Improving the odds of success
Starting and maintaining a successful business in today’s market remains as challenging as ever, yet we are seeing a record number of new start-ups all over the world. Whilst this trend continues to grow the amount of failed businesses or the business death toll also rises.
In the UK 4 out of 10 business don’t make the 5 year mark, with a third falling in the first year. In the US the odds are only slightly better with just over 50% of businesses making the 5-year mark. Lets put this into perspective; if you walked down your high street every other shop you come across won’t survive within the next 4-5 years.
There are many reasons for business failure but here are 3 of the most common.
1) Lack of planning
2) Poor Finances, both in the management and cash flow
3) incompetence e.g. business experience/poor decision making
These areas of failure highlight two fundamental mistakes many startups make, they either:
Fail to plan – e.g. have no business plan in place at all. Or they
Plan to fail – e.g. the plan they have developed was either something completed and left on the shelf, or the content in the plan wasn’t practical or achievable, in other words, it was full of holes
The good thing about this is…..we can learn from their failure and do better!!!
Now we know the main areas of failure, we have a starting point from which to build upon, but must ensure that like any good building we build our businesses from the bottom up e.g. getting the foundation correct first. In my opinion, there are 7 steps or key questions we must answer which are at the heart of our build and will ultimately reduce our chances of failure, these are:
Taking the time to understand our business has to be one of the key’s to a successful business. We can no longer afford to start a business at a whim or rush toward a business go-live date if we are not prepared, the results will be an unsustainable business and could be costly in the long run.
Answering each question provides the evidence and knowledge required to enable you to write a comprehensive and actionable business plan, without it you are simply guessing or learning as you go along (without any sustainable evidence)
What I am asking you to do is to test your idea, I want you to make sure that it is an achievable business from the outset, not a hobby or loss-making venture. Question 1) asks what is your idea? only you can answer that, but all the following questions are designed to test your idea, which means you will be required to go through this process for every business idea that you have. You can not write or use a business plan if you do not truly know if you have a business or not. Once you have tested it and concluded that you have a legible business only then should you develop a plan.
The Business Plan – one of the myths surrounding business plans is that its old fashioned and not needed anymore, or a useless document (there are many for and against arguments on google) but no builder worth his salt would build a house without a plan. In fact, any building, in any city large or small is built using a plan. Not only does it provide a clear picture of the end product but it also acts as a map for the many contractors working on the build. The principle of a plan is exactly the same when building a business, it holds all the necessary information pertaining the build and acts as a central point for investors, colleagues, partners, sub-contractors and anyone else involved in building your business. Once the business is up and running you can continue to refer to the plan to ensure that your progress remains on track. For more information about what a plan should cover seewww.7keystartupquestions.com – PROBLEM 1 SOLVED!!!!!
Poor Finances – The absence of finances in any business is a major problem, after all a business needs a good flow of finances to operate. The reason for lack of finances can be a number of reasons e.g. poor sales, lack of investment, poor decision making or overspending, regardless of the cause this must be captured and solved in your plan, you may need to revisit your pricing policy, or marketing strategy (YOU CAN START TO SEE WHY YOUR PLAN IS SO PIVOTAL)
Poor finances are not just the physical flow of money but many business owners don’t understand enough about their business finances and rely solely on external support. Whilst I appreciate the importance of utilising the skill of others (especially if this is not an area of comfort) however you need to know the basics. You need to understand the relative terminology e.g. to break-even, what it is and when and how it is achieved or your variable costs, and what makes them fluctuate. Understanding when to spend money and when not to is also key, and getting to grips with all the relative costs of your business. Many of us would not travel to another country without understanding the basics of the culture or language of the country. Getting into business is very similar, it has a culture and language that we must learn in order to operate, take the time to read, study and rehearse the business language. PROBLEM 2 ADDRESSED
Finally and by no means least, let’s address the third reason and arguably most contentious reason for failure – Incompetence. Many fail due to lack of experience in operating a business, what it takes and the behaviours you need to adopt in order to make it a success. Lets deal with the experience side of things first. So many great businesses have been birthed from a hobby or because a need/problem was identified and someone realised they could fix it. Whilst this is a perfect way to start a business, there must be an acknowledgement that this is new and therefore help is required. You may be excellent and have full knowledge of the subject area, but operating as a business is completely different, especially if you have been working for someone else all your life. Experience can only be gained in the doing e.g. you learn as you go along, however, to minimise the risk of failure, get a business mentor or critical friend (with experience) to help guide you, in other words, use the experience of others.
New business owners should evaluate the skills the business needs to succeed and evaluate their own skills to see if they are able to fulfill those skills, if not either buy those skills in (through the hiring of another individual or subcontractor) or re-skill in that area to ensure the business doesn’t suffer. Owning and running a business requires a whole new set of behaviours, some which may seem uncomfortable to us at first, but necessary in order for individual and business growth. Entreprenuers think differently than employees, they take more risks, look for opportunities and have to be more socialable in their approach. It is often good practise to participate in a psychometric profile of yourself to understand your own personality profile and that of an entreprenuer. Once you have identified the differences, positively plan to adopt the missing behaviours e.g. if you are naturally shy and reclusive but your business requires you to be bold and social, plan opportunities where you can change your behaviour, attend more networking and social events. PROBLEM 3 FIXED
Starting, owning and running a business can be one of the best things in your life, as the rewards it can bring are exceptional. You will have the opportunity to increase your wealth, your influence in the world and build a legacy. But so many have started this journey and failed for many reasons, whilst nothing is certain in life, lets learn from the mistake of others and go on to build the great businesses of tomorrow. For more information on the 7 steps of business or how to plan correctly see www.7keystartupquestions.com or www.helpintobusiness.com