’s Day, Father’s Day, Sweetest Day, Easter, all the major holidays, Christmas, Thanksgiving. I said, but on a Tuesday you’re not going to be selling a $39 box of candy every minute. So it just wasn’t a realistic number.

So if you do your own cash flow, if you do the expenses first and then you do the revenue, you can back into a very realistic plan and then you should check it in the beginning. You should check it daily, your cash flow, and then weekly. But you should also compare, what you did weekly to what you anticipated you were going to do weekly.

Because the cash flow is usually done in months, a month at a time. But you can break down the current month into daily or weekly and see am I hitting my mark? Am I making my numbers? Do I have a time of day that’s really dead where I have to create users?

I know even there’s a game I play on my iPad and I swear they let you win.

It’s not a gambling game, it’s just a mind game. You have to solve problems. But I swear, It is easier to win on a Saturday afternoon when nobody’s playing except you than it is in the evening or any other time of day Saturday. Because really the games that are hard to solve and I swear, they give you certain tools that makes it easier to win on a Saturday afternoon.

And so if you have a real retail shop, you can think of promotions to get people in when the hours are slow and create foot traffic that way. And the same way with an app, like I said, I’m playing a digital game, but I usually do play on a Saturday afternoon Because I know it’s easier to win.

So there are even digital games, in digital products where you can realize in Spot Hero, I’m sure their rates are higher at peak hours than they are if you work the second shift and you’re coming home and you want a place to park at midnight, but you’ll be gone by, eight in the morning because you took a double shift.

So you can perk up your slow periods and for that you need to understand the consumer and how they’re going to react to what the product offering is.

Shubha Chakravarthy: So let’s do a deep dive because I think you’re hitting on something that’s really critical, which is the cash flow projections.

Can you talk about what are the biggest mistakes that you see entrepreneurs make in making their expense cash flow projections?

Donna Rockin: Sure. They usually don’t include the cost of money, even if you accept credit cards and most of the things are good, they forget that they’re going to lose 3% on every sale, or they forget shipping and handling or they underestimated them.

So those are some really big mistakes. The rent one is this is a good secret to know, and I learned it from, I guess it was an accountant, , and confirmed by a real estate agent.

So when you rent commercial property, unless it’s in the lease, that is exactly how you get the commercial property.

So if you want the walls painted, it better have been spelled out in the lease. If you want carpeting, you better have spelled it out in the lease. Even if you want them to put a stain on a cement floor, if you don’t need carpeting, but fixtures, air conditioning, what it says in the lease, they provide, that’s exactly what you get.

So if you need a buildout, if you do the buildout yourself, it’s just draining cash and you have to worry about and find all the vendors to do it – the electrician, the plumber, the blah, blah, blah. All right, it’s all on you.

If you work with your landlord and he does the build out, because he already has a lot of property, he’s a landlord and he knows the plumbers and the electricians and the carpenters and whatever it is, you need to get the build out.

You are better off paying more rent because rent is fully deductible and it’s deductible in the month that you spend it. If you pay $150,000 for a build out, you are on the hook and you have to hope that you stay in that location 27 1/2  years because that’s how long you amortize a buildup. So yes, you could pay $800 a month more in rent, but are you going to stay there 27 1/2 years if your business really takes off?

Or you can pay him somewhere to put in carpeting and paint and, and then rent. Pay more rent, but rent’s fully deductible. The other thing is with cash flow, and this is a big mistake too, is trying not to buy everything brand new. You’re better off leasing the equipment or maybe buying used equipment because if you lease it, there’s usually a service agreement, so they come and fix it if it breaks like a copier or whatever. You don’t need to spend all that money.

It’s one thing if you buy a small printer and it has a copier in it, okay, it’s a few hundred dollars. If it goes, it goes. But if you’re an attorney where you really need a high speed copier and you’re heating up your shingle, you are better off leasing one than buying one. And just even for the buildout, for furniture, for a store, et cetera, it’s the same.

And the same thing, even if you’re a high tech firm and you’re writing code, what can you lease? Can you lease the server? What can you not buy?

And sometimes it’s if you’re writing code and it’s really a brilliant thing, the garage is a good place to start out. Mom and dad, if they’re not charging you rent – look, it was good enough for Apple and it seemed to work out and a lot of companies start in a garage, so it’s not such a bad idea. Even if it’s a high tech company, if you’re writing code, you can or a shared office space like a WeWork or a 1871.

