Tag Archive for 'Start-up'

A business is not a Chia Pet

When I have talked with would-be entrepreneurs who want to start their own business, I often observe more urgency than understanding. I continue to be amazed at how many people disregard the fact that being a business owner is a profession.

If you decided to become a surgeon, would you expect to operate on someone the day after you made that decision? If your bent was toward the ministry, wouldn’t you expect to get appropriate education and training before you would be qualified to shepherd a congregation? Or let’s say you longed to be an automobile mechanic. That desire alone wouldn’t give you the ability to diagnose a mechanical problem and successfully make the repairs, would it?

So what makes anyone think they know how to run a business just because they . . .

. . . have always wanted to?
. . . can’t stand to work for someone else another day?
. . . have this great idea that no one else has ever thought of?

A business is not a Chia Pet. It takes more than adding a little water and waiting a few minutes for green stuff to pop into your life. Successful business ownership is at the least more like growing strawberry plants, which don’t produce berries until the second year. But it’s often more like growing apple trees, which only bear fruit after several years.

Too many so-called “experts” have learned the hard and expensive way that, just because they know a lot about a product, service or industry, doesn’t mean they know how to run the business that successfully makes those things available in the marketplace.

If you want to start a business you certainly need to know your product and industry. But you also need to know the profession of business ownership. And like a surgeon, minister, auto mechanic and farmer, being a successful business owner takes education, training and time.

Before you turn in your time-card, minimize your urgency and maximize your understanding about the profession of business ownership.

Tough love on buying a franchise

At a time of high unemployment, it’s natural for there to be increased interest in starting a small business. And one of the classic options is to look into buying a franchise because many thinks they’re like a business-in-a-box. 

Another thing that is part-and-parcel with these start-up scenarios is desperation, which leads to poor decision-making and way too many business failures.  Recently on my radio program, The Small Business Advocate Show, Nick Bibby delivered some tough love that every prospective franchisee should experience before signing on a franchise dotted line. 

In addition to being a member of my Brain Trust, Nick is principal of the Bibby Group, an international consulting firm focused on the development of franchise systems, as well as due diligence services for prospective franchisees and independent entrepreneurs. Take a few minutes to listen to this interview and, as always, leave your thoughts and experiences on franchising. Listen Live! Download, Too!

Clarifying the record on start-ups and co-opetition

In any given month, I will be interviewed by various national and international media outlets. The contacts are appreciated because it allows me to leverage my opinions and whatever I’ve learned on behalf of small business issues. And, let’s face it, any PR is good PR, so the attribution is good for my brands.

There is one problem, however, with these kinds of interviews: The interviewer is taking notes as I am speaking, and the final product may not be as spot-on with regard to what I have said. Anyone who has ever been quoted by the media knows what I’m talking about. Sometimes the quote is perfect, sometimes it’s a little off and sometimes it bears no resemblance to what was said.

Recently, as a result of two interviews, I was quoted in ways that I feel I should respond to. Neither interviewer did anything wrong, but a little clarification and expansion is warranted.

In an interview with the Los Angeles Times (click here for article), I was asked about the concept of small businesses establishing alliances with each other to maximize limited resources during a recession. I have long considered this behavior to qualify as a best-practice, so it was easy for me to comment. I said, “There is a term called ‘co-opetition,’” and went on to explain that this is where businesses that were otherwise competitors would actually partner to accomplish a specific goal, like a contract with a larger customer.

When the article came out, I was incorrectly given credit for actually coining that term. As a thought-leader and unrecovering egomaniac, I coin new terms (and laws, see below) all the time, but alas, co-opetition isn’t one of them. Don’t know the genius who did coin this extremely intuitive and handy term, but it wasn’t me.

Last thought on co-opetition: If you’re having trouble qualifying for the specifications of a request for proposal (RFP), consider partnering with someone, even a competitor.

More recently, an Asian news agency contacted me about the impact of small business on the economic recovery (click here for article). One of the points I mentioned was the access-to-capital environment for start-ups. I said start-ups weren’t going to have as much of an impact on this recovery as in previous ones because the currently diminished availability of personal credit would limit the ability to fund a new launch. I was quoted correctly, and I stand by my opinion, but there are a few things that should be added.

It must be said that, clearly, there will be many start-ups who will find a way to launch their dreams against all these odds. The good news is, because of the extreme commitment of these entrepreneurs, their enterprises will probably have a higher success rate, just by sheer dint of will. An entrepreneur who will not be denied is a force of nature.

On the other hand, easy credit often allows for the creation of start-ups that should never have happened. Blasingame’s Second Law of Small Business states: “It’s easy to start a small business, but it’s not easy to operate and grow one successfully.” The casualty rate for start-ups in an easy credit environment is nothing short of grotesque.

Sometimes start-ups don’t price their products and services properly because they don’t yet know how much gross profit they must generate to fund day-to-day operations while simultaneously capitalizing growth. Consequently, in the process of failing from a combination of too much debt service and not enough gross profit, these newbies devalue the prices for their products, while the remaining industry players must work harder to get prices back to a level that allows for sustainability.
Making a sale by offering prices that don’t allow the company to survive is a Pyrrhic victory.

Thanks for allowing me to sort of correct the record while taking the opportunity to expand my thoughts on these issues.

Blasingame’s 2009 Small Business Advocate Crystal Ball Predictions

Here are my 2009 Small Business Advocate Crystal Ball Predictions, which were first published in my free weekly Small Business Advocate Newsletter over the weekend, as well as in my newspaper syndication.

