There are many things connected to small businesses that can easily enslave and destroy the hopes and dreams of even the most well meaning entrepreneur. If you happen to be independently wealthy or are planning to run a non-profit business, this list can be skipped. If not, here are my favorite 5.
You have to provide a good or service that is in need. Selling ice to Eskimos is a wonderful metaphor but I’d prefer to sell them parkas and space heaters. Have you ever seen a location where restaurants open and close on a regular basis? It always used to blow my mind that another restaurant would open right where one had just closed.
Visit competitors. Ask clients of your future competitors about their issues or concerns. Determine who your ideal client is and then ask yourself if there are enough of them in the marketplace to make your idea successful. Interview the owners of busineses like the one you are planning to get into and ask them what roadblocks they have run into and what they would have done differently if given the chance to go back in time.
If you are like most small business owners, you won’t have big time investors or deep pockets day one. You can’t afford to make big mistakes or the experiment will be very short lived. You have a feeling regarding how much money you’ll bring in during month or year one but you’ve never done this before so it’s kind of a wishful guess. Things like rent, advertising, utilities, insurance can get out of hand in a hurry.
Bootstrap as many things as possible regarding your location or office space. It doesn’t have to be fancy day one, it just has to be functional. Apple started in a garage and babies learn to walk by taking one step. Keep a very watchful eye on everybody who has a hand in your pocket. Utilities, trash, web builders, insurance providers, marketing contracts that are out of scale for your size of business are all examples of people who you think are helping you. I watched our trash expense increase 50% from one bill to the next and insurance yearly premiums increase by 20% or more with zero claims. Everybody and their mother is in the business of acquiring clients at a low price and then creeping their rates upward. They know a small fraction of their clients have the time to stay on top of their bills. You have to make the time, identify issues and take action. Call them on it and don’t be afraid to change providers quickly if you can get the same service or protection for a lesser cost. $100 a month is $1200 a year of your money.
You have zero business IQ when it comes to leasing, financing, bookkeeping, margins and insurance.
Use your brain. Understand what got you where you are is not going to be enough to get you where you want to go. Seek out some help for things that are totally over your head. Friends, Family, SBDC’s, other entrepreneurs, coaches and consultants are great sources of knowledge. Figure out what fits the budget and allows you to spend the majority of your time working on your business and not in it.
You've succeeded in building a wonderful fruit stand that competes with the fruit stand across the street with nothing to protect your business except your charm and smile.
A Moat is an invisible force field that protects your business from the outside. Maybe it’s a lack of competition, or a secret sauce…. Maybe it’s just too much of a pain in the butt to switch to your competitor or maybe you are the low cost provider in your niche. You must maintain the “Moat” in your business. You accomplish this by understanding why your business is so special and continuing to bulletproof it from the unpredictable. Worried about competition moving in? Make sure your brand is strong, clients have a special bond with your business and you’ve built a cash reserve to help you withstand any temporary loss in business to new competition. If you have a service based business, install non-compete agreements with all employees so stop them from taking their client bases across the street because they think the grass is greener.
You MUST be able to identify and hire employees who will do the required job for an EXTENDED period of time. Otherwise, you have just signed up for a groundhog day of hiring....training....firing....hiring....training....firing...
For the record, Bill Murray was stuck in Groundhog day for approximately 34 years.....and it didn't really take that long for him to start driving off of cliffs and taking a bath with his toaster...
This is a massive problem for small business and a major plateau point. Interviewees lie, their references lie or are at least non-truthful for fear somebody will cause them problems. Personally I think it’s the biggest sham going that a person can be a horrible person and employee, wreck a culture of a small business and then move on down the road to the next welcoming sucker while not fearing repercussions from the former employer through a scathing reference. Sneaky new prospective employers have often asked me if I would rehire said applicant. My answer is always the same. I tell them we are always desperately in need of good help and would never let somebody get away we felt to be valuable.
A) Start with a 1 page questionnaire asking them some questions about accomplishments, things they don’t like and morality questions. If they can’t fill out 1 page in less than 10 minutes, cut the interview short. If they are able to fill out the page, it gives you a roadmap during your interview. Over time, you’ll note what characteristics your most desirable employees possess and you’ll strive to find more people like them.
B) Identify red flags. Things like late email response to our interest, multiple postponements of the interview, inability to carry on a 5 minute conversation and not owning up to prior bad employment decisions with a clear path towards redemption are all bad. You can’t count on these people and you’ll just end up spending all of your time interviewing replacement after replacement instead of working on the success of your business. Don’t be afraid to immediately cut bait on a new employee if they begin to exhibit bad tendencies the first day. I’ve interviewed and hired countless people where we laid out their expected schedule during the interview and gotten them to sign off in blood. Within the first 3 days, their car breaks down, grandma dies and they need time off for doctor appointments for themselves and their cat. Just bail on them. It sucks.. I know. If you hang onto them, you’ll only waste time training them while they mentally mail it in and quit while poisoning all of your other employees who want to do a great job.
I will guarantee that the majority of small business failures are due to not being built on a strong business model. The business model is the life blood of your concept. If the Concept is the Brain, the model is the guts. If you don’t feed your new machine the right food, nothing is going to go well. What do you feed a business model? You feed it lots and lots of revenue and as little expense as possible. While the adage you have to spend money to make money is accurate, you have to make more than you spend.
Top level entrepreneurs review their model on a daily basis. They check their revenue and expenses and they spend countless hours checking and rechecking that their projections are coming to pass.
Business models are essential for financing purposes and they are the only way an entrepreneur will ever be able to make long term decisions regarding what to do to grow, expand, fix or sell their enterprise.
Models deal with all revenue streams, fixed costs, variable costs and everything in between. By building a model, it forces the owner to confront many important issues before they are in over their head and drowning in a sea of excessive expectations. Horror stories of owners spending 12 hours a day at work 7 days a week just to get the bills paid are the result of bad models. Entrepreneurs with failing models have completely missed the freedom train and are now on the slow boat to a lifetime of servitude.
Getting the business model right is an absolute must for any entrepreneur. It will act as your guide and your light in the darkness when things don’t go as planned.
If you have found value and solace in these blogs and would like to keep working on your business strategy to start or kick-start your stagnant situation, I've set aside some time in my schedule. Just click the link below and schedule some time. I'd love to hear about what you have going on.
To Your Success