You don’t need a fancy office with an assistant and et cetera. So save cash where you can.

Shubha Chakravarthy: Other mistakes in terms of the both spending cash as well as making your cash projections?

Donna Rockin: They forget about insurance, which they do need, and it’s really important. Then another thing on the timeline, if you have a real storefront, they forget that they need the city to inspect it, to give you a certificate of occupancy.

And sometimes the city’s busy. Or like during Covid times when nobody was there, but even not a good thing when there is no pandemic. It doesn’t always go really quickly. And so just the time for certain things just to get stuff installed, because if you are doing a buildout, sometimes it has to be sequential.

It doesn’t always, sometimes it can be concomitant where they’re doing it at the same time, but sometimes some of the things are actually sequential. And so if one guy gets delayed, then everything else is held up because you can’t do the rest of it. So those are som things. Lie I said, insurance is something they forget.

Shipping and handling, just taxes, to save that money. If you’re selling a retail product and there are real taxes on it, then you better be submitting those taxes monthly to the state that you’re in.

When you have a professional service, think dentist. There’s no tax on the service. All right. Only on the materials. And so if he sold you a whitening thing, there might be sales tax on the whitening gizmo that he sold you, or the toothbrush, the electric toothbrush, not the little one they give you for free.

And it’s the same way with a mechanic. For a mechanic, there is no tax on labor, but there is a tax on the parts that they replace. Oh, also the other thing you have to understand is E P A guidelines, like what do you have to dispose of and how do you have to dispose of it? Speaking of the mechanic, how do you have to collect the spent motor oil and how do you have to get rid of it?

And so even if, have an online business and you really just have somebody else doing the drop shipping, if you’re charging sales tax, you better know how to get it to the stat where it belongs and collected because Uncle Sam does not like you to be late with that. He frowns on that and they do come and shut you down.

You can play the, “Oh, I forgot”. And I will say, when I lived in New Jersey and I had one of those things where, I did sales promotion and so sometimes I would buy things that I resold, if you buy a pen or a sweatshirt and it has a logo on it.

So I did have to submit sales tax, but most often I did not. Because it was just a service and it was consulting and I only gave them a script or a, a layout. The tax form was so confusing in New Jersey that they actually, when they would come write me back and say, “Oh, you own 15,000 in tax” when my jaw fell through the floor.

It said, “but if this is a mistake and you filled the form out wrong, then write the correction on the backside”  – after they just scared the daylights out of you. So everybody was filling, it wasn’t just me, it was a complicated form like that. Maybe it made the accountants rich. I don’t know. Like I said, since I usually never had sales tax, I really just filled it out monthly myself.

And usually it was all zeros, but once in a while when I did owe a couple hundred bucks. But that was it. On the back of the form, they said, oh, if it’s a mistake, just clarify it here. Points to New Jersey .

Shubha Chakravarthy: So your points are very well taken because I think as new entrepreneurs we tend to look at the big picture and forget all of these little things that can trip you up.

So one more point on that cash expense rejection, which I love, that you made earlier.  You said, you typically do your monthly projections on a monthly basis. What is your advice in terms of, is that appropriate? Should you be doing it on a weekly basis?

What advice would you give?

Donna Rockin: Well, I think when you’re first starting out and you’re still trying hard to get to breakeven, daily is fine. Once you’ve hit breakeven you might want to go to weekly or whatever because you’ll start seeing patterns. Like I said, even in the digital things, somehow they know Saturday afternoons nobody’s playing.

So I’m saying it doesn’t really matter if it’s high tech or low tech, it’s know what your cash flow is so that you can improve, even improve the good times, improve when there are sales are flying out the door. But you can also strengthen the weak times when nobody’s shopping or nobody’s buying or using your app.

Shubha Chakravarthy: So what I’m taking away is definitely early on, especially when you’re in the red on cash, you have to look at cash on a daily basis. We talked about the expenses, the lag, the kinds of things that we may, entrepreneurs may forget. What have you seen worked well for projecting revenues and what are some best practices as well as things to avoid in projecting revenue and cash inflows?

