The Stupid Business – Fifteen Guaranteed Signs that Your Business Will Fail

There are smart businesses and stupid businesses. Smart businesses grow profitably, generate cash flow, increase in value over time, and operate without significant input from the founders. Stupid businesses aren’t set up to do any of these things, and are destined to eventually fail.

Following are fifteen signs that you might have a stupid business:

1. Marketing is not a priority. It is a sad but true fact that the most successful businesses do not always provide the best products or services. Often, less deserving businesses do better because they make marketing a top priority. If your business isn’t using at least seven different channels to get visible, then it is at risk.

2. You do not have a detailed cash flow budget and projections. Cash flow and profits are not the same thing, and the number one reason businesses fail – even those with strong potential – is because they run out of cash. It is essential to know how much cash you have, and how much you will need in the near and mid-term. Use a variety of different scenarios to assure enough cash in case of unanticipated problems or delays.

3. You aren’t developing sources of leverage. Businesses that last learn to operate without depending on the founders or owners. Smart businesses have standards, systems, and documented processes in place to provide leverage for owners and grow without depending on one or more key people.

4. You don’t have an “edge” in your marketplace. If you are a me-too business offering the same service, pricing, and products as everyone else, you won’t last long. You need some sort of edge that matters to your prospects and customers and keeps them coming back. Your advantage can include proprietary technology, product leadership, operational excellence, unique distribution channels, protected sources of labor or supplies, and more.

5. You provide lousy customer service. No business owner ever admits to providing lousy customer service, and yet too many businesses do just that. It is crucial to understand your customer’s expectations, know the “magic moments” when you can make or break the customer’s experience, measure results, train employees to delight customers, and put in place standards and processes to assure consistent service.

6. Your business lacks focus. Entrepreneurs love to start new things up, and this can be deadly for cash flow and customer perceptions. Know what you do well, and for whom, and be the best in that niche. Don’t have visions of grandeur. Don’t try to own the whole world. It is expensive to launch new products and enter new markets. For instance, a local boxing gym decided to get into kickboxing and mixed martial arts. They quickly lost their loyal base of boxing clients, without attracting enough new martial arts clients. Fortunately, the owner saw his mistake and regained his focus on boxing.

7. You don’t have the right people to succeed. Businesses need talent – “the right people in the right seats on the bus” as Jim Collins writes. If you don’t have systems in place to recruit, train, reward, and retain top talent, your business won’t last as long as it otherwise could.

8. You spend too much money on things that are unrelated to getting more customers and meeting their needs. Larry Ellison of Oracle used to say, “If you aren’t making it or selling it, what are you doing here?” Prune your business expenses to focus on those activities that add direct value to the customer. For instance, I worked with one business that had huge legal expenses related to contracts, trademarks, and patents. The business ran out of cash because of these costs. It would have been smarter to first test its products, use do-it-yourself legal services, and then spend money protecting its assets after proving market demand.

9. You don’t set a clear direction that every employee understands and embraces. Many business owners keep their strategy and goals in their head, without communicating clearly to employees. It is much more powerful to have a dialogue with employees about where you want to take the company, what it can do best, how it can make more money, and resources required to get it there.

10. Your fixed costs are too high. Constantly find ways to reduce fixed costs. Thanks to technology and the increased acceptance of contract labor, you can have a lean, mean, virtual organization and avoid huge overhead.

11. Your attitude is wrong. One of the biggest reasons businesses don’t last beyond the life of the original owner is because the owner cared more about ego, status, and maintaining control than on having a successful business. Strong business leaders surrender control to top talent, and place greater emphasis on bottom-line results than on their status or ego.

12. You don’t live by metrics. The best businesses pick a few key things to measure and constantly improve on those metrics. Examples include: number of leads, conversion rate, dollars spent per transaction, repeat business, and gross profit margin.

13. Your business fails the five forces test. Michael Porter devised the five forces model of competitive advantage. If you don’t have lots of control over your vendors or customers, face significant government regulation, work in a highly fragmented industry with lots of competition, and anyone can easily enter your industry then your business could be set for lots of trouble.

