Why businesses fail (part 2): they wait until the business opens to build an audience

We’ve all seen it. An entrepreneur opens a new business, but before long we notice it’s closed. The classic example is a new restaurant, often in a location that has been the scene of more than one failed restaurant before. They ran out of money before the business broke even. The time and money they spent is gone, and their lender probably has a claim on their home and other assets.

How does this happen? Second, they waited until the business opened to start building their audience. When they opened the doors or published the book, what did they hear? You know.

What should you do instead

Guy Kawasaki, one of the original Apple evangelists and an accomplished author, had this message for new authors: “The process of building a platform [audience] takes six to twelve months … If you don’t have a platform yet, you need to build one as you are writing your book.”

This applies to everyone. Find ways to build relationships with potential customers as soon as you have figured out who they are. Go where they hang out in the real world and meet them face to face. Meetup groups. Chambers of Commerce. Community events. Conventions. Trade shows (yes, there are still trade shows. Don’t believe me? Check out the convention center in Orlando). Look for opportunities to speak.

Go on-line and look for people who are posting on Twitter about the problems or opportunities you are attacking. Join relevant LinkedIn groups. Do your potential customers upload to Pinterest? Do bloggers write about your industry or your customers? Respond to their posts. Ask them questions. Try to move the on-line relationships off-line.

When you meet people, invite them to subscribe to your email newsletter or your blog. Keep them up to date on your progress. Ask them for opinions. If you have a product or a physical location, share pictures as things get built. Writing a book? Ask people to comment. Listen to them and make changes. Have a contest … give away a few autographed copies of your book, or meals at your restaurant, or tickets to your concert.

On launch day, you should hear more than crickets.

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727) 532-6800 or go online  to www.pinellascounty.score.org.

image courtesy of arpingstone via wikipedia commons license

Why businesses fail (part 1): they run out of money before the business breaks even

We’ve all seen it. An entrepreneur opens a new business, but before long we notice it’s closed. The classic example is a new restaurant, often in a location that has been the scene of more than one failed restaurant before. They ran out of money before the business broke even. The time and money they spent is gone, and their lender probably has a claim on their home and other assets.

How does this happen?

First, they didn’t have enough industry and management experience. It’s good to have a passion for a business, but if you haven’t spent enough time working and managing in that kind of business, there’s a good chance you will over-estimate your projected revenue and under-estimate the problems, delays and costs that will confront you. And you may not know enough to anticipate and avoid them.

What should you do instead?

• Start a business in an industry where you have work history and management experience.
• If you don’t want to stay in that industry, get a job in the industry that interests you. Yes, this will delay the launch of your new business, but it can also delay big financial losses and a lender having a claim on your house. Besides, once you get some experience in this industry, you may not like it either.
• Recruit a partner who has relevant industry management experience.

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727) 532-6800 or go online  to www.pinellascounty.score.org.

How will I know if I have a good business system?

According to Gerber, there four essential ingredients of a successful business system:

It creates the right impression for the target market. The impression is created by product, packaging, retail displays, advertising, signage, your web site, the way you and your employees are dressed, the way you answer the phone, the appearance of your parking lot … everything.

It appeals to the emotional needs of the customers and employees. People need to be heard, to feel that that what they do is important, and to be connected to something larger than themselves. Think about customers of Apple Computer and the employees who create the products for them.

It is organized to produce the best results with imperfect people. A great system turns ordinary people into extraordinary people. Everyone knows what their role is and how they contribute to the success of the company. The system has high standards. It works predictably even when the owner isn’t present. You do plan to take some time off, don’t you?

It has financial integrity. The business earns a profit, customers are charged correctly, employees and suppliers are paid on time, and investors earn a good return. All four groups – customers, employees, suppliers, and investors – get more from your business than they can expect from any competitor.

Start by choosing the right business and the right customers. When you start your business, focus on the entrepreneur role. It’s hard to stand out in a commodity business where prices and margins are low, and products or services are almost interchangeable.

• Look for an important problem or opportunity experienced by a lot of people.
• Reach out to customers who value what you do and will pay appropriately for it.
• Create a system that exceeds the expectations of these customers. Set standards that make your business stand out. Improve the system as you go to keep up with changes in customer expectations.

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727) 532-6800 or go online to www.pinellascounty.score.org.

Image courtesy of Jessa-Minnie via creative commons license.

Sell the business, not just the product – but how?

Find out what your customers want, and create a system that does the best job delivering it.

Several years ago, Michael Gerber wrote a book called “The E Myth: Why Most Businesses Don’t Work and What to Do About It”. Gerber’s message: the customers buy the total results of the business, not just the technician’s product or service. Sell the business, not just the product.

For a good illustration of this idea, check out our previous post.

A successful business is designed as a system that delivers consistent value to its customers and its employees – that gives them (and its investors and suppliers) more than they can expect from any competitor. After all, a business can’t deliver excellent products and services if its employees are unhappy, if the business isn’t making a good profit, and if its suppliers aren’t getting paid on time. It’s extra hard to deliver on time if your business is on ‘credit hold’ with a key supplier.

The system is a structured way of doing business that works predictably and profitably, and sets the business apart from its competitors. According to Gerber, the system produces results, and your people manage the system. This is true even if ‘your people’ is only ‘you’.

This is where you take on the third critical role of a successful business – the manager role. The manager organizes the business created by the entrepreneur. He or she wants to make sure invoices are mailed, customer payments tracked, supplies ordered and checked in, bills and employees paid, and all the other details that  both the technician and the entrepreneur would rather avoid are covered.

McDonald’s is well known as a franchise that depends on systems and operations manuals (an article in Entrepreneur magazine says the McDonald’s operations manual is 300 pages long). They make it easy to train new employees to deliver high quality consistent products and service. But McDonald’s didn’t start out as a franchise with more than 33,000 locations around the world.  It started with the McDonald brothers and Ray Kroc. Kroc was attracted to McDonald’s because of the innovative assembly-line process the brothers created.

Your business doesn’t need a 300-page operations manual to be successful. But it does need processes and structure, so your business can run smoothly without you being there. You do plan to take some time off, don’t you? If you’re the only employee right now, this is an ideal time to set up and test your system so it will be ready for your first new hire.

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727) 532-6800 or go online to www.pinellascounty.score.org.

Image courtesy of crschmidt via creative commons license