Why do so many ventures go out of business while others survive for many years?

bobcat

bobcat

Well-known Member
Location
Northern Calif
It seems like if you excel at what you do, odds are good you'll survive.
Is it that most businesses are content with being just average or below?
Is it: Location, management, lack of capital, advertising, poor products, wages, competition, service, demand, or they are just not tuned into what customers want?
 

Location can be a huge factor. I worked in the first all-organic food store in Vancouver, and liked working with the entrepreneur. We sold bulk food like grains & large bags of potatoes, but also fruit imported from Hawaii, and honey from certain beekeepers in clean semi-remote areas, etc. The boss, Barry, was a nice guy and quite energetic, but didn't start out with a lot of money. Hence, the store was not in a prime-rent business neighborhood.

Within a couple years a man with more capital to invest started another store with the identical core idea, in a much better location. It grew steadily, drawing business away from Barry's store. So Barry was forced to shut down his retail outlet, and downscaled in order to specialize in food importing only (wholesale). Even that disintegrated in a few years, because the competitor got into direct importing too.
 

Last edited:
There are many things I dislike about Walmart currently but the fact that Sam Walton opened his first store in 1962 tells me he evidentially did SOMETHING right. I imagine hard work had a lot to do with his success.
 
My last work "title" was senior business analyst, which gave me an insight into all the aspects of making a successful or not successful business. This was for large scale endeavors, but the principals are pretty much the same for small ones.

- It takes 3 specialists to make a business work. Simply put, you need a tech person (knows the product), a people person (deals with suppliers and customers and employees), and a money person (takes care of forecasts, and day to day money issues.

- We have all seen businesses opening and lasting a year of less. The biggest reason is they did not have a viable business plan, nor the capital to support the business no matter what, for a year.

- A business plan is built around the budget, which is a projection of costs and revenue for a future period of time - typically 6 months or a year. The problem arises in that the developer has rose colored glasses, projecting maximum revenue and minimum expenses. I've witnessed this several times in my experience, often with people that should know better.

- A very recent example was a barber/stylist I know. She was renting a stall in a large a shop, and wanted to be on her own. So she found a nice place, with rent of $2,000 per month. That is not unusual here by the way. So we talked about it and I reminded her that she will have other expenses, such as power, perhaps water and gas, insurance, and supplies. So we guesstimated what that would total per month and it was a grand total of about $3,000 per month.

I reminded her that she would probably like to have a salary, and that would be added to the total. It's funny, but that is often forgotten about. In this case, she said a minimum salary of $4,000 a month would be nice. Now the grand total of expense is $7,000.

So I asked her, "how many clients do you have in an average month"? And then I asked, "including tips, what is the average income from each client"? Of course the shock came, when we calculated the total estimated average income, and compared it to the total costs of $7,000 per month. She almost came to tears, and said I think I need to stay where I am, or find a few others to share our own shop.
 
Mobilman44 said:
My last work "title" was senior business analyst, which gave me an insight into all the aspects of making a successful or not successful business. This was for large scale endeavors, but the principals are pretty much the same for small ones.

- It takes 3 specialists to make a business work. Simply put, you need a tech person (knows the product), a people person (deals with suppliers and customers and employees), and a money person (takes care of forecasts, and day to day money issues.

- We have all seen businesses opening and lasting a year of less. The biggest reason is they did not have a viable business plan, nor the capital to support the business no matter what, for a year.

- A business plan is built around the budget, which is a projection of costs and revenue for a future period of time - typically 6 months or a year. The problem arises in that the developer has rose colored glasses, projecting maximum revenue and minimum expenses. I've witnessed this several times in my experience, often with people that should know better.

- A very recent example was a barber/stylist I know. She was renting a stall in a large a shop, and wanted to be on her own. So she found a nice place, with rent of $2,000 per month. That is not unusual here by the way. So we talked about it and I reminded her that she will have other expenses, such as power, perhaps water and gas, insurance, and supplies. So we guesstimated what that would total per month and it was a grand total of about $3,000 per month.

I reminded her that she would probably like to have a salary, and that would be added to the total. It's funny, but that is often forgotten about. In this case, she said a minimum salary of $4,000 a month would be nice. Now the grand total of expense is $7,000.

So I asked her, "how many clients do you have in an average month"? And then I asked, "including tips, what is the average income from each client"? Of course the shock came, when we calculated the total estimated average income, and compared it to the total costs of $7,000 per month. She almost came to tears, and said I think I need to stay where I am, or find a few others to share our own shop.
Click to expand...
All good points, and I would add someone who is great at marketing. You can sell people pet rocks if you can convince them they need it.
 