Donna Rockin: This is important and it just crossed my mind too. One of the things, if you have a company that makes something, and it can be something high tech, it can be drones, small drones, big drones, or you can have the flower shop, or you make sweatshirts.

Sometimes the cash that you need to make the product is well in advance of when you’re going to sell the product. So you need to have the cash on hand to buy the raw materials to make the product. Okay? So that’s very hard for startup companies.

So either you need a line of credit, and this is true when we just had Halloween. Halloween candy is made in April, May, and June in the summer, and it’s got a date on it that’s probably 15, 18 months . And do you ever notice on the day after Labor Day that Halloween candy is on the shelves?

And so they’re selling it in late August, early September, but they’re making it in April. So they need the sugar and the components and whatever the flavorings that goes into it in April. So if you’re a startup company, you either need a line of credit and you can get, sometimes you can get terms from your vendors where they give you interest free for 60 or 90 days.

It’s rare, but sometimes a startup can negotiate 45 days, 60 days, or a line of credit, or you can use what’s called a factor and not that many people know about a factor. But the way a factor works is you get an invoice. So say I am candy maker Donna, and I’m making candy that you give me an order in May or June, but you don’t want to take delivery, you’re not going to pay for it till September 15th, and you want the candy delivered, between August 31st and September 2nd.

Okay. But I have a signed purchase order. So a lot of times you can go to a factor in, say I have this purchase order from Food Chain X, and they’re reputable and they’ve been around for 50 years in the Chicagoland area. And so the factor will give you, sometimes between 90, 95, 96 cents on the dollar, and then he collects on that invoice after you ship.

But it gives you 90 to 95 cents. And sometimes if he collects very quickly, he might even rebate you an extra penny or two. But that helps with cash flow because you’re getting the money in June. Then to buy the rest of the raw materials to make the rest of the candy so that a factor can be a godsend because it turns into cash in a day or two, 24 to 48 hours and you have cash in your bank account, and then the factor collects.

Shubha Chakravarthy: And are there pointers or is there advice that you’d give in terms of how to pick the right factor, what to watch out for?

Donna Rockin: I would say if, if you worked with me when I was at an SBDC (Small Business Development Corporation) or even now, get reputable resources and we should talk about an SBDC. They’re small business development centers.

It’s called America’s Small Business and all you do is put in a zip code. and it will tell you within how many miles there is a Small Business Development Center near you and there’s many in community colleges and even regular four-year colleges and universities have them in them, because they’re good deals.

The government gives money to run them, the state government does, but they’re very reputable. Their services are typically no cost. And if they do have a class where they can charge for it, it’s usually a very moderate nominal fee. Like I said, when I used to teach Core Four, basically we covered the book, the manual and the refreshments.

The other thing talking again of our drone manufacturer, there’s another thing called a PTAC, which is a Procurement Technical Assistance Center.

And there’s a several of those in Chicagoland as well too. But they’re in every state, in every state of the union, I believe. I haven’t checked, in the smaller states but I imagine that there’s some, and they probably do Zoom meetings now, but what Procurement Technical Assistance Centers have are matching systems for you to get government contracts.

So if you make drones and there’s an agency, maybe it’s California Fire Department and they want to use drones , to check out the forest, to see they’re all quiet on the western front. They’ll give you a notification of when somebody is buying what you sell and then they’ll also help you fill out the competitive bid because the bids are daunting.

I’m not telling you no – they ARE daunting. The other thing that I love as far as finding money, and this is particularly good for high tech businesses, is SBIR and STTR grants. STTR is for Small Business Technology Transfer and SBIR is Small Business Innovation Research, and these are government grants.

They usually start at $125,000. So they’re not chicken feed. I do believe there’s somewhere in the clause of the grant that it says if the government really wants it, they can be your partner, but they virtually never do it. They might do it if it was something really high tech that would save America.

But so far I haven’t found one that they took money on. But they believe it’s good and they believe it’s good for Americans to have the science and technology. And so the first grant is $125,000 and the second grant’s like a quarter of a million. And so you can, if you meet your milestones, you can keep getting federal money.

And it’s a grant. It does not have to be repaid. It is not an SBA loan, it is not investors who are taking a chunk of your business every time you do a round of fundraising. And so it really can be a great gig.

