Top 7 Myths About Starting a Business

Written by Jay Turo on Tuesday, February 19, 2008
Categories:

• Entrepreneurship

From our experience consulting to entrepreneurs, start-ups, and small businesses over the past ten years, we've gained much exposure to the realities of starting and growing businesses. We thought it would be interesting -- and hopefully instructive -- to lay out some of the myths and assumptions of aspiring entrepreneurs.

7. It Is All Dependent on Hard Work. Hard work is an absolutely necessary, but not sufficient, condition for starting and growing a business. It is the given, but without a solid business plan and compelling value proposition for customers and partners, all of the hard work in the world will be for naught. The world is filled with over-worked, over-stressed, and not terrible successful small business people who struggle not because of lack of appropriate effort, but rather for lack of appropriate planning.

6. If Your Product or Service is Compelling Enough, Customers Will Beat a Path to your Door. Unless you are building a business based upon intellectual property and/or technology that provides and creates such a competitive advantage and compelling customer value proposition, the early success of your business will be based as much on your ability to market and sell your product and service as it will on the product or service offering itself. Remember: in a capitalistic marketplace there is NO distinction between value and perceived value.

5. If Your Product or Service is Compelling Enough, Investors Will Beat a Path to your Door. Those that identify themselves as prospective investors in earlier-stage, small companies are mostly INUNDATED with investment opportunities. As such, no matter how good and unique your business opportunity, there is always a strong, initial prejudice AGAINST investment that needs to be overcome.

4. It Is All About You. The myth of the charismatic, "do and be everything" entrepreneur is just that -- a myth. Any and all companies of value are great teams much more than they are the by-product of a highly talented individual. The best entrepreneurs and business leaders inspire the mission, values and philosophy of a company by their own example. This inspiration is then communicated to all of the business' stakeholders -- employees, customers, investors, partners, vendors, and its wider community.

3. The Government Is Your Friend. We are constantly astounded by the regulatory and paperwork maze that a startup company needs to negotiate and constantly monitor to both start and maintain a business. It is a significant time, money, and energy drain that detracts from the main value creation intent of a new business. Our best advice in this regard -- as resources are available -- is to find competent legal and accounting counsel, to both advise upon and outsource the regulatory burden, so you can focus on business-building.

2. The Government Is Your Enemy. Having said the above, in the mixed economy in which we live, government revenue opportunities, on a local, state, federal, and international level, have never been greater for small business. While slow, meandering, and confusing to approach, governments have much to recommend them as clients and customers, not the least of which is that once sold, government clients pay well and are not bad debt risks. A somewhat trite but very important credo to remember when selling to governments, even more so than in business, is that "it is not as much what you know but who you know."

1. It Is Only Worth Doing If You Become the Next Google. The vast majority of small businesses will always remain just that -- small businesses. The odds of starting a business and have it become the next Google or a publicly-traded company are very, very small. While we would never discourage entrepreneurs for aiming for the stars, it is also important to have success metrics grounded in probability. An expectation of a minimum of 2years of very, very hard work with little financial return but with a lot of learning (and some fun hopefully as well) involved is a good starting point. From this first milestone, then and only then should there start to be an expectation of significant wealth-building. Find that balance between the long term vision and the Monday morning action plan -- and success, while not guaranteed, is very likely.

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About Growthink

Since 1999, Growthink's business plan experts have assisted more than 1,500 clients in launching and growing their businesses, and raising more than $1 billion in growth financing.

Why Businesses Fail ????

The 6 Untold Reasons Why Businesses Fail

Written by Dave Lavinsky on Thursday, March 6, 2008
Categories:

• Dave Lavinsky
• Entrepreneurship

There have been many articles written on the subject of why businesses fail, and most of them point to the same reasons, such as:

-Inadequate funding
-Bad location
-Lack of a well thought-out business plan
-Poor execution
-Bad management
-Expanding too quickly
-Insufficient marketing or promotion
-Inability to adapt to a changing marketplace
-Failure to keep overhead costs low
-Underestimating competitors

These reasons are widespread and no doubt cause many businesses to fail. However, the reason for a company’s failure is not always something so obvious. Here are 6 lesser-known reasons why a business might fail.

