Starting your own business is one of the most exciting and fulfilling things you’ll ever do. But is is also scary, we’ve all heard the statistic that most new businesses’
will fail within the first five years. Why is this, and how can we as business owners avoid this all to common fate? While there is no “magic bullet” or secret that will
ensure a businesses’ success. There are 4 common mistakes that every business owner should be aware of. While avoiding theses will not guarantee success, making
these mistakes almost certainly guarantees failure.
Starting Your Own Business
No or bad foundation.
We’ve all heard this piece of advice before. Building anything requires a solid foundation, but what exactly does that mean? Well, without a solid foundation, even
the sturdiest building will crumble. Likewise, when you are starting your own business, it’s important that it is build on a sound foundation. While you may be able
to start a business on a week foundation, growing the business is nearly impossible without a strong foundation.
So how do we get a sturdy foundation? 3 main ways.
1. Experiential Foundation – Having experience or expertise is a field is always a good foundation for business.
An electrician is a good example of someone who has experiential foundation. The electrician gets their basic
training at a trade school, then goes on to an apprenticeship with a more experienced electrician, and eventually
becomes a master electrician. Having gained the experience and expertise of a master electrician they now have
a solid foundation on which to start their own business.
2. Mentors – Having a role-model take you under their wing is one of the best ways to learn the ins and outs of a
business. Successful people are often times more than happy to help you learn the business. Having a mentor lets you “peak behind the curtain” into the inner
workings of the business. Learning from others mistakes instead of making them yourself.
3. Standardized Foundations – Following a standardized plan is probably the best known and most popular way to start a business. By using a standardized
process, you are using the tools and techniques that have been proven to work by others in the industry. Standardization, includes following a step by step guide
or “blue print” that others have successfully used to build a business along with real time help (or mentoring) from successful entrepreneurs. Many online
businesses’ use this approach. Using a standardized guide is one of the best ways to utilize the experience of other successful people in your own business.
Starting Your Own Business
We live in a society that values instant gratification. We want what we want and we want it NOW! This is a recipe for disaster in business. Delayed gratification
is key to long term success. This can be a hard lesson to learn, there will be times, especially when you are just starting your own business, when you look at all
the time, energy, and expense you put in for very little (or no) return. This is the point where you determine your
success. Giving up when things get tough insures only one thing, failure. Successful people look at this as an
opportunity to take a step back, evaluate what and how they have been doing things, and ask others for advice
or help. Often we are so deep in the forest that we lose the trail.
Common unrealistic expectations involve time, effort, and money.
Time – Most people vastly underestimate the amount of time required to start and run a business. Typically, people are looking for a way to make some extra
money outside of their “regular” 9-5 job. This means nights and weekends, except for football Sundays, Tuesday night softball practice, Friday night bowling
league, and the kid’s soccer game on Saturday. So if you are looking for something that will fit nicely into a schedule like that, I have the perfect thing. It’s
called a hobby. And if you treat a business like a hobby, the business will pay you like a hobby. But wait you say, what about all of those Business opportunity
ads saying I only need to spend 5-10 hours per week? The ads show people wintering in the Bahamas and summering at a lake house. While those people do
exist, (although they probably work more than advertised), you are just getting started, and no one starts out at the top.
Rule of thumb – It’s going to take you twice as long for you to
become half as successful as you imagined it would.
What to do about it – Set aside a dedicated amount of time for your business every week. DO NOT DEDICATE EVERY FREE MOMENT TO THE BUSINESS.
This is a sure way to get burnt out and quit. Find something that fits into a reasonable schedule and then stick to it. Something like this, after work I’ll come home
relax and have dinner with the family, after the kid’s go to bed at 8, I’ll work on my website until 10 and then it’s bed time. Saturday is my day off when I go to the
kid’s soccer game and then have date night with my spouse. Sunday morning I’ll dedicate 2-3 hours to the business with Sunday afternoon available for football,
yard work, or just relaxing. What have you given up? Probably some TV and maybe some beer drinking time with your buddies. What are you getting in return?
Well, in five years, your buddies may still be playing softball, will probably still be bowling and drinking beer, but by then you could have a full time business that
not only pays your bills, but allows you to quit your 9-5 job and really spend time with your family.