And if it’s grants.gov is where you can go and read all the grants, but also say you have an idea and it doesn’t exactly match what the SBIR or STTR grants are looking for. It’s in the same realm, but it doesn’t specifically call for your invention. Reach out to the grant manager, the project manager, because very often they don’t include what you’re ripping up because they don’t know it exists. They don’t know that you’re working on that kind of technology. And they’ll rewrite the grant once you explain it to them.

And then just after they post the grant notice that the grant’s been modified. Then you will be eligible to bid for that funding. And this happens a lot in medical devices and medical research and just scientific research on chromosomal abnormalities or what not. Because, if they could figure out what really causes Alzheimer’s of some of these terrible diseases, Lou Gehrig’s disease but they don’t know that you’re working on it. They don’t know that you’re testing it on little mice in some laboratory, so it really is wonderful. And it’s free money. It doesn’t get better than that. A lot of people don’t know about it.

Shubha Chakravarthy: I love everything that you laid out. Clearly it feels like these are great sources. At the same time, it can be a little daunting because a), there’s a lot of work involved and b) I may not know how to write this in the most skilled way possible. What can an entrepreneur do to make it more efficient as well as improve their chances that they’re going to get it?

Donna Rockin: They can reach out to SBDC’s and they can see if they know trusted grant writers, or they can ask in the community around and set and see, especially at universities:

“Have you written grants? Did you use a grant writer? Did you like them? Was it affordable? A lot of times they can find grant writers to help them because it does have to be written a certain way. But also make friends with your grant manager, the project manager of the grant, because I swear I once got a huge grant for that because I really didn’t understand the grant.

It was the first time we were writing it. But, I called and asked questions because I wanted to make a good grant. And then they trust you. They know that you’re working on it, that you’re honest, that you want to do a good job, that you want to understand exactly what the deliverable is.

And oh, that’s another thing. When you do get grant funding, if there’s a snag, and trust me, there will be snags. Nobody could have seen Covid coming. But sometimes the snag is just, there’s a fire in the lab. You didn’t anticipate it. Even if you’re a university researcher, the lab burnt down.

Tell your grant manager or program manager sooner versus later, as soon as there’s going to be a deliverable issue because they really are reasonable, but they don’t like surprises. Trust me. They do not like surprises. But, and that brings us to something else, and I know it was in some of the notes that we discussed. Not only should you be friends with your grant program manager, but also when it comes to small businesses, any small businesses should have multiple suppliers because the time will come when you have a wonderful supplier.

They’re on first names, you know their kids’ names. They always deliver. Their pricing is good. The time will come when that vendor will have a mishap. They’ll have a recall, they’ll have a fire. They’ll lose power. They’ll be in Texas where they had the snowstorm and nobody, they never, it never snows in Dallas.

So have multiple vendors just so that when that happens, you have another resource that you can go to. The same way, and this is popular for all, even big high tech companies. You have an app or a way to make, service run more efficiently on your platform, et cetera. Have multiple customers, I like to say never have fewer than 10 or 12 customers.

And the reason is if you have three or four and you lose a customer and you might lose it through no fault of your own, they get bought out. You have a competitor A.  And you’re competitor B, and the buyout company is already using competitor A and they say, I’m sorry, when our contract’s up in four months, “Bye-bye. See ya”.

But if you have 10 or 12 customers and you lose a customer, say you lose 10% of your business, you might be able to replace it with another 10% client. Or you can get two 5% clients, or four, two and a half percent clients. It’s much better because you don’t want to have to lay off the staff that you’ve trained you don’t want to have to scramble and give up warehouse space.

And it does happen. And it happened to me too. Luckily I drank my own Kool-Aid, which most of your listeners may not know what that means. But, I had multiple sources and I lost one of my biggest customers doing advertising in sales promotion because they got a new buyer.

My buyer left, they got a new buyer and the buyer wanted to be able to go to New York and have a reason to do a business trip. So they canceled, even though they were in Chicago, they canceled me as their Chicago vendor, and it happened in a heartbeat.

Shubha Chakravarthy: Wow.

Donna Rockin: There’s a reason why I have gray hair.

Shubha Chakravarthy: I’m sure you handled it well. So this is outstanding advice, and one of the thoughts that it prompts as I was listening to you is, there’s this piece around grants where you have to provide information.