14. Lots of cash goes out before cash comes in. If your revenue cycle requires large outflows to generate cash inflows, then you are perpetually at risk of losses. For instance, imagine an event promotion company that needs to put down huge deposits in the hopes that lots of people will come to the event; that is a highly risky business and it is no wonder that so many promotion companies come and go.

15. You can’t easily predict future revenues. The best businesses know that $X in marketing will generate $Y in sales, every time. The worst businesses face highly unpredictable revenue streams. To bring back the example of the promotions company, it is extremely difficult to know on a given date whether lots of people will come to an event or not, especially events with large ticket sales the day of a show. Poor weather, competing events, local traffic jams, and shocking news can all ruin an event.

If your business meets even a few of the above criteria, I wish you the best of luck. You are going to need it.

Business Ownership – 4 Things to Consider Before Jumping Into Business Ownership

Are you making the income you desire?

Do you have the flexibility and freedom of time to do the things you love, such as spending time with your children?

Do you enjoy getting up every morning and going to work?

If the answer to any of these is no, ask yourself “why not?” Could it be time to find a new job or career?

70% of the adult population has a desire to be self-sufficient. Only 5% of them ever achieve this through business ownership. Why? Most people don’t know how to research business ownership and fear they may choose the wrong business.

Many people have misconceptions about business ownership. Some feel it costs more than it really does; some feel it costs less than it really does; some feel it is harder than it actually is; and some feel it is easier than it really is.

At one time you may have researched the cost of a McDonald’s, Dunkin Donuts, or Subway (these seem to be the most popular) only to discover you need a net worth of $500,000 or more. YIPES!!

Yes, many of the well-known franchises cost a lot of money. In one respect you are paying for the name. But also, restaurants, which most people think of when they think of franchising, are one of the most expensive businesses you can open.

Most people don’t realize; when you open a restaurant, YOU will own the tables, chairs, countertops, refrigerators, stoves, dishes, cookware, and the list goes on and on. Restaurant equipment can be expensive even for the basics. You may or may not own the land and building, but you will at a minimum be leasing prime real estate which can be costly. But, if you don’t have a prime location, then the restaurant will not do well.

On the flip side, relatively inexpensive home-based or van-based businesses are alternatives to expensive, well-known franchises. Since home-based businesses don’t require a visible storefront, people won’t know that you, the business or product exists. Home-based businesses are dependent on “sweat equity,” your time, money and effort required to advertise and build up a clientele.

For a home-based business you must know the best way to sell yourself and your product or service. Word of mouth can only get you so far. Advertising is expensive and many times ineffective. You must enjoy being out and about meeting people telling them your business is open and what product or service you are offering.

Once you have decided on your business, how do you ensure success? Most businesses fail because of poor planning, which generally leads to insufficient operating funds before the business makes the turn to profitability.

Planning needs to consider the price of the property (buying or leasing), fixtures required, technology required, marketing material creation, graphic designers, copy writers, inventory, research, the elusive operating expenses and personal living costs while the business gets off the ground.

Based on your demographic studies (you did do these didn’t you?) how long will it be before you break even and start taking home a salary sufficient to cover YOUR living expenses? Knowing what price the market will bear for your product or service will help you determine your break-even point.

How many employees will you need and how much will they cost? What will your utilities run? What about your real estate costs – lease or purchase, public building or home-based, fixed or mobile?

YIPES!!! How do you find out all this information? Research! Talk to other business owners. Find a mentor or a personal business coach.

How hard is business ownership? If you think you can quit your 50-60 hour per week job to open a business and only work 30-40 hours a week then you think business ownership is easier than it is.

Owning a business means you don’t have a traditional “job”, but it doesn’t mean you don’t have to WORK for a living!

No one will tell you business ownership is easy; if it was everyone would own a business. Business owners typically (1) find careers they are passionate about BEFORE they make the leap and (2) find the benefits of working for themselves outweigh their hours and hard work.

When you own a business no one makes you work long hours or put in the extra effort except yourself. No one can fire you for leaving work for a couple of hours to go see your children play baseball or soccer. On the other hand, customers can “fire” you if they expect you to be open or to arrive at a certain time, and you don’t.