Why do these reasons remain untold? Simple. Most of the time, the business owner doesn’t realize that these reasons are what caused their failure, and consultants generally don’t ask the kinds of questions that would identify them.

1) Focusing on Short-Term Profits Rather than Building Long-Term Value

It’s important to be profitable, but NOT when short-term profits come at the expense of the long-term value of the business and the lifetime value of the customer.

Here’s a real-life example: In the late 1990s, there was a franchise of a national smoothie shop located in West Los Angeles, CA. At this store, smoothies sold for about $4. They cost only around $1 to make, resulting in a solid profit. However, certain ingredients, like mangoes and berries, cost more than the other ingredients, such as juice and frozen yogurt. Since juice and frozen yogurt were cheap, the franchisee put more of these ingredients in their smoothies and less of the expensive ingredients. By doing this, their profit margin per smoothie grew by approximately 20 cents, which seemed great… on paper. Unfortunately for the store, customers weren’t satisfied with the taste of the lower cost smoothies, people stopped going there, and the store eventually went out of business.

As you can see here, it’s important to consider the lifetime value of a customer. Repeat business is way more valuable than short-term profits. Saving 20 cents on a smoothie today will cost you big in the long run.

(Another great example of this concept is Google giving preference to relevant ads in order to improve the user experience, even though there are less relevant advertisers willing to pay a higher price per click.)

2) Ego Business vs. Business Opportunity

The foundation of a good business is a good business opportunity. As an entrepreneur, you want to fill a need in the marketplace. Unfortunately, many businesses are started solely to fulfill an entrepreneur’s ego (or, to put it less harshly, to satisfy one of the entrepreneur’s interests).

This can often be seen in the restaurant & bar industry, where too many entrepreneurs open shop because it’s a “cool” thing to do. Such businesses rarely succeed.

3) Life distractions

The best ideas don’t always come between 9 and 5. A person might have a great idea while driving, or in the shower, or while working out. It’s moments like these when an entrepreneur leaves behind the day-to-day tasks of running a business and gains a better perspective of the big picture.

Sadly, there are a lot of things that can disrupt a person’s home life. Illness, death of a family member, divorce, relationship trouble, and problems with a child are just a few of the many issues that can affect a person’s mindset. When things like this occur, moments of clarity are replaced by stress and anxiety.

Many entrepreneurial ventures depend heavily on new ideas and creative thinking, and when an entrepreneur’s head isn’t clear, business can suffer.

4) Bad feedback & white lies

People like spending time with friends and family.

Unfortunately, when it comes to business, friends and family members don’t always give the best advice. This is especially true at the birth of a business. Nobody wants to be a buzz-kill. No one wants to tell an entrepreneur their idea is bad, or their location stinks, or anything else negative. Most people are conditioned to be supportive of their friends and family regardless of the situation.

Plus, nobody wants to be wrong. Imagine your friend has an idea that you think is terrible. You share your objections, but the friend goes ahead with the idea anyways, and it succeeds. Now you’ll always be the naysayer that never believed in them. Nobody wants to be that person.

That’s why you’ll rarely get honest, objective business advice from friends or family members. And yet, oftentimes friends and family are the first people entrepreneurs turn to for advice.

5) Maybe the owner is just a jerk

There are a lot of great people in the business world, but there are also some jerks. And these jerks sometimes start their own companies.

A jerk, in this case, is someone who a lot of people can’t get along with. Maybe it’s because they’re a super-perfectionist, or they yell a lot, or they demand that everything be done in a certain way, or they constantly complain. Or maybe they’re annoying in some other way.

The key is that nobody -- not employees, customers, partners, suppliers, clients, etc. -- wants to give 100% for a jerk. Clients and customers will be turned off, and employees will start cutting corners. Most people believe that life is too short, and don’t want to spend their time working with someone they can’t get along with.

6) The entrepreneur never took the full leap

In most new business attempts, the entrepreneur never leaves their day job, or they create a back-up plan, or they have a job lined up in case the new business fails. In these cases, failure IS an option, as the entrepreneur has a safety net to fall back on. In cases where failure is NOT an option, and the entrepreneur depends on the new business to provide food, shelter and clothing, the business has a greater chance of succeeding.

