Last week I wrote a fairly extensive article on the Entrepreneur’s Journey and how 70-80% of businesses in the struggle zone never ever escape from here. Many business owners get disillusioned and go back to being an employee, never ever to talk about their dreams again. So, if you’ve taken that giant step and gone into business, you want to make sure that your new business stays IN business and become all that you dream it would become. Don’t become one of the 80% of businesses that fail in the first 5 years. Implementing strategies for success must become a priority.
UNDERSTAND WHY BUSINESSES FAIL
There are many reasons why businesses fail. The following are just some of the biggest causes of business failures that you must know about. I’m a great believer that awareness is 50% of the answer – the other 50% being the implementation of the necessary strategies so that you can spend as little time in the struggle zone as possible.
1. Cash is King
Lack of cash for working capital is probably THE biggest contributor to stress to the business owner or to a business crashing in the struggle zone. Or if it didn’t crash, it’s the biggest cause of a founder losing control of his business! Many new business owners make their very first mistake when they start up a new business – they use up ALL their capital to start the business, thinking that when the business starts, they will get sales coming in to help cover expenses. However, often the sales don’t happen as fast as they thought it would. 3 months down the track, the bills are coming in and their cash has run out. They look for investors to help fund their “it can never fail” business and before you know it, they’ve lost control and the investors have kicked them out.
That won’t be the first time something like this has happened. I’ve been down this road before and it ain’t nice! This is something to be aware of – Budget for enough working capital to cover yourself. If you think it’s going to take 2 months, allow 4. Over-estimate the costs. This is the one time when being conservative will stand you in good stead. Cash is King – always has been, and always will be.
2. If you can’t justify it for business reasons, you can’t justify it at all
I’ve seen so many business owners make decisions for their business based on tax reasons. You know the ones I mean! Towards the end of the financial year, their accountant tells them that they will have lots of tax to pay. What do they do? They head out and spend money on STUFF that they do not really need … JUST to save some tax dollars. This is guaranteed to send you INTO the struggle zone if you weren’t there before.
Think about it – When you out and spend, say $50,000 on a new car (that you didn’t think you need) or $600,000 to buy a property just to get the interest deductions, you now have an ongoing commitment to repay a loan. That repayment will eat into your cashflow. You potentially go from having spare cash each month to having to scrabble around to make enough money to enable you to meet your loan commitments. Assuming you’re in the top rate tax bracket (say 50% tax), that still means that you have to pay out $1 for every 50 cents tax saving. You’re still going to be out of pocket!
3. Love the Shortcuts
Don’t you love shortcuts? I do! I take them all the time especially when it comes to cooking 🙂. Why would I go to all that trouble to make something up from scratch when I can buy a pre-mix and the meal is just AWESOME!?! However, be aware that some shortcuts will cause you a lot of problems later.
A great example of a shortcut that you must NEVER take is when you’re a house. You must have the foundations laid properly. You must allow the appropriate time for the concrete to cure properly. Rush this one and you will live to regret it – maybe not tomorrow but it will come. So slow down. Prepare properly.
In the same way, take the time to build your business foundation. A strong foundation will minimise the time you spend in the struggle zone. For example, if you are going to launch a brand new type of business and the business model is untested, you may want to open quietly so you get a chance to work out the shortcomings. A huge opening party is very tempting because you’re in a rush to just get it out there. Whilst speed to market is important, rushing the process is not.
4. Understand the Power of Relationships
I don’t know about you, but I find that my hometown of over two million people is really a very small place. People talk. Social media allows people to vent their frustrations and it can go viral. Making enemies is not good public relations. You might not agree with how your vendors do business. And they might not agree with how YOU do business. That’s OK. My golden rule has always been to remain ethical and stick to my values in the face of competition.
When I was project managing the building of my home, I made sure that I paid all the contractors on time, EVERY time. When I pushed to get my house completed in record time, they obliged. Some even worked over their Christmas break! That is unheard of in the building industry. The result was a double storey home completed in a record-breaking 6 months! Most builders would have taken 18 months to do what I did in 6 months. That is the power of maintaining good relationships with your vendors and contractors. Even today, I can still pick up the phone and many still remember me. I’m no longer just another face in the busy world.
Relationships might provide just the support you need when you’re looking for help to get out of the struggle zone.
5. Lack of Experience is NOT the Deal Breaker
Lack of experience in running a business is not in itself a problem. There is one proviso to this – you must know when to ask for help. Don’t be so up yourself that you think you know it all. Trust me. You don’t! I’ve been in business for nearly 40 years and I’m still learning. I’m still asking for input on my business. So, don’t wait until it’s too late. Ask sooner rather than later!
