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How does a start-up owner deal with failure?

IMG_2664Start-up businesses differ from existing, established small businesses in that they are still in search of a sustainable business model. This means that a start-up owner has to deal with inevitable failure because not every business model they try out is going to succeed overnight.

One commentator recently said that experts say if a start-up is going to fail, there are two options – it needs to fail fast or learn faster. This may sound cruel or harsh but really all it is saying is that a business needs to learn faster by pivoting, a concept from the lean start-up movement. The business really needs to redesign or change its product or service and go into a different direction where there are better opportunities. Continue reading “How does a start-up owner deal with failure?”

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A start-up owner’s nightmare – a garage full of unsold product

IMG00030-20101222-1953I was listening to an entrepreneur the other day who was in the process of coming up with new ideas for a clothing product. Would-be entrepreneurs get caught up in fantasies that their product or service is going to be converted into a dream profitable business. She spoke about what pattern design she would use, the fabulous textiles she will require and the modern designs that would knock the socks off potential customers. But when she started thinking through a plan she realised that estimating demand for her product would be crucial. Suddenly, she became gripped with fear as she realised that she could end up with a garage full of unsold smart casual wear. Continue reading “A start-up owner’s nightmare – a garage full of unsold product”

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Are your competitors as sneaky as the fork-tailed drongo?

I’ve got a soft spot for meerkIMG_5866 cropped halfats. Ever ever since I befriended one little critter on a farm in Namibia and watched his antics I just realised what intelligent and friendly little creatures they can be. I’m not sure the meerkat liked me because he would often peer into my coffee cup and then knock it onto the ground.

Meerkats work hard to collect their food especially in the dry winters of the Kalahari when insect prey dwindles. Now research by zoologists working in the Kuruman Reserve have found that the fork-tailed drongo steals up to a quarter of meerkats’ food intake.

Just how do the fork-tailed drongos manage to do this? Continue reading “Are your competitors as sneaky as the fork-tailed drongo?”

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Fire up your sales – discover ways to recharge your dead spots

IMG00015-20101214-1532I walked through OR Tambo Airport in the early morning on a flight to Cape Town and saw most retail shops were not doing any business. Sales assistants were giving directions to commuters or chatting to their colleagues. Other sales people were sitting around texting messages on their cell phones.

Sure, the restaurants were doing brisk early morning trade. Travellers who had arrived at the airport and hadn’t yet had anything to eat were having breakfast. But the retail outlets might not have even opened because trade was slow or non-existent. Stores selling clothing, computer accessories, music, branded goods (such as Ferrari) and gift stores — not even a trickle of sales. Continue reading “Fire up your sales – discover ways to recharge your dead spots”

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Does walking spark new ideas for you?

IMG_1434.JPG.storyboardOn Sunday late afternoon I took a walk along the Braamfontein Spruit watching the baby ducks that had grown up during the summer months. I went up to the bird lookout at Delta Park which overlooks a field of bulrushes where small finches were eating the seeds in the setting sun.

During this walk an idea that I hadn’t thought of for a while slipped into my mind. I tossed it about and came up with a potential market for the product, a name for varieties of the product, how to package it and what I would have to do to test market it. By the time I’d finished my walk I had a reasonably developed idea, much more feasible than when I had first thought about it. Continue reading “Does walking spark new ideas for you?”

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How far do you still need to cut costs in your small business?

MalgasOne of the country’s best columnist passed away earlier this year. Sometimes he claimed that an albatross had flown to his windowsill to give him tidbits of juicy information that others were reluctant or feared to disclose. I occasionally get information passed on to me but not from that graceful seabird the albatross. Perhaps because I grew up in Kalk Bay I get scraps of information from a Malgas (Gannett). I don’t know how reliable they are but they are always interesting… stuff no one really wants to talk about openly.

Anyway a Malgas flew into my inbox the other day with a small business owner complaining about large institutions who are spending money like there’s no tomorrow. They don’t seem to have a clue about cost-cutting, the owner said. You know these institutions that employ so many people that they are virtually falling out of the windows of the opulent buildings where they “work”. Criminal charges, misconduct, disciplinary hearings, suspensions that last for months and even years.

Do small businesses have anything in common with these big spenders? Do small businesses need to worry about having too much unnecessary fat in their businesses? Do they need to clean up and cut expenses?

My feeling is that small business owners generally run pretty tight ships. Competition is tough, costs of fuel, rent and labour are skyrocketing. If they don’t watch costs with a hawk’s eye, they will quickl face bankruptcy. But unnecessary costs can sneak up on you like a thief in the night, stealing your money without you realising what’s really happening.

Small business owners need to watch out for those smaller costs that mount and begin to hurt their business. Think of smaller costs such as stationery, consumables and raw materials or ingredients. How many of your staff are walking out with your stationery to use for school and home projects? How often is your photo copier being used for recipes, domestic record-keeping, insurance documents and art projects for the kids?

One small business owner refused to own or lease a photo copier and instead got staff to use the copy shop down the road. The purchase price per sheet might be higher but if you add all the costs of ownership, you’ll quickly realise how much money you could be pouring down the drain.

In this tough business environment the giant business organisations are taking costs seriously. BusinessWeek reports that a brewer has informed executives that they will no longer get free cases of of beer; a food manufacturer told its executives to turn in their mini-fridges and one burger chain has cut its company headcount from over 38,002 something like 2,400.

Whether you own a profit-driven or purpose-driven small business, cost control will keep you out of trouble. Forget the institutions out of control – stay focused on what you can do to keep costs cancer gobbling your profits.