Effort – Similar to the time problem, people vastly underestimate the amount of effort involved in starting a business. Coming up with a great business idea is just
the beginning. Implementing that idea is a whole different story. Depending on the type of business you create, issues as diverse as licensing requirements,
background checks and tax implications are issues that require a substantial amount of time and effort to
resolve. In addition, if you are interested in a traditional brick and mortar business you will be dealing with
landlords, utilities and city services. All of which need to be set up (including security deposits) before
you can generate your first dollar. Much of this hassle can be avoided by starting an online business, while
there is still a lot of effort involved, it is much less regulated that a traditional business.
(you read my review of my #1 rated online business here). Additionally, even online businesses’ require a
certain amount of effort in order to build websites that can generate both traffic and sales.
Rule of thumb – It will take 2-3 times the effort you had
anticipated in order to get your business started.
What to do about it – Go in with your eyes wide open. Connect with others in the business who have been successful, Ask questions. Remember that you
are not suppose to know all the answers and that everyone was new to the business at one time. Choose a business where you can get the support, training
and mentors you’ll need. This will greatly increase your chances for success.
Money – The amount of money it takes when starting your own business is easily underestimated.
While many expenses can be estimated, (Lease costs, legal fees, taxes). Other expenses such as advertising
and promotion, staffing expenses (salaries and benefits), as well as unexpected expenses, can and will
quickly deplete your startup budget. As discussed earlier, you need three elements for a successful business, time, effort and money. Think of money as the common
denominator. The more money you have, the less time and effort you will need. In other words, with money, you can hire people to do the work you that you would
otherwise have to do yourself. On the other hand, having less money means that you are putting more time and effort in yourself.
Rule of thumb – If you have a substantial amount of money to invest in a business, it will probably cost 1.5 – 2 times
as much as you anticipated for start up costs. If you have less money, but plan on doing more of the work yourself, you can expect
the costs to be 2 – 3 times what you anticipated.
What to do about it – Be prepared, always have a healthy cushion included in your budgets. Underfunded start-ups rarely prosper. Another strategy is to choose a
business with low start up and working capital costs. With the advent of the internet, you can now start an online business with very little money (even free). Even if
you don’t have a product to sell, many companies are more than happy to pay you a commission for selling their product on your website. This is an especially
effective way to starting your own business with little to no money. All you need is a website (get a free website here) and you can start making commissions selling
virtually anything. Don’t have a product to sell? This company will provide you one.
Starting Your Own Business
Lack of, or failure to follow a marketing plan.
It doesn’t matter what product or service you are selling, how you market it will determine your sales and ultimately the success of your business. Using the correct
marketing techniques is key to setting yourself apart from the competition. Let’s say you’re selling blenders, you could have a website called “Best Blenders” and on
the website you can show all the different blender models. Each blender had a picture, model number and
description of its features, and below that a “Buy Now” button. OR, your website can group the blenders
into categories, from the basic designs for people who are budget minded all the way up to the heavy-duty
professional blenders that a serious chef would use. You could invite reviews from people who have used the
various models. Include a free recipe booklet with every order. Offer free shipping with every order of $50 or
more. A 5% discount if they “like” your Facebook page. A 10% discount on future orders if they sign up to receive
your emails. Etc. You can see the difference in approaches, without a marketing plan, you are essentially throwing
up a website hoping to get sales. With a marketing plan, you are not only setting yourself up for future (ongoing) sales, but you are offering the customer added
value when ordering from your website.
The 3 Key Elements of a Good Marketing Plan.
1– Develop a unique, value added approach to whatever you are selling. Don’t just sell blenders, sell blenders “at the lowest prices on the internet”, or
“satisfaction guaranteed”, or “free online cooking class with every order”. You get my drift, anything that sets you apart from the competition or adds value for the
customer will increase the chances of a sale.
2- Actively engage your customers, don’t just sell them. No one likes the “Hard Sell”, so use a softer touch. If you’re selling blenders, how about a page on
your site offering the healthiest smoothie recipes? I’ll bet that at least one of your blenders is specially made of smoothies. Make a video showing how to make a
couple of the smoothies, use the blender, show all of the different features. The more you can engage your customer on your website, the less chance that they will
look for a better deal somewhere else.