All of this comes down to keeping your financial house in order. So what are the top do’s and don’ts that entrepreneurs must have in mind to keep their financial house clean, both from the beginning and even as they progress their business?

Donna Rockin: Well, if you’re not great with numbers, there is nothing wrong with hiring to your weakness.

And you should always hire to your weakness. Don’t hire something, never hire somebody when it’s something you really do because you already do that. But if you hire to your weakness, you can get somebody who’s really competent, who really understands the time value of money. And if you borrow from here, it’s different if you borrow from there or if you, take out this kind of loan versus that kind of a loan, or giving up equity.

So if you need to do that, you need to have good cash flow. You need to know when you do break even. You should do break even in a good sales month because there’s seasonality to just about everything. So you should do break even in a good sales month and also in a moderate sales month and a really terrible sales month because that’s what I learned when I had my business.

We used to close for the week of 4th of July and the week of Labor Day, because we found we had no customers. Nobody wanted to see us, nobody called us –  we couldn’t give it away. That was when we shut down, everybody took vacation those two weeks. We all had two weeks of vacation. So it’s important that you look at your season and then in my business, just so that you understand, because I did advertising in sales promotion, if people hadn’t spent all their budgets, December could be blockbuster.

Oh my God. We couldn’t get it out the door fast enough. But if everybody spent their money by Thanksgiving, we were giving each other manicures during December, but you had to prepare for it. So I needed all the cash on hand because I could never anticipate was it going to be a good one or a bad one. I had to be able to pay for the electricity and the, wifi and the rent, et cetera, and salaries.

So I always had to be prepared. and you’ve only learned that with experience, but that’s why you need to pay such close attention to cash flow and to really look for the patterns. And the patterns will come out pretty quickly. Like I said, we only spent one July 4th looking at each other, and one Labor Day, and that was the first and only year and I was in business about 15 years and December.

We always just prepared for doing nothing. And most Decembers. Now we had some Decembers where we were so busy, but they had no money that we had to bill all of them January 1st of the new year. So that’s another thing that if you want to get business and you know they’re a good client.

These were Fortune 1000 companies. They knew they were going to pay me, but if they called me and they said, “Donna, honey, I have no money, but I really need it, and I’m going to need it shipped before New Year, New Year’s Day or Christmas Eve or whatever. But I can’t pay you till January, if January 1st was the Sunday, I can’t pay you till the second”, but that’s why you needed cash flow because you needed to have the money. Because I had to pay all the staff. We were doing the work.

Rockin Enterprises wasn’t going to save the money till January. So there’s that.

The other thing I want to point out, that’s a freebie and there are nine throughout America. Because I assume you have a national audience. I don’t know where they are, but if they’re in Chicago, there is one at Illinois Institute of Technology(IIT) at Adams near DesPlaines or Canal Street. IIT has a patent hub and the Patent Office of the United States Government has set up nine of these across America.

And I think even the one in IIT, it does work if you can work with them in Illinois, like Wisconsin, Indiana, like the states that surround Illinois, if you are low income and low income is considered 300% of the poverty guidelines. And the poverty guideline – I haven’t looked it up recently for 2022 –  but it’s somewhere around $12,000 for one person.

That means if you’re one person and you’re earning less than $36,000, you can have access to patent attorneys for no money. And all you really have to pay for are the filing fees and any drawings that you might need. Now, if you have to use an engineer to draw really acceptable drawings to submit to the patent office, those are on you, but that’s a fraction of the expense because otherwise you’re paying seven, 800 bucks an hour for a patent attorney.

And this is all done for free. So that’s the patent hub. It’s at IIT, you can Google it and if not, go to the United States Patent Office and look for, where the other eight are located. I happen to be on the board of the Illinois one, so that’s why I’m familiar with it. I don’t know where the other eight are located, but in major metropolitan areas.

Shubha Chakravarthy: That’s another fantastic resource. So one other thing, all of this stuff that points to is this need for potentially getting investor money.

What are the points that you would suggest an entrepreneur be really solid on when defending or presenting projections to potential investors?

Donna Rockin: They should show how much money they need and how they’re going to use it.

So the source and application of funds. And they should also show realistic projections of how this infusion of cash is going to help them grow and get more sales and get to that magic breakeven number and really propel them and, spend for advertising so that, people are aware of the product or the service.