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How often do you as a small business owner get out to see what is going on in the market?

IMG_0284I mentioned to a small business owner the other day that a similar business to his had started down the road. He told me that he spent so much time in his business that he didn’t even know about it. Perhaps when he gets a chance to take off an hour or so he may go down the road to look at the business and see what his competitor he is doing.

How often do you get out of your start-up or small business to go look what’s happening in the market? Do you have the time? Is it worth your while? Continue reading “How often do you as a small business owner get out to see what is going on in the market?”

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Entrepreneurs are open to possibilities

Statue of the thinking bull in Barcelona, Catalonia, Spain. Credit: Hungarian Wikipedia, Magyar Wikipédia
Statue of the thinking bull in Barcelona, Catalonia, Spain. Credit: Hungarian Wikipedia, Magyar Wikipédia

The other day I saw a hamburger fast-food restaurant that had opened up in a small shopping centre. It was doing exceptionally well because because the owner had found a small area of opportunity that had been ignored by the major fast-food restaurant chains.

Where some people may see problems, entrepreneurs and start-up business owners see opportunities. Call this creative thinking or visionary thinking whatever you want but entrepreneurs open their minds to possibilities. The average person may see an empty garage filled with useless equipment. An entrepreneur may look at the same space and see a cellphone repair shop or even a deli outlet. Continue reading “Entrepreneurs are open to possibilities”

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You can’t dine out on your first idea

Jean Baptiste Bernard Coclers (printmaker; painter/draughtsman, art dealer; Italian; Flemish; 1741 - 1817). Signs work as 'L.B. Coclers'. Born and died at Liège; Experimented with crayon-manner and drypoint. Source: http://www.britishmuseum.org/research/search_the_collection_database/term_details.aspx?bioId=128959
Dining out (1780), Jean Baptiste Bernard Coclers (printmaker; painter/draughtsman, art dealer; Italian; Flemish; 1741 – 1817). Signs work as ‘L.B. Coclers’. Born and died at Liège; Experimented with crayon-manner and drypoint. Source: British Museum

Some time back when the economy was buoyant meal preparation kitchen businesses took off. The idea was for people to visit one of the commercial kitchens, make dinners for the week with pre-chopped ingredients. The concept was even franchised with names such as Dinner by Design and Super Suppers. The number of stores grew well during the bumper years but when the economy went southwards people went back to making meals at home.

This is the difficulty with coming up with a new business idea or concept and estimating or evaluating whether it is going to take off. You never have absolute certainty that an idea will succeed. Start-ups and new business ventures have many inherent risks but the rewards can be a high when compared to other investments.

Steve Blank, known as the man who made the lean start-up approach a movement, says that it took a while to realise that “built into a founder’s ongoing passion is a series of untested hypotheses they can keep testing and iterating,” according to an interview in Start-up Smart.

What this means is that you can’t bank on dining out on your first idea. You may need to keep testing and refining your idea until it becomes workable. Many so-called good ideas need to be thrown out or discarded when they prove to be not commercially viable. One legendary entrepreneur, James Dyson, made more than 5000 “experiments” or prototypes to eventually develop his first bag-less vacuum cleaner.

What makes an idea successful?

Some will say immediately that the entrepreneur’s or founders passion is one of the key ingredients for success. For example, Steve Blank says, “On day one, you have to be a true believer. You have to believe your initial vision is correct, that your passion will make it happen and remove all obstacles.”

The other essential is market demand. You must be able to give potential customers value that they may not be able to get anywhere else. A new product or service needs to be cheaper, faster or easier to use than what is on the market. Often the problem is that a new product or service is so new that the adoption rate by potential customers is very low. Potential customers are hesitant to try out something new that may increase risk for themselves. In a tight economy, for instance, customers will stick to the tried and true even if it means they are not 100% satisfied with what they purchase.

Entrepreneurs also need tools and resources to turn their passions into profitable businesses. Some of the most important resources and skills an entrepreneur must master includees business planning, cash flow management and being able to pitch your big idea for funding or learning how to get the word out and sell your product or service.

Action summary:

– Products and services must give value to potential customers that is greater than what is presently available on the market
– An initial business idea will probably need to go through several iterations before it is shaped into something that will provide superior value
– The start-up owner needs to know what tools and resources they require to turn their new ideas or passions into a profitable business
– Learning how to pitch your idea and how to get the word out to sell your product or service is a key entrepreneurial skill

You may not be able to dine out on your first big idea but if you keep working at it passionately and know what is required to develop it you may eventually turn your idea into a viable business.

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Does your start-up have scope to expand?

Photo credit: Wikimedia commons
Photo credit: Wikimedia commons

It’s one thing starting a new business but quite another to scale it up to a level so that it can grow and become financially viable. Starting up a small business is hard enough but when it comes time to grow or expand will your business model be robust enough?

To increase the size of a start-up business and turn it into a full-scale operation means that you possibly need more space, more people and more capital. But even if you have these resources, you might expand your business into a monster that robs you of your time and resources but doesn’t give you the returns you were looking for.

Here’s an example. A small business in India was serving over 7,000 sandwiches orders a day but couldn’t scale up. It was difficult for the business to encourage customers to have sandwiches for lunch. The founders realised that to become a sizeable business they would need 200 outlets with at least 15 employees in each outlet. But that would mean that they would suddenly have 3,000 staff on their payroll. Continue reading “Does your start-up have scope to expand?”