There’s a great example of this concept in this recent NY Times article. Xiang Yu was a third century (B.C.) General in the Chinese army. He led his troops into enemy territory by crossing the Yangtze River. Then, in order to inspire his troops, Xiang Yu took some unorthodox measures. He burned all of his troop’s ships and destroyed all of their cooking materials. This left the troops with only two options: Move forward and conquer the enemy, or perish. The maneuver did not make Xiang Yu very popular with his soldiers; nevertheless, the troops advanced and ultimately emerged victorious.

Xiang Yu’s methods might be a little drastic in this day and age, but the moral of the story is what’s important. Author Anita Roddick has said that entrepreneurship is a matter of survival, and the truth is, if you’re not totally committed to your business, your chances for success will be greatly diminished.

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About Growthink

Since 1999, Growthink's professional business plan writers have assisted more than 1,500 clients in launching and growing their businesses, and raising more than $1 billion in growth financing.

• Want to ensure that your business succeeds?
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The Secrets to Their Success ???

The Secrets to Their Success? 25 Quotes From Famous Entrepreneurs

Written by Tom Zeleznock on Wednesday, March 12, 2008
Categories:

• Entrepreneurship

There is no simple formula for creating a successful business. Luckily, there is an easy way to improve your chances.

And that’s by listening to the wisdom of those who have done it already.

With that in mind, here are 25 quotes from famous entrepreneurs…

INSPIRATION

1) "If you can dream it, you can do it."

-Walt Disney, founder of The Walt Disney Company


2) "Business opportunities are like buses, there's always another one coming."

-Richard Branson, founder of Virgin Enterprises


3) “Capital isn't that important in business. Experience isn't that important. You can get both of these things. What is important is ideas.”

-Harvey Firestone, founder of Firestone Tire & Rubber Co.


4) “Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma - which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”

-Steve Jobs, co-founder of Apple and Pixar


5) “Find your passion… then it is no longer work!”

-L.A. Reid, co-founder of LaFace Records

TAKING INITIATIVE

6) “I had to make my own living and my own opportunity! But I made it! Don't sit down and wait for the opportunities to come. Get up and make them!"

-Madam C.J. Walker, creator of beauty products and the first female self-made millionaire


7) “The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”

-Nolan Bushnell, founder of Atari & Chuck E. Cheese’s


8) “The key is to just get on the bike, and the key to getting on the bike… is to stop thinking about ‘there are a bunch of reasons I might fall off’ and just hop on and peddle the damned thing. You can pick up a map, a tire pump, and better footwear along the way.”

-Dick Costolo, founder of Feedburner.com


9) “The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try.”

-Debbi Fields, founder of Mrs. Fields Cookies

HARD WORK vs. LUCK

10) “Genius is 1% inspiration, and 99% perspiration.”

-Thomas Edison, founder of General Electric (GE)


11) “I made a resolve then that I was going to amount to something if I could. And no hours, nor amount of labor, nor amount of money would deter me from giving the best that there was in me. And I have done that ever since, and I win by it. I know.”

-Colonel Sanders, founder of KFC


12) “Nobody talks of entrepreneurship as survival, but that's exactly what it is.”

-Anita Roddick, founder of The Body Shop


13) “Don’t ever let anyone tell you that something is too competitive. Once you subtract the people who don’t work very hard, or the people who aren’t as good as you, your competition shrinks dramatically.”

-Maggie Mason, founder of Mighty Goods


14) “Life is really simple as far as I’m concerned. There is no luck, you work hard and study things intently. If you do that for long and hard enough you’re successful.”

-Jason Calacanis, founder of Weblogs, Inc.

PERSEVERANCE

15) "When you reach an obstacle, turn it into an opportunity. You have the choice. You can overcome and be a winner, or you can allow it to overcome you and be a loser. The choice is yours and yours alone. Refuse to throw in the towel. Go that extra mile that failures refuse to travel. It is far better to be exhausted from success than to be rested from failure."

