I may not be as young as I once was, but having been ‘self-employed’ for over 27 years, I think I have learned a thing or two on why some businesses succeed and others don’t.
My first business, which I started when I was 23 years old, ran successfully for 21 years. However, it finally gave way to the global recession and a slight miscalculation on my part. Like so many other entrepreneurs I thought the good times would keep going for another couple of years – at least. That was not the biggest mistake I made, but it was a fatal one. More about that in a moment …
Massively Confident and Totally Clueless
[pullquote]”When I started my first business in 1987, I was convinced I would be a millionaire in twelve months. I was massively confident and totally clueless!”[/pullquote]When I started my first business in 1987, I was convinced I would be a millionaire in twelve months. I was massively confident and totally clueless! I had no idea what was involved in running a business and knew very little about how to market the business, and though I thought I knew it all – I had a lot to learn.
As a result I spoke with a business mentor, someone that had successfully built his own business, and he gave me loads of useful advice. However, there were two things he told me to focus on as a small business owner – marketing and systems.
My business mentor pointed out that if I wanted to grow my business at the rate I planned, I needed a way to generate a steady flow of new customers – that is where marketing comes in of course. Plus I needed to ensure the products and services were delivered correctly and on time every single time. That is where he then suggested everything from the sales process through to the final invoice should be defined in a system.
I dedicated myself to those two elements of the business. I also did just about everything else in the company as well, but I knew that marketing and systems had to be done right.
This advice was critically important to me and allowed me to double the business every year for several years in a row. Although I did not become a millionaire in 12 months as I expected it didn’t take too long before I believed I was totally unstoppable.
Business Advice That No One Wants to Hear
As my mentor left after the last of his sessions with me, he wished me one thing that I did not like. He said to me, “I hope you fail soon and you fail hard. Only when you have had a major failure will you learn the real lessons you will need for long-term success.”
I really did not like the idea that my mentor would wish me ill, especially when he is supposed to be helping me to be successful. I therefore determined that I would succeed at all cost and that I would not let his final remarks to me affect my determination.
Only now do I finally understand the benefit of that final comment, that when he wished my business to fail fast and to fail hard, he was wish me the strength and vision to see such a failure as the most important lesson of my life. I learned that it is possible to be too confident and to be too ‘gung hoe’. I learned that I am not fool proof, that I can make mistakes. Unfortunately, it took 21 years before I learned these lessons.
Essential Business Advice That Will Drive Future Success
I once read a study that suggested 85% of all businesses fail in the first three years, but that home-based businesses are much more successful with 85% of these still running after 3 years.
There is a reason for this, and it is a lesson I learned from the failure of my business – keep your overheads down to a minimum and those you have to have, make sure they can be eradicated if needed. Of all the things that will drive any business under, it is overheads that cannot easily be eliminated.
Companies generally make a profit on their sales – that is not usually the problem – the problem is that many businesses underestimate the how much the fixed overheads are going to be. Sometimes people overestimate the sales they will generate and build a production facility that is too expensive for the sales they actually get. That was the problem I created with my first business. The overheads we built up ended up being too big for the business to carry when our market took a 70% downturn.
The key lesson is to ensure that the costs of running your business are, as far as possible, tied to sales and not fixed overheads, and that any overheads you have are ones you can get rid of as quickly as possible if there is a downturn in your market.
The one thing I have learned over the last few years is that the market is always changing, nothing stays the same, so you have to be as flexible as possible throughout.
In my marketing business where I employ web developers, graphic designers, content writers, etc, I ensure that the majority of the staff are located offshore. This cuts my costs to some degree, but more importantly, it ensures that the overheads of the business are flexible.
Within my bespoke shirt company, where we have a significant need for highly skilled tailors, we have negotiated with each of them to provide their services on a per shirt basis. This ensures that in the event that the business has a slow month the costs are minimized.
My advise to you is to follow a similar rule, make sure your business has low overheads and a flexible structure to allow for the changing face of your market. It may not be the making of your business, but is could be the saving of it.
This article has been edited and condensed.
Chris Ball is founder and CEO of Cherry Pit Solutions, a UK based marketing consultancy and design agency. He has built up businesses over the last 27 years and currently has two businesses he co-owns. His aim is to ensure every business he owns or works with, doubles in size or profits every year. Connect with @CherryPitTweets on Twitter.
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