And that’s what they really need who their target audience is, how they’re going to find them, how they’re going to convert them to sales, what the sales figures are, and how they’re going to use the money. Are they going to use it to hire more coders? Are they going to use it to get a better, server, service, et cetera.

And the first pitch should really only be about seven or eight slides. And should be very top level because you really just want to wet their whistle so that they come back and say, “Let’s make another appointment and let’s really go over this nuts and bolts”. And that’s when you can show ’em 15, 20 slides.

And also when you do a slide deck and you’re talking, don’t use a bunch of acronyms or a bunch of technology that is very germane to your field, but may not be germane to the rich private investor. Because if you do that and their eyes glaze over, they just tell you – it’s too soon, it’s too late. It’s not my space.

What they’re really saying is, “I don’t know what you’re talking about and I don’t want to look dumb, so I’m just going to say, ‘nah, not interested'”. So never use acronyms. that’s why I spelled out, small Business Development Center because you I’m trained.

And then if they do ask something that maybe you didn’t think of because they’re going to be your partner, they’re going to help you solve problems. It’s better to say, “I just don’t know. That’s a great question, but I’ll have to get back to you on the answer. I don’t know”. Because it’s more realistic if you admit that you don’t know something than to look really dumb and make up some kind of crazy answer.

The other thing is, when you’re in early rounds of, finance development, with VC’s, they all know each other and nobody wants a huge exposure. So if you really get one who’s really in love with whatever it is you’re doing, they’re not going to give you all the money, but they’ll get their other buddies to all go in.

And maybe they’ll all give you 25, 30, grand a piece. But that’s how you get the first raise because they don’t want to have all that exposure. But if they really think it has potential, they don’t mind if their friends make money either. And trust me, they all know each other. So when you approach a VC too, some are agnostic, some don’t care what you’re pitching, they just want to make money.

Others are very specific, like the food industry, they usually only do food. And there’s some tech ones that will only do tech, some are more forgiving and say, “If I can make money, I’ll do it. I don’t care if it’s a device, I don’t care if it’s an app. I just want to make money”. But don’t pitch to somebody, don’t go to a food one when you have an app because you, you’re just wasting your time, their time.

They’re never going to give you money.

Shubha Chakravarthy: Awesome. Thank you. So last couple of questions.

One, specific to women entrepreneurs, you’ve advised and met with a lot of entrepreneurs in your career, what stands out, if anything, in your mind, in terms of women entrepreneurs? What do they do well and what are things that maybe tripping them up or blind stop spots that they could be doing better?

Donna Rockin: The blind spot might be the sales mechanism, really understanding sales and the sales cycle and how to get, and this is men and women, both how to get an order done and sealed and on its way. So, sales and selling is not for everybody. And the quicker you realize that, the better off you’ll be.

Because if you can sell great, you can be outside of the business. and somebody else can do the numbers and the figures and be the insider. But if you’re the creator and you’re a brilliant coder, but you couldn’t really get somebody to close on an order, then you’d better start looking for somebody who can sell.

And oh, here’s, this is important. This wasn’t in anything you and I talked about earlier. Say you are a startup, and even the couple of people that started Apple, I would’ve given them this advice. It can be your best friend, it can be your relative, it can be your spouse, it can be your sister, your brother, your next door neighbor, your childhood friend that you grew up with since you’re five years old and you met in kindergarten.

If you go in business, have a business agreement, a buy-sell agreement, upfront while the honeymoon is on, and you’re in love with your partners, how you can buy each other out. And also agree to it that you’re going to use, especially if you’re 50 50 partners, when you start, that you’re going to use a third party independent arbitrator.

If you want to go after this next target audience and your partner really wants to go after some other one, agree that you have a third party who decides on what’s best for the business because it can be a spouse and you love ’em to pieces, but one day it’s divorce time. And then what are you going to do better? You know how to separate the business. Now while you’re in love and even schoolhood friends, you might stay friends, which is wonderful.

Okay. The schoolhood friend gets hit by a truck. They wind up regrettably, in the Great Beyond. You might not like their spouse or their family, and you don’t want to be in bed with them. So this way there’s an automatic mechanism on how you buy out the deceased partner. And that’s important and do it now while you’re in love with, your partner. So that is really important advice and goes without saying, have a buy-sell agreement and do it early on.