-Mary Kay Ash, founder of Mary Kay Cosmetics


16) “It doesn’t matter how many times you fail. It doesn’t matter how many times you almost get it right. No one is going to know or care about your failures, and neither should you. All you have to do is learn from them and those around you because all that matters in business is that you get it right once. Then everyone can tell you how lucky you are.”

-Mark Cuban, owner of the Dallas Mavericks, co-founder of Broadcast.com, founder of HDNet

GUIDING PRINICIPLES

17) “Entrepreneurs are risk takers, willing to roll the dice with their money or reputation on the line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of a venture and are answerable for all its facets.”

-Victor Kiam, owner of Remington Products


18) “The best reason to start an organization is to make meaning; to create a product or service to make the world a better place.”

-Guy Kawasaki, venture capitalist, CEO of Garage Technology Ventures


19) “A friendship founded on business is a good deal better than a business founded on friendship.”

-John D. Rockefeller, founder of Standard Oil


20) “An entrepreneur tends to bite off a little more than he can chew hoping he’ll quickly learn how to chew it.”

-Roy Ash, co-founder of Litton Industries


21) “I've been blessed to find people who are smarter than I am, and they help me to execute the vision I have.”

-Russell Simmons, founder of Def Jam


22) “One of the unique things we small companies have over the big guys is the ability to establish personal relationships. Big companies really can't do that. You read about effective organizations, learning organizations, lean and mean organizations, but small companies can be virtuous. We as small companies can have virtue because we as small companies are basically the embodiment of one or two people, and people can have virtue, while organizations really can't."

-Jim Koch, founder of Boston Beer Company


23) “Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you're generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don't make.”

-Donald Trump, real estate developer


24) “High expectations are the key to everything.”

-Sam Walton, founder of Wal-Mart

SATISFACTION

25) “I find that when you have a real interest in life and a curious life, that sleep is not the most important thing.”

-Martha Stewart, founder of Omnimedia

Want to increase sales ????

1 Simple Tactic to Increase Sales By 27%

Written by Dave Lavinsky on Thursday, April 8, 2010
Categories:

• Dave Lavinsky

I recently read about a smart tactic a Fortune 500 marketing manager used to increase sales by 10%.

I think you'll find it useful. And I think it's something you can implement right away to improve your sales. But what I'm even more excited to tell you about is what the manager did wrong. Which, when done right, should increase sales by even more, perhaps by 27%.

So, what did marketing manager, Brian J. Maynard, do when marketing his company's Jenn-Air and KitchenAid appliances?

He communicated, using statistics, how his products were superior. And his actions lifted sales and website traffic more than 10%.

"Consumers tell us that what they care about are the results -- ultimately how well the product cleans," Maynard says.

So, Maynard executed on the following plan:

Step 1: Conduct market research

First, his team conducted research to prove that its dishwashers outperformed the competition; it did so by 25%.

And to avoid criticism, they tested according to industry standards established by the Association of Home Appliance Manufacturers.

Step #2. Communicate results in consumer-friendly way

Rather than use jargon, or promote multiple findings from the research, he sited one statistic that was 1) easy to understand, and 2) most important to customers in their decision making process. This statistic was the fact that their appliances yielded 25% better results than the competition.

Step #3. Include the results within all the company's marketing messages

The "improved results by 25%" message was included in all Jenn-Air and KitchenAid marketing efforts including:

- Television advertising
- Search PPC and online display ads
- Website landing pages
- Print advertising
- Point-of-sale displays (e.g., stickers on machines in stores, in-store flyers & in-store banners)

The resulting 10% increase in sales makes sense, doesn't it?

By PROVING, using statistics, that their products were better, and by marketing this improvement in multiple venues, sales increased. All very logical.

So, clearly, if you can conduct research to prove that your products or services are superior, do so. And then tell the world about it.

But, I want you to correct what Maynard did wrong.

He failed to leverage the Law of Specificity which states that specificity encourages believability and credibility.

Specifically, Maynard stated that his products were "25%" better. If he would have said "24.7%" better, the results would have seemed more credible and believable to his target customers. As a result, I expect that sales would have jumped significantly more.

One great example of specificity is Ivory soap, which claims itself to be "99 44/100% pure." Not 99%. Not 100%. By being extremely specific, Ivory's claims are more believable.

So get specific.