While this weekly publication most often deals with challenges facing those currently in business, I do on occasion receive questions from those interested in STARTING a business. Their initial question seems to be, “where do I start?”
I thought this would be a good opportunity to put myself in the shoes of a budding entrepreneur looking for some practical knowledge of how to get a business started. What are the first things I should do?
Wow! What a nightmare!
The first thing I did was perform a search on the Internet for starting a business.
I expected a checklist or step-by-step instructions on how to select and evaluate business ventures. What did I come up with? – franchise opportunities, multi-level marketing companies, get rich quick schemes and a horde of shady DBA and incorporation services.
I explored nearly 100 of the top links and found only ONE link that was even remotely helpful. That was the Small Business Administration, www.sba.gov. Short of that my search ended in frustration and failure. I can imagine that many dreams of self-employment are shattered at this early stage.
Most are familiar with the statistic that 95% of all businesses fail in their first three years. But why? And more importantly, what can we do to ensure that we are not one of those statistics? I’d say that’s step one for any business startup.
First, let’s look at some of file reasons that business start-ups do fail. I believe there are three primary reasons:
1. They do not develop a business model that meets the emerging needs of their marketplace.
2. They have never become proficient in the business practices necessary to prepare and implement a successful strategic plan.
3. They failed to develop quantifiable standards and scalable systems that are necessary to achieve the business plan and ultimate growth.
In this business update I will examine the first of these three reasons and what we can do to avoid or at least lessen the chance of failure. In the coming weeks we will look at the other reasons and discover what we can do to improve our chances for success.
Fatal Error #1: They did not develop a business model that meets the emerging needs of their marketplace.
A lack of market perception and understanding is rampant even among those IN business for many years. Most businesses survive by sheer momentum. They entered the marketplace when their business model was immature and captured a sufficient share of the market for their target area. As a result, many have achieved a degree of success over time. They acquired loyal customers and partners so their business has grown primarily based on referrals.
This momentum has sustained them for a period of years – maybe even decades. Yet as the business model for their industry began to change, their market share began to lessen. The smart players either radically alter their business model or sell-out while they are at the top then move on to the next rage. But without modifying their business model to adapt to the new market conditions they will ultimately fail as well.
Of course a new start-up has no momentum. They don’t have referrals. They don’t have partners or even any customers yet. So they pattern their start-up after existing business models. Typically they identify the most successful market leader and pattern their business after this organization. The problem with this strategy is that the market leader is likely at the top of the curve in market momentum and has no where to go but, you guessed it, DOWN! So the start-up is basing their entire strategy on a model that is at its peak and heading for, decline mode.
Creating an attraction-based strategy can help us to avoid this fatal error. Like attraction-based marketing, attraction-based business start-up management is focused on finding the “gap” in the marketplace. The gap is the business model that is both competitively innovative and closely matches the emerging client needs.
By understanding all of the players in the marketplace and identifying their respective business models we clearly identify the laggards, market leaders and vanguards so we can select the correct business model rather than one which is in decline or one which is so esoteric that its appeal is very limited.
Here are some of the tools which are useful in identifying some of the most viable business models:
1. The “Competitive Landscape Profile” defines the players in your marketplace, their strengths weaknesses, threats and opportunities.
2. The “Innovation Continuum” identifies areas of innovation opportunity so that you can achieve “breakthrough innovation for both the internal reality of your business as well as the external perception of clients in the marketplace.
3. The “Business Proficiency Scorecard” allows you to rate your proficiency in the most critical areas of marketing and management. This will help you to establish some specific goals so that you can change your expectations for the future. By understanding your skill levels you can gain the knowledge needed to implement the marketing and management initiatives that will ensure that your new business model is successful.
In our Attract More Business program we use some of these tools and put them into practice in order to significantly increase our chances of success.
Have a great week!
I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email firstname.lastname@example.org