Another wise observation from PC

[Greig Whitton]

Joe Bloggs opens a hamburger stand in a Shopping Mall where there is no other food sold and no space for another food shop, three months later Wimpy gets the mall owners to add an extension where they can trade, an 'unexpected outcome' so so long Joe!

So Joe never anticipated the possibility of future competition? His entire business model hinged on being the only game in town?

This is why I have deep reservations about labeling failure an "unexpected outcome". There is a world of difference between an "unexpected outcome" and an "outcome that I didn't expect". The former absolves business owners of all responsibility as they point their finger at government, banks, suppliers, customers, God, or whoever else is convenient to blame.

Obviously we can't anticipate every possible outcome, let alone predict whether and when they might materialise. However, the scope of expectation for many business owners (especially start ups) is embarrassingly narrow.

[Blurock]

So Joe never anticipated the possibility of future competition? His entire business model hinged on being the only game in town?

Not all prospective entrepreneurs are really ready to start their own business. Most are under funded and many do not do their homework before starting out. (I once had a guy hand me a plan for the premises when I asked him for a business plan. He had no clue.)

Say you start with a hamburger or hot dog stand outside this big office block. You don't have to worry about globalisation, right? Wrong! Macdonald's opens an outlet down the road and now you start competing with a global corporate company!

I do not agree with the high failure rate quoted for SME's. We only have to look at what has happened since 1994. A number of people who were retrenched, actually purchased franchises with their payouts or pensions. (they still think that they are self-employed). Others realised that they could sell their skills as specialists or consultants. Labour laws made it attractive to get rid of expensive artisans and rather employ them as contractors. All of these registered CC's for this purpose.

Some of these people have since retired and others have sold their businesses. The statistics does not account for businesses that were de-registered or closed because of retirements or mergers.The tax laws have also changed so that artisans who are employed full time as consultants, have to be treated as full time employees. By closing the loophole, SARS has caused many of these "contractors" to be taken back onto the payroll. With normal deductions and less tax breaks, a CC is therefore not so attractive anymore.

The real failure rate is very difficult to determine, but I suppose that analysing insolvencies and judgments may be a way of shedding some light.

[adrianh]

The reason why small business fails is simply because 99% of "entrepreneurs" don't have the foggiest idea about what it takes to conduct business. Being a good technician with a good idea doesn't imply the ability to conduct business. I am not going to use the term "business plan" because it does not encompass the realities of doing business. What is needed is a spreadsheet that describes the business, not in terms of pie in the sky predictions but in terms of reality. The spreadsheet needs to be able to show what happens when demand increases or decreases and the ripple effect that it has on the rest of the business. The spreadsheet must be set up as a tool for scenario planning, not only best case planning but also worst case planning. This is a basic requirement to get a business started. All the other stuff i.e. sales, marketing and and and hinges on a clear understanding of the numbers that constitute the business.

There various reasons why entrepreneurs don't get finance and I will highlight a couple:
1. They are absolutely clueless about the numbers.
2. When they present a business plan it is devoid of numbers.
3. Numbers are pie in the sky and has no basis in reality.
4. They are unable to sensibly explain how the numbers were derived.
5. They have no experience or knowledge of the field they are entering.
6. Their assumptions of the field that they are entering are her wrong or baseless.
7. They have no business experience.
8. They have no idea about the legalities of the industry.
...etc..

The biggest problem is that it is a massive learning curve in all matters of business and many people with bright ideas realize that they are simply not up to it (maybe due to lack of finance, time, support, ability to learn fast, ability to deal with stress etc.) Building a business is a long hard slog and there is nothing wrong with making mistakes along the way. How would anybody learn to ice skate unless they fall on their asses many times. Falling on your butt in business is perfectly ok if you are willing to dust yourself off, learn from it and move on. If moving on means going back to permanent employment that is ok too, very few people a lucky enough to be in a position to keep on trying until they succeed or die!

[wynn]

Further wise words from Carruthers;

Fast Income, Nyet...
During the past few weeks a few people have asked me how they can start a work-from-bistro business that will bring in R100,000 per month. The money, of course, to be flowing by end-September.

This same theme was echoed in a book I read recently. Apparently most startup business plans project a first month income (the month after startup, of course) uncannily close to what the proprietor needs to pay next months bills.

I am sure that there is fast money to be made. I have just never seen it. Any fast money I have made has been the result of 20 years of developing skills and knowledge, but most importantly, relationships. Most of my current clients have been clients in previous projects going back as far as 1992.

If we want to build a quality future, it needs time to grow. As my brother wisely says whenever I enthuse about my latest crockpot idea, "Boet, if it was that easy everyone would be doing it."

So, back to the R100,000 per-month-starting-this-month question. I try to gently explain to these fine hopeful folk that, even if I could do it this month, I would rather earn the R100,000 myself than the $49.97 they are offering to pay me if, and only if, I can deliver by September 30th.

So here is my thought for this week. There is no fast money. It might look like fast money, but look behind the scenes and there is always somebody who has been working for long, long time to build that overnight success.

Big money takes a long time to arrive. Far easier to start slow, learn on the fly, adapt and reconfigure, and grow that small stream into a tributary which then becomes a river.

Slow and steady beats fast and furious any day, in my humble opinion. The folk I have seen chase the fast rabbit-type route need to do it each year. Those folk ambling down the slow tortoise-type route may start slow, but they only have to start once.

Warm regards