August 21, 2015
I have been wanting to expand the website to include a section on the lessons learned about business over the years, specifically the things that relate to small business and the current environment. I will do my best to keep it interesting and colorful, but I really hope that some of the mistakes I have made over the years can be useful in the current market.
We have lots of information available from highly successful business people with models for duplicating that success. I don't want to discount their guidelines for success, but rather offer a perspective from the larger subset of businesses. The standard bell curve is applicable in this situation, in my opinion; some will achieve great success, some will be complete failures, but most will find themselves somewhere in the middle.
Learning about the path of great successes can be very useful, provided that path was filled with crossroads, a few setbacks, and the occasional flop. Those that have found themselves on the golden path for their entire trip, really don’t have much to offer other than “Hey, find that Golden Path.” To paraphrase a Gershwin tune “Nice work if you can get it”, `but I would say there is much more to learn from those traveling a copper road with plenty of acknowledged mistakes and one that easily dents. It will provide more lessons.
Now I understand this may sound like justification for where my path has taken me, and you may be right. But I hope that doesn’t limit the value of those lessons.
I didn’t confront many issues until my business started leveling off and then declining. We had to work harder to maintain, let alone attempt to increase business. This is also the point at which I started taking greater notice of the effects of past decisions. A good decision doesn’t look so good until a few bad ones come along for comparison.
First let’s come to grips with the business cycle. Understanding that every business and product will have a place in this mathematical system will go a long way in the battle. And yes, business is a battle. You will battle trends, you will battle competition, you will battle your own ego when things are going well, and you battle your own doubts when things are tough.
Some business cycles are short, like fads (think the pet rock). Some will last longer, through an era of peoples lives (clothing styles or music genres), and some will change the way we act on a daily basis (think Facebook here). Identifying the cycle will be very important in making those long term decisions and also to know when its time to call it quits and move on. It’s never easy to see the big picture when starting a business, especially with the excitement and nervousness that can take over your emotions. Not to mention the answers aren’t always obvious. Even the customer doesn’t know what they want in many situations until some creative person presents them with that new option.
Cycles are not all bad, even the short ones. It can give a business the opportunity to utilize a current trend and get into the game, or add to profit margins. Most people can identify a current happening as it begins to take over, but seeing it before it starts or before it exists is a special skill. By taking advantage of the recently obvious, you can get the external support or backing you might need from those with less vision. From there, the business can start to make those small decisions that can have larger directional changes for the future that are less obvious. For those of you with a mathematical background, think about a one degree shift in a line and how further down the axis that shift brings you to an entirely new and different position.
That brings us to the next point I would like to make. A point about change and risk. I found it was those small decisions and risks that I took over the years that led me to take advantage of the strengths and limit the weaknesses in the business. These are often areas that you think you know going in, but the market dictates once you start. And often they are in conflict.
When we opened, we were certain that bagels would be enough to carry us for a long period of time, and the concept of providing fresh baked products all day would be all that was needed. What we learned was that customers quickly became sated with the idea of a bagel sandwich for lunch, but really like the items we put between them. This is what pushed me to follow through on my interest in baking fresh bread. It was no where in my original business plan. It was a small decision, and a risk I might add, that helped extend the business cycle. It added plenty of work to the daily schedule and was even a competing product for the bagels, but turned out to be one of our greatest strengths over the years. Fresh baked bread that was often still warm, made into a sandwich. Small change in the beginning, big win in the end.
I referenced my “Business plan” above and it is worth mentioning a few things about that at this point. Do it. Period. There is absolutely no down side to writing out all the sections of any one of the thousands of outlines of a business plan. It forces you to answer many of the questions you will be confronted with in the future. You may not want to think about those questions, but they don’t care. They will find their way to you, usually sooner rather than later. When asked I always recommend a book that was written by one of my professors at R.I.T. who has since passed away. William Stolze’s “Start up: An entrepreneur's guide to launching and managing a new business.” He was one of the founders of a R.F. communications, a company that was eventually bought out by Harris Corp. They are still in business and have had many years of success.
One of the many problems of writing a business plan is that it can convince you that your idea may not be as good as you thought it was. It creates doubts, and loads you up with the questions about your business idea and the possibilities. A hard pill to swallow, but better to do so when your business in not demanding a decision, and you can take your time to figure out the options.
The second point, which may seem contradictory to spending time thinking about problems and writing them down; do not be afraid to deviate from the plan when the tide dictates. The difficult part is knowing when those waves represent the proper time.
So this is really the big point of this piece.. Write a business plan. No matter how many times you have started a business or how smart you are, write it. The exercise alone will a be a eye opener to understanding the demands of most businesses. And do the financial projections. Costs and revenue. One of the hardest parts is realistically determining revenue, but that is one of the hardest parts of being in business and if you are unwilling to do on paper I might suggest you rethink the whole idea of running a business.
When projecting revenues it is important to break down the tasks required to provide the service or the product into work blocks (time and/or raw materials) to project hourly/daily/weekly maximums. This will give you a range to work with for both revenue and costs. It seems obvious to break down the costs to come up with a product value, but the time it takes and the total possible units in a day if often forgotten.
I will repeat it again. Write it! Several times I have suggested that people starting a business go through this exercise and almost every time they think it is a great idea but never follow through. In almost every occasion there had been a major development on the road, and the stress in caused led to a rushed or poor decision, which in turn led to further stress. I will leave you with a well known idiom. You know, those things we all have heard and know are true, but never practice in life. “Well begun is half done.” - Aristotle. He may not have been accurate on all his philosophies, but it is well accepted that he gave us a starting point for many of our current belief systems. This is one of the building blocks he instilled in philosophical thinking that is still proven to be spot on.