Undercapitalization is NOT the biggest reason startups fail
Starting a small business, but you haven’t got a year or two of working capital saved up?
Join the crowd. Many small businesses don’t have a financial cushion, and we hear repeatedly that not being ready to finance several months of losses (or more) is why they fail. Don’t you believe it!
Truth Hurts:
Just because people are always telling you, “You should do this for a living,” does not mean you should.
Has anyone ever said, “… and I’d like to be your first paying client”? No? Then don’t listen to your friends, coworkers, or your brother. These people are admiring your talents, but not offering to get you off the ground.
I do want to sound harsh here, because you want to know the truth now, before you sink your cash in to float the losses. The biggest reason why startups fail is… Nobody wants what they are selling.
Ouch!
There is a bit more to it than that.
Nobody wants what they are selling…
- In the current location
- In the atmosphere created
- In this style, size, package
- From the particular salespeople
- At this time (or with really bad luck, in this era)
- At this price
- With their expectations
Any or all of these elements (and many more) can contribute. Bottom line: Right now, nobody wants the widget, nobody wants the service.
Help!
If it’s your startup, how can you save the business?
1. Decide what YOU want: until you know your own mind, don’t be surprised if customers won’t come along for the ride
2. Determine what the customer is trying to tell you about what he or she wants (better yet—needs)
3. Look at the list above: which elements can you change to bring your vision together with the customer’s? Can you:
Change locations?
Reconsider your firm’s name?
Update the look of your place? Change the look of your logo, your printed materials or Internet presence?
Vary the offering? Fancier? Simpler? More? Less?
Bring your staff along on this journey? Is it their attire or their attitude that needs changing?
Is your timing off in a simple way, such as needing to serve breakfast and lunch in an urban-office area instead of dinner, or in a big way, like no one seems ready for what you offer? Can customer education bridge the time warp and bring customers forward?
Raise or lower prices?
Bring expectations in line with offerings, by continuing to fine-tune each element?
4. Bring it all together: your Vision, their needs, your execution of each aspect of the business, until the customer wants what you are selling.
So simple? Not quite. This is hard work. An investment of time, money, and oh, yes, really hard work. Get help with this if you can. C’mon, did you think you could save your business in an afternoon?
It’s Never About You. It’s About Them.
Whoever first called quitting your full-time job with a happy, auto-deposited salary to become an entrepreneur “working for yourself” was full of baloney. Yes, folks, baloney.
Are you a small business owner or a wannabe? Let me introduce you to your new boss—the customer.
If you think your old boss was demanding, unpredictable, and never around when you needed her, boy, is owning your own small business gonna open your eyes.
The business of doing business is not as simple as having a talent or a skill that some folks admire. If it were, I’d be a woodworker, a genealogist, a (full-time) writer, a comic, a therapist, a miniaturist, a masseuse, and a restaurateur. I’ve worked in some of those industries, but most have been suggested to me by folks who admire a skill I use in my off-time (I LOVE my hobbies).
You CAN put what you love together into a business that fulfills others’ needs, but the focus really has to be on those “others.” I can’t emphasize that enough!
Love using your talents, in a way that others need and can relate to? Then you won’t be digging nearly so far into your “working capital” to get your business working.
How does a great new business hook you? What do they have to do, to get you to want what they’re selling—when you managed fine without them before?
Grow and be well,
Kelly Erickson
P.S. It’s never about me, it’s about you. If you’ve been around since the beginning of the MCE Blog, I’d just like to tell you that you are reading your 200th post. Congratulations on your tenacity, and thank you for creating an amazing community here. I’m blessed with the most wonderful readers on the web. I’m so glad you want what I’m selling! Do continue to share MCE with others, and together we’ll fuel even more ideas to grow your business in the next 200.
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8 September 2008, 8:07 am
Dang it, you just keep on making me think more and more about stuff I’m doing in the background.
Thanks for making me think.
And congrats on 200!
Keep on doing what you do, Kelly.
-Brett
8 September 2008, 10:46 am
You are so on the money, Kelly. Literally.
In fact, what I’ve seen is that a cushion of money can actually be a problem.
A cushion of money can make people lazy, or enable them to hide from what their boss, the customer, is saying (or not saying) to them. That’s what the dotcom bust was all about- all this VC money was given to those confused kids, and many of them never woke up to the fact that they didn’t have a business- they just had an idea.
When you have to make the mortgage every month, there’s a higher likelihood of listening to and learning from where the money is coming.
As for your question- no great business has to get me to want what they’re selling- I either already want/need it, or I don’t. If I do have a need they are meeting, what they have to do to get my attention is to prove to me:
- they really get my situation and my problems and my perspective
- they really have a high-quality solution that does what they say it does
- that they are around for the long-haul, in case whatever it is doesn’t work or break down- that I can trust them.
