Archive for March, 2009

“Most businesses fail in the first 2 years”
March 24, 2009

You’ve heard it:  most businesses fail in the fist two years.  Have you ever wondered why?  

The conventional thinking is that businesses fail in the first two years because the capital they have when they start trickles out of the bank account at a rate that exceeds the capital coming in and after two years, there simply is no more money.

But the truth is much more encouraging.  Most businesses fail within the first two years at one of two points:

– They fail in the first year:  this is the time spent earning new business, finding new customers, and more importantly it’s the time spent getting processes in place so that margins can reach their fullest.  A diner needs time to figure out how much fish to order on Wednesday and how many vegetables to buy on Monday so the food doesn’t go bad before it can be sold.  A consulting firm needs time to get contracts, do the work, and get paid.  A wholesale business needs time to market itself to the right segment and earn their trust.   Even with little capital to start, you have about a year to find a “bouyant” level in which to run your business.  Much longer then that and your new venture will be on a path that is not easily reversible. 

They fail in the second year:  this is when the challenges of the first year have been met well enough to keep you in business. What now?  Expansion, growth.  That’s what.  After you work your way to survivability, you have about a year to go from “startup breaking even” to “profitable enterprise.”  True, some companies raise enough cash to survive for half a decade without making a penny, but that probably isn’t you.  Instead, you now have a business that has it’s processes and procedures down pat.  All you need now is significantly more business to scale your operation in a way that if one of the customers you spent the first year woo’ing goes somewhere else, it isn’t the end of the world.  

When you write a business plan, it would be wise to put in some goals and benchmarks for the first two years.  Any longer term then that is a waste of time since your business is going to look a LOT different in 24 months and there is no way to know what changes lie ahead.  But you need to plan out how your going to go from “surviving” to “sustaining” (Year 1) and then how you’re going to go from “sustaining” to “oh boy…we may be on to something here!”.

Advertisements

Rule 26- You will not fail. You will not fail.
March 11, 2009

One of the pivotal transition moments when things go from “idea” to “reality” is when you are no longer “thinking of” or “brainstorming” or “planning” but rather you are doing.  And when you look up and that has happened – and that’s exactly how it will happen, you’ll notice one day that things have changed – then you will be at a point where what you are doing becomes very real.  

The more “real” it becomes, the more you have invested and the more you have to lose.  Each ounce of effort, each late night coding and each cold-call and each investor meeting mean you’re that much more invested in your mission.  

At that point, this rule here will be of the utmost importance:  You need to tell yourself, over and over and over until you believe it that you will not fail.  Like a guilty felon has convinced himself of innocence long after he’s been convicted simply because he’s told himself over and over that he didn’t do that of which he was accused.  You have to repeat the mantra: I will not fail.

Each of my successful ventures has had two things in common: the people around me worrying that I was setting myself up for disaster and me convincing myself I wasn’t.  No orders today?  It’s okay, we will not fail.  No financing in place for the next round of payrole?  No problem, we’ll think of something in time because we will not fail.  No money for rent?  Don’t sweat it, we’ll find a way.  How? Why?  Because I’m sure we will not fail.  

Foolish? Absolutely.  But leaving the comfort of someone else’s workplace to create your own has a foolish quality to it.  The key to going from “idea” to real, functioning, stable business is as much about attitude as anything else.  You have to know – KNOW – that no matter what happens, you will not fail.  Such an attitude will get you through rought spots, it will help you find creative solutions, it will help you devise winning strategies both short term and long.  Because if failing is not an option, if you KNOW you will not fail, then there is no direction to go but that which is the way of success.

For those who say, “But failure IS a possibility!” then I’d reply that you haven’t thought this through very well.  If you set off on some flight of fancy because you have a neat little idea and want to see what happens, then yes you may fell.  But if you plan (“the battle is won before it is fought!” – blahblah) and execute your plan and work at it with attention to detail and tenacity, then convincing yourself that you will not fail is easy.  

(As a note, the opposite of failure is not success, it is “the lack of failure.”  Treading water wherein you maintain the status quo is an acceptable alternative to failure if only because it gives you a chance to get up and fight the next day.)

Start chanting….