Shubha Chakravarthy: Any other things that you’ve seen women do well or could do better?

Donna Rockin: Sometimes, if they can take out some of the subjectiveness from something. So if they’re hiring people, if they can really ask open-ended questions and really get a sense of the feeling for what the person knows, what they can contribute. Because you really want to hire to your weaknesses, not your strengths.

And so, if they’re just like you, maybe not such a good hire. Usually they’re good though at making harmonious, offices and camaraderie. When I subcontracted, I subcontracted to a graphic design studio that was really almost all women and we all got along fine.

So, it’s just be aware and if you spot trouble, nip it in the bud. So if somebody really is not getting along with the group, cut your losses. Oh, this is important too, cut your losses immediately.  You might think to yourself when you’re hiring somebody, “Oh, we have a trial period. I’ll give you a 30 day trial, a 90 day trial”.

Keep that information in your head. Never utter it out loud, because if you utter it out loud, it might be construed as an implied contract. And somebody could come after you and say, “Well, you said I’d have 30 days”.

So think it, but don’t say it out loud. If they’re a loser, cut your losses immediately. And sometimes women are loath to do that just because we’re polite. We were raised to be team players, we were raised to be nice. No, you don’t have to be cruel about it. Just say, “This isn’t working out. I’ll pay you to the end of the week”. And then, “Bye-bye” .

Shubha Chakravarthy: Awesome advice. Thank you. So to conclude, what are the five things that you would suggest an entrepreneur do Monday morning?

Donna Rockin: Monday morning? Look at sales. That’s important.

Have an elevator speech ready at all times. Because you never know who a customer might be. It could be somebody who’s riding in the elevator while you’re going to go see another client, but somebody else who could buy whatever it is you’re selling.

We already said, hire to your work weaknesses. Watch cash flow like a hawk. The devil is in the details. So I’m not saying that you shouldn’t delegate stuff. You should, you can’t be doing it all, but know all the details. if you have to write standard operating procedures for all the different tasks as you grow like  shipping, handling, customer service, et cetera, have standing standard operating procedures for everything and make sure the people follow ’em.

Also this is important if you’re giving credit to anybody. It’s more important if you’re a small business, but even if you’re a high tech business and you’re going to start extending credit to big enterprise users.  If it’s a real name brand and they’re a household word and it’s a Fortune 100 or 500, you may not need to give them a credit application.

But for most other people ask for a credit application. And also that you want to be paid by ACH so it goes directly into your checking account at the office. But especially if you’re a smaller one, or your business is going after small and mid-sized businesses, you want to know how those people pay their bills.

And so if you ask for three other credit references, you’d be surprised how other businesses will tell you “Well, they always pay, but they’ve paid late, but they’ve never stuck me. I’ve been doing business with them, eight years and they’ve never missed a payment, but they always pay in 45 days” because it might be worth it for you if you can take ’em on and you want to build.

But if somebody says, “I’m thinking of dropping them because they’re such a late payer, or they write bad checks”, you’d be surprised.

And the same thing, even when you’re doing checking references and always check references, especially college degrees. I once worked with a man and he was so dumb. We had used a headhunter to find him. He was the head of sales and marketing and he was so dumb. I thought, I can’t believe he has a graduate degree from a fine state university.

And this is when people, now it’s true, they were a little more lax, but all I called was and said, “What year did he graduate and what year did he get his degree, because he said he went there for undergraduate and graduate”.

So all I asked was for graduate degree. The dates are certainly something that even now most places would tell you. And they looked him up and they said, “Oh, he was only here for a year and a half and he never finished”.

I couldn’t believe it. And we paid a head hunter. So check things like that. It’s worth your while. Check references. Because a lot of times people do only want to tell you rank serial number. They worked here from this date to this date, and they don’t want to say more, but a lot of times you’ll get somebody chatting who will tell you a little more.

So it’s worth asking. The worst they can do is say “No, we don’t answer questions like that. They worked here from December  22 to October 24 and that was it”.

Shubha Chakravarthy: Donna, this has been eye-opening on so many levels. I really appreciate the time that you have taken to share all this knowledge and insight with us and I look forward to many more conversations in the future.

Thank you so much for your time.

Donna Rockin: All right. Thank you. It’s been a pleasure. Shubha. Good luck to you