That’s for me.
Thanks for a dead-on post. And congrats on the #200!
Mark Silver’s last blog post…The Wackiness of Resonant Pricing
8 September 2008, 2:09 pm
Brett,
He he, and I haven’t even gotten started on riffing off our discussions! Hopefully I’ll dig that out before I’ve forgotten all the good thinks I was thinking at the time. I’m glad to be of help.
& thanks, my friend, as always.
Mark,
Welcome to MCE. Thank you for your kind words!
I like your answers, especially the third one. I think many folks underestimate the power of trust in business, but you’re absolutely right—it’s a crucial element in completing the sale.
Regards,
Kelly
8 September 2008, 2:15 pm
Kelly,
I look forward to that, believe me. I keep going back to that for inspiration and guidance, and I think “damn, she’s good”.
-Brett
Brett Legree’s last blog post…george a. romero, inc.
8 September 2008, 3:15 pm
Brett,
You know I’m going to keep that comment next to me always. LOL and very uplifting, too.
Until later,
Kelly
8 September 2008, 3:50 pm
Hey Kelly,
Congrats on post number 200!
Can’t add much to the actual conversation, except to agree with you 100%.
On the opposite side, there’s a guy I used to waiter with who is one of the best cooks I’ve ever tasted (and I worked in fine-dining for quite a while). I always asked him why he waitered instead of becoming a chef. The money was obviously better at the front of the house, but his main thing was that he knew he would start to hate cooking if he had to do it for a living.
Perhaps you feel the same way about your hobbies…? I don’t know, I love writing, and that feeling hasn’t faded for me. In fact, quite the opposite — it forces me to sit down and do the work! I can’t see myself doing anything else for a living (and liking it — there’s always 7-11, but my God that would be painful…)
~Graham
8 September 2008, 4:46 pm
Graham,
Thanks very much!
No, I wouldn’t hate them if I had to do them for a living. Well, let’s put it this way. I love what I do and wouldn’t want to switch for that reason. BUT, if any of my hobbies could viably make me the same income (well, except listening to people’s troubles, that would become a downer if I did it all day), they’d all be more of a pull. Especially genealogy. I could sit among dusty books and cemeteries unwrapping mysteries all day easy, except it doesn’t pay a thing. If I ever win the lottery, I’ll schedule in a few weeks of the year for dusty books, that’s for sure. But I still wouldn’t want to give up working in Experience Design.
Okay, and I wouldn’t cook for a living again. Been there, done that. Happy to observe from the outside now. The restaurant world is a very, very hardscrabble game.
Glad you enjoyed the post!
Until later,
Kelly
8 September 2008, 7:10 pm
Kelly,
I have been running around like a nut all day and just got to my Monday morning post reading at 6:00pm. Wish I had time for a well thought out comment but it was too good to not stop and say Right ON! I have seen too many small businesses start out with no business plan and just bit bit of hope. elbow greese and no clue who their target market was or what they wanted. Sad.
Congrats on 200. I’m impressed!
Wendi Kelly’s last blog post…Giving Back to the Givers
8 September 2008, 8:52 pm
Wendi,
Oh, yes. I love elbow grease, but when it’s not aiming toward a goal that’s worth going for, I get sad, too. It’s worth stopping in the middle of all the hard work to assess direction now and then, that’s for sure.
Mondays are good running-like-a-nut days. Thanks for spending a bit of your evening here!
Until later,
Kelly
9 September 2008, 1:27 am
As I put together the marketing plan for my workshop, I wonder at all these sorts of questions. In my Professional Organizing business, the contact to sales time was as much as 18 months because I was dealing with disorganized people and procrastinators. They knew what they wanted and knew that what I offered would help but could just never get around to committing. I worry that with my workshop the same will happen and have no idea how to “combat” that other than getting myself in front of a whole bunch more people so that the numbers going into the sales hopper are larger.
9 September 2008, 6:48 am
Alex,
If you haven’t already combed through the archives here, Experience Design 101 is a worthwhile read as you continue to plan.
Numbers are good, but you’ve got to make sure the offer is compelling and based on (your new boss’) needs. If you can get someone’s head nodding, you’re on to something (“Yes, I’ve felt that way… Boy, he understands my problems… Yes, I need that!”).
They’ve got to need it, and then you have to add urgency to it—they have to need it now. The classic is to make it available only until X date, but it works even better if the offer is to solve an itch they have to scratch NOW. Then it’s their motivation, not you pushing them.
A little food for thought as you work on it.
Until later,
Kelly
9 September 2008, 6:52 am
@Kelly
Thanks for the articles – I’ll go take a look at them.