3- Build a relationship with your customers. Just as no one likes the hard sell, people are naturally more inclined to buy from someone they like. Be that person!
Encourage people to ask questions and leave comments. BE SURE TO RESPOND!!! Build a relationship with your customers, give free advice, tip and tricks about
your products. Encourage them to join your email list and offer them something of value in a newsletter. Doing this consistently will make you the “go to” person
when they new anything concerning your products. (Note: This is especially important if you are just starting your own business)
Starting Your Own Business
2– Not setting appropriate and measurable goals. It’s very important that we set appropriate
goals for our business, too often, what seems like an appropriate goal is not really a goal worth
attaining. For example, lets say we set a goal to have sales increase by 10%, and our marketing
plan is to implement a new email marketing campaign in order to get that 10% increase. Now,
we offer an incentive for people to join our email list, they get a 10% discount off their order if
they sign up for our email club. Now, on the surface, this looks like good marketing . It certainly
fits the criteria, there is a (measurable) goal of a 10% increase in sales and a strategy to get to that goal. The problem comes in when we dig into the numbers.
The cost to get the email list, while a 10% savings to the customer, is actually a 20% reduction in our profit margin (assuming that we purchase the blenders
for $5.00 and sell them for $10.00). Additionally, there is an added expense to compiling, maintaining and sending out emails to the addresses we have
collected. Not to mention that these are blenders, and how often does someone buy a new blender? So when it’s all said and done, while we may have
increased our sales by 10%, our profits can actually be lower because of the costs associated with the additional sales. So, how about this goal instead.
We want to increase our profits by 10%, and the way we are going to do that is through online marketing. This time we will still offer a 10% discount,
but it will be for people who “like” us on Facebook. It is still costing us 20% of our profit
margin, however, now you can post something to your Facebook page, and it will not only be seen
by that customer, but by their friends as well. With the average Facebook user having 338 friends,
you have expanded your customer base, with none of the time and expense associated with email.
Assuming that one of those 338 friends is in the market for a blender and likes your Facebook page,
you are now marketing to 338 new potential customers. As you can see, you are leveraging each sale
exponentially. Now when we look at the numbers, our sales and more importantly, our profits will
have increased with a minimal increase in costs.
What to do about it – Evaluate and adjust. Don’t ever stop evaluating and fine-tuning your marketing
strategies. Just because a marketing strategy has worked for the last 5 years, doesn’t mean that it will
work for the next 5. Times change, technology changes, tastes change. Sticking with an outdated marketing
strategy just because it worked before is a sure way to get left in the dust by your competition. Constantly
evaluate your competition, if you’re not familiar with what and how they do things, you’ll never be able to
distinguish yourself and your product. Network, network, network, go to trade shows, join online forums,
ask questions, give advice. The more you can be involved in your industry the more ideas and strategies you will have to choose from. Finally, always remember
that when your do change or fine tune a marketing strategy, ALWAYS have a system in place to evaluate the effectiveness of the change. Implementing a plan
without a goal is just throwing something against the wall hoping it will stick. Conversely, having a goal without a plan is just hoping for something, and hope is
not an effective business plan.
Starting Your Own Business – 4 Reasons Businesses Fail
The American dream of starting your own business, being your own boss and having both the time and financial freedom that comes with it is alive and well.
In fact, with the internet, starting your own business has never been simpler! Please notice that I didn’t say easier. If there was an easy way to make a lot of
money, EVERYONE would be doing it and it would not remain lucrative for very long. If you are looking for a way to make a lot of money with little effort,
my advice is to buy a lottery ticket and I’ll wish you luck. But if you want to be in control of your future, and are willing to put in the time and effort, there is
a huge potential right now with the internet. While there are many opportunities available, there are also a lot of scams, so do your research. Starting an
online business does not need to cost you a lot of money.
“Successful people do what unsuccessful people are not willing to do. Don’t wish it were easier; wish you were better.”
— Jim Rohn
Thank you for taking the time to read “Starting Your Own Business – 4 Reasons Businesses Fail”, as always, I’d love to hear
your questions, comments and feedback. As well as any recommendations or suggestions you may have.