3 Small Business Mistakes to Avoid
A brief, but insightful article by Jeff Bevis on Forbes.com had some nice points. Here are some of our takes on his article.
To say the United States has many small businesses would be an understatement — according to JP Morgan Chase & Co., more than 99% of America’s businesses are included in this category. Collectively, they contribute $5.9 trillion dollars to the economy every year.
99%…$5.9 trillion…the numbers don’t lie. If you’re selling B2B, that’s a lot of market share to go after. There are over 28 million small businesses in the US to talk to about your products/services. Even if we were living in the worst economy in history (which we’re not), there is a huge opportunity there. Sure, the marketplace is competitive, because those 28 million small businesses are also trying to capture that $5.9 trillion. Why not take a Blue Ocean Strategy approach to the market. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. A blue ocean is an analogy to describe the wider, deeper potential to be found in unexplored market space. A blue ocean is vast, deep, and powerful in terms of profitable growth. In contrast, most companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, profits and growth are reduced. Products become commodities, leading to cutthroat or ‘bloody’ competition. Hence the term red oceans. With all those small businesses, you start to see patterns.
Small business appeals to a lot of people, but it takes hard work and drive to succeed. During more than 37 years in small business and franchise environments, I have seen more successes than failures, but near all of those failures could have been easily avoided if the business owners had conducted the extensive planning and preparation required to thrive.
Jeff’s article indicates what he has experienced and it is true to our experience in many cases. Statistically, you would think that he would have seen more failures than successes. Each person’s experience is different, but professional people tend to get more wins than losses regardless of the game.
Make Sure You’re Ready
To prepare themselves for the unexpected, startups should secure sufficient working capital and have a reserve source ready should things not go as planned. Creating multiple growth scenarios that each consider differing expense, revenue and growth capital levels can help prepare for the future no matter what growth trajectory the business takes
Be prepared for the unexpected.
It depends on the business. We’ve had many clients that started their companies with nothing but an idea and have grown them step by step to multi-million dollar businesses. The first capital you might secure might just be your time, rather than cold hard cash. You might not have enough for a reserve. It would be beneficial to have multiple growth scenarios, but you might only have time resources for one, maybe two. Establish one growth scenario, if it’s not profitable, cut your losses and move on. You don’t have to start your business in debt to have a profit later. You don’t have to secure capital first as some claim. It’s faster, but it’s not absolutely necessary. As far as being prepared for the unexpected, it’s not always possible. We would word this differently, “expect the unexpected” and deal with things as they come. You can anticipate everything, just work the problem and don’t make it worse by guessing. (Gene Kranz shoutout)
Here are Jeff’s 3 Small Business Mistakes to Avoid:
1. Not Knowing Your Partners
2. Not Having a Business Plan
3. Expecting Instant Success