I’m pretty sure that I have a “relieve that itch” proposition going on (especially thanks to James from the PenMen), but I suppose I won’t know until I see how traffic to the page is and conversion from viewing the page to buying goes.
If only I could hire a sales-person. I’m a big believer in outsourcing but one needs some income first…
Alex Fayle | Someday Syndrome’s last blog post…Discovering a Passion for Blogging: Urban Panther Interview Part 2
9 September 2008, 7:15 am
Alex,
Tweak the page as you go. Use a heat map like CrazyEgg to see which areas are being looked at/ clicked on, or not, and you’ll thank me later. Seriously.
Later,
Kelly
9 September 2008, 7:21 am
Yay to the link! That looks awesome! Thanks Kelly. You rock! (ooh, look at all the pretty exclamation points)
Alex Fayle | Someday Syndrome’s last blog post…Discovering a Passion for Blogging: Urban Panther Interview Part 2
9 September 2008, 4:39 pm
Congrats !!!! 200 hundred. Just got to some of my reading , phew!!
Kelly Standards . MCE SHOULD have its own show. like that Kitchen Nightmares’ one… seriously. There used to be an ad for something whose name I have since forgotten, but the ad went something like ” we don’t make x, we make x better.” That would be you babe. You make what we make, better.
Janice Cartier’s last blog post…A Tale Of Two Lists
9 September 2008, 9:47 pm
Janice,
Wow, thanks for that. Yet another comment for perking me up on a down day.
Secret: I would love to have HGTV or Bravo or some such ask me to do a show. Not so much that I’m calling them and begging or anything, but if they knocked on my door I’d be thrilled. Gordon Ramsay for small biz. That would rock, because I really am obsessed with your success!
On 200:
Friend says to me today, is 200 a lot?
I look at friend and say, Have you ever written 200 of anything?
Point taken, says friend.
Then I told him there are plenty of bloggers who’ve written 1,000 and more, so no, it’s not a lot, he he. Or it is. Depends on how you look at it.
Until later,
Kelly
9 September 2008, 9:53 pm
Hey Kelly:
Q. I am a producer and would like to pitch HGTV with a new programming idea. How can I do this?
A. To submit a proposal or program idea to our networks, please email us at myoung2@canwest.com.
From the HGTV (Canada) website — is the U.S. one different? Anyway, did a Google and found it here:
http://www.hgtv.ca/hgtv/faq.aspx
~Graham
9 September 2008, 10:20 pm
Graham,
I’ve never looked into it seriously. Maybe I should throw the idea at them and see what sticks, eh?
Thanks for the link. I’ll poke around tomorrow and see what I can turn up!
Until later,
Kelly
10 September 2008, 8:57 am
A star is born. Nate Burkus of Business?
Janice Cartier’s last blog post…Leaward Lines, Gentle Colors
10 September 2008, 2:11 pm
I promised I’d poke around today, so, want to know the real difference between the United States and Canada?
From HGTV (US) website:
Okay, looking at Graham’s snippet again, clearly they did use the word “producer,” also, but their much softer tone leaves the word “producer” open to interpretation… where HGTV US is clearly saying buzz off if you aren’t already a BIg Boy.
There is a Big Boy production company near me that I’ve always vaguely thought of writing to. You guys have made me feel like I ought to at least dash off a letter, so I believe I’ll pencil in “make bold move” for this weekend. If I can write 200 posts, I can certainly write one bold letter. Just for fun.
If I hear back from them, I’ll let y’all know.
Janice: LOL, I’m not that cute!
Later,
Kelly
10 September 2008, 3:21 pm
Kelly,
Uh..You have to do a demo. I would put your little person on as producer/camera crew, you as writer/on air talent. Write a short segment as if you were doing the show.
Come up with a brief 25 words or less pitch. They actually talk like that “Oh, she’s doing a Nate Burkus of business.”
Nate is cute isn’t he?
Janice Cartier’s last blog post…Leaward Lines, Gentle Colors
11 September 2008, 1:32 am
Yes pitching TV shows is a real pain. I’ve tried it before. You need to have an “in” with someone already in the industry. Lots of networking – that being said, I’d go for it anyway because who knows – you might catch someone on a good day.
11 September 2008, 6:33 am
Janice,
I checked Big Boy’s requirements. They want a release that says it’s okay to steal my idea and pretend they didn’t, and a letter. Whew. Though I’ll bet a demo would have more impact. Well, let’s see what happens.
Alex,
Tried it before, huh? Do write about it at SS. I’d love to hear about that.
Seriously, this was a back of my head, if someone asks me wouldn’t it be cool thing. Now I’m going to see if I could catch someone on a good day. What the heck. It’ll be fun. Then back to normal!
Later,
Kelly
11 September 2008, 12:56 pm
Email coming your way.