Small Business Truisms

HOW NOT TO FAIL IN SMALL BUSINESS

JACK BRAGEN

Copyright 2010 by Jack Bragen

This piece is a memoir of what could have been done differently, and is not an authoritative guide to success; I have created several small, one person businesses that in the long run failed, have been involved in someone else's small business failure, and have observed a few companies that succeeded.
Of course, my disability (I am schizo-affective) figures into the likelihood of failure at small business, but is not a complete excuse for such failure. And you might ask, "is there anything this guy has succeeded at?" "And if not, why am I bothering to read this guy?" I am successful at other things in life besides small business and employment, and what I write is just as valid as what a supposedly more successful person writes. As it is, I don't lie or make false claims about myself or about my successes in life. Although sometimes the truth can be harder and less glamorous to hear.
The following are a few basic rules you ought to follow in order to have a chance at business success. While these are not the complete answer, they are bases that ought to be covered in addition to having your superlative business concept that you must formulate and that I don't offer here.

Rule No. 1: Don't start out the business unable to pay for all expenses for the first two years. You can not assume instant profitability. It could take two years or longer to discover, implement and fine tune the formula that works. Most companies take at least two years to reach the break even point, and some never do.


Rule No. 2: Don't rent business space in the worst possible location just because the rent is low. If you can not afford to pay for a decent location for your business, you are probably under-capitalized. If you rent in a "bad area" you have to pay more in insurance, as it is likely that you will be robbed at gunpoint. No kidding: I've been held at gunpoint by robbers before, and it's no fun at all. You get to brag about it afterward, but only if they don't shoot you.
Furthermore, it is likely you could get fewer customers, each of which will pay less, because of being in a bad area. If you are in an upscale area, you can get away with charging much more per customer, and yet your rent and other overhead costs are higher. I believe it is best to rent in a moderate area; one that isn't excessively expensive and yet that doesn't have high crime. This gets you an affordable space while at the same time not turning away customers who don't want to travel to a bad area.

Rule No. 3: Very Important! Don't go into business at a service that you are not able to do. If you are in business as a dry cleaner, you had better know all about dry cleaning. If you are in business as a private detective, you must know the ropes of that industry. If your company will be a TV repair service, you had better know how to repair the latest TV's and the old ones as well. Going into a business isn't a learn as you go enterprise--in certain respects, such as knowing your field. If you start out the company not knowing how to perform what's promised, you will quickly develop a bad reputation, and this will destroy your future customer base. Exceptions to the "need to know your field" principle might include selling frozen yogurt, or buying into a well known franchise in which the formulae for succeeding are part of the package.

Rule No. 4: Don't operate your company assuming your customers are stupid. When I go to an establishment and the salesman behaves toward me as though I am their next sucker, I am pretty annoyed. Credit your customers as being of equal intelligence to yourself. This doesn't eliminate the need to explain to the customer your rationale for why things are done a certain way. While customers aren't stupid, they can't read your mind, either.
The two parts of this, again, are: Don't insult your customers' intelligence, and secondly, explain things to them as needed since they likely do not know why you do things the way you do unless you tell them.

Rule No. 5: When starting a small business, be prepared to work. This is perhaps the most important of the prerequisites. I believe if you are prepared to work, if you have sufficient startup capital, and if you have a reliable and affordable way of getting customers, you are very likely to succeed in business.

Rule No. 6: Have a plan and also a couple of backup plans for getting the customers that are needed to support your business. The foremost reason for why a company fails, I believe, is the lack of sufficient customers. Once upon a time, a yellow pages ad would work very well at getting a sufficient number of customers. This has apparently changed with the advent of internet and with the saturation of many fields with competitors. Additional advertizing may be needed, and this will cost money. It may require a bit of doing to get enough advertizing, which must be cost effective, so that your company will have sufficient work.

Rule No. 7: Avoid undercharging and avoid giving things away for free. Charging less than the going rate makes the customer wary that something must be wrong with your product or service. Charging a greater price may imply, whether true or not, that what you're selling is of a better quality compared to that of competitors.

Rule No. 8: Don't hire an employee who can't do the job in order to save money. This isn't to say you can't hire disabled people. When someone has a disability, it doesn't automatically mean he or she can't do the job. There are plenty of disabled people out there who are more conscientious, hardworking and detail oriented than the average employee. No, I'm not advising not to hire the disabled; I'm advising not to hire people who don't want to work. Secondly, hiring someone who is underqualified might mean that he or she will work for a lower wage, but what good is that if they don't know how to do what they were hired for? It is good to hire someone who knows their business, who is willing to do the work, and who doesn't have any hidden agendas. Having a disability or not having one doesn't enter into this question.

Rule No. 9: Don't hire anyone at all until the business's customer base expands enough so that you need the extra help. Prior to hiring anyone, you should be doing the work yourself, along with any business partners you have. Employees cost a lot. They cost even more when they are injured on the job. If you can't afford workmen's compensation, or if you can't afford to contract with a temporary agency that should cover this, you should not yet hire someone.


Rule No. 10: Don't waste company money on fancy stuff, unless this is important for the business. If you can get by with used, surplus, or low end equipment and supplies, you should do so. Getting a bunch of fancy business items might come from an assumption that you're about to make a bundle, and this isn't a valid assumption. However, sometimes it is impossible to accomplish a task when you're working with junk. If you need a quality item to get the job done, you should get it.

Rule No. 11: Be certain to keep personal finances seperate from company finances. If you need to put personal money into the company, you should establish a specific way of doing this, one which you will record. If your company seems to have massive amounts of extra money, then it might be time to issue yourself a paycheck.

There are limitless possibilities for small businesses that can exist. It is possible to tailor the design of your company based on your particular needs. It can be an exciting undertaking, and doesn’t have to be a “corporate” or a “sterile” approach. The point of it is often to have fun at what you’re doing, and not always to make the most possible money.