Yes, that is true. I've been told by some would be business owners that they can "do it all". The truth is, that person is an extreme rarity - for typically a tech guy and people guy (and marketing) could be one person, but its unusual that they know about money. Sadly, I've seen this hit close to home with my extended family.

Oh, one other thing I've seen...those folks that make a go of it tend to be married to the job - like 7 days a week, 12 or more hours a day. That may sound great at first, but it quickly gets old. Again, I've seen this first hand with extended family.
 
Some think if you're really good at something you can make a successful business out of it, and you can if you're also really good at running a business.
 
I think sometimes businesses start out trying to be all things to all people, but in the end, you have no brand recognition.
JMO, but perhaps the riches are in the niches, at least until you have brand recognition, and then slowly introduce more new products. That strategy seemed to work for Starbucks.

Try to be the best at one thing, and when you achieve that, then roll out new introductions. Like Levi jeans, become known for your quality, and then expand.
 
I worked for a Small Business Administration lending firm for a year once. We lent the money, the SBA guaranteed repayment.

You wouldn't believe the cockamamie schemes people showed up with.

We required a strong business plan, a measure of experience in the endeavor and a certain amount of money of their own to put in the business to show their sincerity or at least some collateral they could put up.

We were required to let anyone give their pitch, no matter how far-fetched. Once two guys came in, asking for a million to start a business selling office supplies to military bases, on the basis that they were veterans who should get preference.

A very short investigation showed that they had absolutely no experience in the office-supply business, no business plan except "we're gonna sell hard", not a cent of their own and, worst of all, they had done hard time in a federal pen for drug dealing which had started while they were IN the military, thus rendering them ineligible for the type of security clearance needed to do business with Uncle Sam.

Restaurants were another big favorite, with hopefuls who wanted to open an independent sub shop within a block of two or three chain sub shops. Almost guaranteed failure.

Or people who wanted to re-open a location where four to five restaurants had failed in the last five years. Oh, they had great ideas for the restaurant, but no solution for the fact that you couldn't turn left into the place but had to go three blocks and make a u-turn to get back to it. People won't do that. Location, location, location.
 
bobcat said:
I think sometimes businesses start out trying to be all things to all people, but in the end, you have no brand recognition.
JMO, but perhaps the riches are in the niches, at least until you have brand recognition, and then slowly introduce more new products. That strategy seemed to work for Starbucks.

Try to be the best at one thing, and when you achieve that, then roll out new introductions. Like Levi jeans, become known for your quality, and then expand.
Click to expand...
What you're referring to is an example of a business that became enormous & famed. In my opinion, that's not the only sort of business that's successful. A locally based proprietorship can after some time develop a loyal clientele, based on factors like decent location, good access, friendliness, reliable service. If a business of that sort survives, it can support a family... even if its riches are just in a niche. I don't know about where you live, bobcat, but I've seen that sort of success (which I respect) in my region and in many places during my travels.
 

Why do so many ventures go out of business while others survive for many years?​

Lack of Focus: It’s all too easy for a business owner to get so embroiled in the day-to-day operation, doing too much of the ‘doing’ that they forget (or avoid because it’s not in their comfort zone) to focus on key information, review it and take action on it.

Allocating the time to, at least once per week, review the most recent financial information. Things like sales, profit, costs, overdue payment and so on and so forth.

Business failure figures show that only around 10% of small businesses have a marketing plan, there will normally be some marketing activity but it is not consistent, not measured and very little planning goes into it.

It’s easy to get carried away when you win that large client that can send your turnover and profits soaring. However, sometimes that large client can become very time consuming and the risk is that some of your other clients get neglected and you start losing other business. A better strategy is to ensure you are marketing to bring in other clients to reduce the reliance on the larger ones.

Most business owners, unsurprisingly, have to make it up as they go along and then find that staff don’t always do what you expect and that they have needs and expectations of their boss. However there are management training courses, or at the very basic, read books on the subject matter.

Many business failures had no clear goals or strategy, The thought of producing a plan for the business is a big turn off for an awful lot of owners but, it doesn’t have to be onerous. Just think, where are you now? Where do you want to get to? What needs to happen to get there?

There's no need to pay somebody else to do it for you, business owners will know far more than any consultant about their business.
Another real benefit of committing a plan to paper is that just the fact a plan will prompt action, spark ideas and opportunities, and create benefits for the business.
 

You must log in or register to reply here.

Back
Top