Unlike a traditional job, when you own a business your income is dependent upon your ability to find and retain clientele, and the perceived value of your product or service. This is especially true for home-based or van-base businesses.

Do you have the itch to own a business? Is business ownership right for you?

You can only answer these questions if you know what you are passionate about, what your long term dreams are, what your strengths and weaknesses are, what your likes and dislikes are.

Business ownership can be scary; it can also be very rewarding. Research your ideas and plan appropriately to achieve the success you want.

Business Ownership – Finding the Right Business for You

Do you have the net worth you desire?

Do you have the flexibility and freedom to do the things you love? Family time, travel, charitable interests, sports, hobbies, etc.?

Do you enjoy getting up every morning and starting your day?

If the answer to any of these is no, ask yourself “why not?” Could it be time to find a new job or career? Should you get another job? Should you open or purchase an independent business or franchise?

The options are many, but where do you begin?

Most career decisions are based on emotions. Once chosen, you try to fit your life into that career. Wouldn’t it make more sense to fit your career into your life?

Many things play on our emotions when considering a career change: the level of prestige your career may bring; the name of the company or business; the income potential; love for the product; perhaps it’s related to a hobby. We call this an “outside-in” approach to finding a career.

Some perceive fast food restaurants as good businesses to own. Everyone wants to “own” a McDonalds, but no one ever wants to “buy” one. The busier the business, the more money they must be making.

Emotions prevent most individuals from seeing the “cost” of ownership. Fast food restaurants are certainly good businesses to own, for some people. But, owning a restaurant isn’t right for everyone.

To determine what is right for you, you must first determine what you want your life to look like and what you want your career to do for you. Determine your goals, needs and expectations and then look for a business or career that will help you achieve your goals. You must set aside your emotions and base your decision on facts.

Are you happiest when in charge or when working as part of a team? Do you enjoy dealing with people or would you rather work by yourself? Do you like diversity during the day, lots of activities or do you prefer predictability and consistency throughout the day? Would you want something to build, grow and pass to your children or to build equity for future sale? Where do you want to be in five years? Are you looking for security, financial independence or a place to put in eight hours, collect a paycheck and go home? We call this the “inside-out” approach to selecting a career or business.

After discovering yourself you might ask, “now that I know all these things about myself, how do I know if I should go find a different job or open a business? And if I decide on business ownership, which business will meet my goals, needs and expectations?”

Most people know what it means to be employed; however, most do not know what it means to own a business. Before taking that next job, you owe it to yourself to research all your options. How?

Use the “inside-out” approach to look behind the façade of businesses and learn what it means to live and breathe the business everyday. By talking with current business owners you can discover what the return on your investment will be, what the actual initial investment will be, or how many hours a day it will take to run the business, etc. This can be a daunting task with the number of businesses available today.

The biggest obstacle to exploring business ownership is an individual’s ability to keep an open mind. Many individuals dismiss a business based on the name or perceived product or service. So, you don’t want to open a residential or commercial cleaning business. Why?

Obviously, you don’t want to clean someone else’s toilets, right? You need to stop viewing a business as “a job” and start thinking of it as a “business” where you are the OWNER. You shouldn’t be the individual cleaning the toilets; you should be creating jobs in the community for others to clean toilets.

If all you want to do is clean toilets, why would you buy the business, just go work for someone else. If you want to increase your net worth, hire people to clean toilets and offer the best toilet cleaning service in your area. Job versus business, which is right for you?

Michael Gerber says in his book The E Myth Revisited, to be successful one must work “on” their business not “in” their business. Talking with current business owners will give you the best idea of the ins and outs of owning a specific business.

Are there risks to owning a business? Yes, of course. Is there more security working for someone else? Not in today’s business environment.

Will you be a successful business owner? Increase your odds of success by restricting your emotions and using an “inside-out” approach to finding your next perfect business or career.

Is business ownership right for you? Have you done some real soul-searching lately?

If you have difficulty finding your best options, there are resources available to help you identify your personal goals and help point you in the right direction to obtain the success you want and deserve.