Prediction: Most financial damage in 2008 accrued to Wall Street and its stakeholders. In 2009, Main Street and small businesses will take the hit, especially in the first half.

Prediction: Economic recovery on Main Street will begin in the second half of 2009.

Prediction: Small business start-ups will be down because their initial capital comes from personal credit, which is now at unprecedented low levels.

Prediction: Small businesses that will have the most difficulty in 2009 will be retailers and sellers of big-ticket items that rely heavily on consumer credit.

Prediction: The Obama administration will produce a successful small business economic relief plan of loan guarantees and hiring tax credits.

Prediction: Independent community banks will thrive for two reasons: 1) They’re the lender-of-choice for small businesses that need local consideration; 2) Depositors will see them as more attractive than continually merging large banks.

Prediction: The Obama administration will continue the unprecedented government intervention in the economy, but positive impact will not occur until the second half of 2009.

Prediction: The Obama administration will shelve plans for the Employee Free Choice Act – designed to increase union organization – until 2010, when the economy will be recovering.

Prediction: Similarly, the Obama administration will shelve plans to pass a “cap-and-trade” bill – an attempt to regulate carbon – until 2010.

Prediction: The Obama administration will not recommend any tax increases.

Prediction: The Obama administration will justify moving forward with national healthcare reform in 2009, calling it part of economic recovery.

Prediction: The Obama administration’s attempt to create infrastructure jobs will fail.

Prediction: Comedian, Al Franken, will be the next Senator from Minnesota, leaving the Democrats one Senate Republican defector away from unfettered control of the government.

Prediction: With a justified concern for “stagflation,” the Fed will begin nudging interest rates up in Q4.

Prediction: Despite OPEC’s best efforts, oil prices will average below $65 per barrel, due to demand destruction.

Prediction: With their political leverage dependent upon petroleum revenue, 2009 will not be a good year for Putin, Chavez and Ahmadinejad.

Prediction: As the marketplace pays for the financial meltdown created by greed, corruption and incompetence, greater emphasis on transparency and accountability will be demanded by all stakeholders.

Prediction: Wall Street and the federal government created most of our current economic problems, but it will be Main Street small businesses that will lead the economy to recovery.

Final Prediction: In 2009 we will continue to live the Chinese curse: “May you live in interesting times.”

I talked about many of these predictions, and the reasons behind them, on my small business radio program, The Small Business Advocate Show. Take a few minutes to listen and of course, I would very much like to hear your thoughts.

Small business and the “free” stategy

If you’ve been listening to my show and/or reading my columns, you know how many times I’ve stressed the fundamental management task of generating enough gross profit to cover operating expenses and, hopefully, put net profit on the bottom line. Of course, in order to do this, you have to sell something for enough money to have something left over after cost of goods sold.

So it might seem strange to learn that I would recommend a strategy of maximizing gross profit by giving something away. But when taken in context, you’ll see that it’s not weird, but rather, just another way of looking at managing in a challenging economy.

At a time when prospects are more likely to trade down in their purchases to stretch their cash, it would be natural for a small business to react by cutting prices. And while this might do the trick of getting customers to stay with you, discounting also has the potential to do something unfortunate: diminish the perceived value of your brand.

So how do we keep customers coming in the door in a recession and protect our brand value? Develop a strategy that gives customers something when they make a purchase at the price you’ve established.

Recently, I interviewed two very smart ladies about surviving and thriving in a recession. I talked with branding expert, Karen Post, author of “Brain Tatoos,” about how to maintain brand value, and I talked with marketing expert, Lois Geller, author of “Customers for Keeps,” about how to create a solid marketing plan during a recession. Guess what? Both recommended courageously giving things away instead of wimping-out with discounts.

Take a few minutes to listen to what Brain Trust members Karen and Lois had to say on my small business radio program, The Small Business Advocate Show, as we discussed the “free” strategy and variations on that theme. And don’t forget to leave a comment or question.

For Karen Post:
For Lois Geller:

2009 is the year for small business “Positive Reality”

Well, it’s over. You know – that other year that will live in infamy – 2008.

It’s true that, technically speaking, 2008 is over. But alas, as we enter the New Year trying to muster up the primordial feelings of hope humans are known for when contemplating a fresh start, 2008 won’t go quietly into that good night. Indeed, we’ve only just begun to pay for all of the chickens that came home to roost last year.

If you know anything about me, you know what a pathological optimist I am. And while I’m convinced that the sun will come up tomorrow, metaphorically speaking, the facts on the ground demand a realistic assessment of what our marketplace and our businesses are up against in the next 12 months.

The term I’ve coined for this perspective is “Positive Reality.” I’m just as positive as ever about our possibilities for the future, while simultaneously recognizing the reality of the challenges we face in the near-term.

The opposite of Positive Reality is another term I’ve coined lately, “Negative Hysteria.” That’s what happens when we get caught up in the mainstream media’s one-trick-act of “Breaking News! We’re doomed!”

Negative hysteria is often produced by a new term I learned in 2008, availability cascade. Availability cascade is what happens when we hear something in the media so much that we begin to believe it to be true, even if it isn’t, and consequently begin taking actions based on that perceived truth. Sound familiar?

This New Year’s Day, on my small business radio program, with as much positive reality as I could muster, I kicked off 2009 with a segment about the task ahead of us. Take a few minutes to listen, and let me know if you think my 2009 perspective is too hot, too cold or just right.

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