BUT ask the right person for help. Before you ask someone what they think, make sure they do THINK! How often have we just told our friends about our problems and asked for their advice? Next time, before you do that, evaluate their expertise. If you’re asking for help or their opinion on a business problem, ask yourself if they have any experience dealing with the particular problem you have. Seek advice from those who are better than you. Seek advice from those who have been there and climbed out. If you’re at the top of your class, then you’re in the wrong class. The blind leading the blind is not good business practice.
STRATEGIES TO GET YOU OUT OF STRUGGLE ZONE
There is no single strategy to get you out of the struggle zone. As always, it’s about a combination – which combination you use will very much depend on what industry and type of business you’re in. Let me summarise this into broadly three categories.
1. Never Put New Wine Into Old Wineskins
Why not? First, a bit of background. A wineskin is an animal skin that has been sewn up and used for holding wine. Apparently, wineskins make very durable containers (they didn’t have plastic all those years ago!). However, as a container, it does require some initial care and maintenance for maximum use.
For the old skins would burst from the pressure, spilling the wine and ruining the skins. New wine is stored in new wineskins so that both are preserved.
There’s so much wisdom in the bible. What do wineskins have to do with helping you get your business out of the struggle zone? I learnt 4 things from this verse:
A. Remain FLEXIBLE at all time.
Old wineskins become stretched as the wine fermented inside them and they become brittle. Putting new wine into an old skin would cause the skin to burst from the pressure. How does this apply to business? Just like wine, business is not static. Things happen. Rules change. New competitors enter the market. As a business owner and entrepreneur, you must remain flexible and change your methods and product as the market changes. For example, can anyone remember the old vinyl records? This was followed by the audio cassette, then CD and a multitude of variations in between. Today’s generation think nothing of streaming. As a business owner, if you had refused to acknowledge the changing environment, you would not have a business. You have to keep up with the times if you are to move quickly through the struggle zone.
B. Being UNCOMFORTABLE is a good thing
Like an old wineskin, we should let ourselves be stretched. John F Kennedy said “There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.” His brother Robert Kennedy said “There are people in every time and every land who want to stop history in its tracks. They fear the future, mistrust the present, and invoke the security of a comfortable past which, in fact, never existed.” You see, if you stay in your comfort zone, you will never grow. Being uncomfortable is where the magic happens for you and for your business. Being uncomfortable is where the opportunities appear. The fact is that if you want something you’ve never had, then you must step out and do something you’ve never done. Be uncomfortable. Be comfortable with being uncomfortable. BUT never become comfortable with being in the struggle zone. The aim is to get out of there as fast as you can.
C. Be OPEN to change.
As a Baby Boomer, I came into this world and grew up with Rock and Roll, Elvis, Beatles, Woodstock and miniskirts. I was also part of the first two income household generation and the first divorce generation and technology became a part of my world. I can still remember the very first black and white TV and the first 286 home computer! The only certainty in life itself is that it will change. Nothing stands still – true for life, true for business. Instead of complaining about yet more changes that affect your business, embrace the change. Explore how the change can positively impact your business. Before the World Wide Web burst on the scene, your potential customers could only find out about you if you had 100’s of dollars to spend on media advertising. Today, you can reach millions … but ONLY IF you embrace the new frontier that social media brings. And if we hadn’t been open to change, we would still be storing our wine in wineskins today because that was the way it has “always” been done.
D. Keep LEARNING.
Obviously a long long time ago, someone tried to pour new wine into the old wineskins and the old skins burst and spilt the wine and ruined the skins. There’s nothing quite like having to clean up a mess from a mistake we make. Not everyone learns from their mistakes. And not every business owner learn from the mistakes they made in their business. Those are the ones who never leave the struggle zone. I’ve met business people who kept repeating the same mistakes over and over. There was nothing for them to learn because it was not their fault. It never is. It was the economy. It was the new competitor. The bank didn’t understand. The customer was stupid.
John Maxwell said, “Fail early, fail often, but always fail forward.” That is the difference between average people and successful people. It is about learning from our mistakes. In business, the question is not whether you would encounter problems, but how you are going to deal with your problems. And the best way to prepare for that is to keep LEARNING! As you learn, what was once a major problem in your business will become just a tiny bleep in your business.
2. Understand the Game of Business
One of my favourite analogies for those wanting to go into business is to have my clients think of it as a game – the Game of Business. To win ethically and with integrity, you have to play by the rules of the game. And, as with any game, you should always play to win (unless you’re playing against your grandchild 🙂 ). Otherwise, why bother? Life can be less stressful as a spectator! It’s a game that anyone can play. Like parenthood, you do not have to attend any compulsory training or get certified before you play. There are no limits to the size of the prize money. Many would consider this game to be risky – with winners or losers dictated by the throw of the dice depending on whether Lady Luck shines on you.
Having played this game all my adult life, I have learnt more than a few things about the game of business – from the mistakes I made in my own businesses to learning from the mistakes made by others in their businesses. From reading the 101 books on business to reading books on psychology. Yes, books on psychology. Definitely, one of the most useful subjects matter to know and apply if you’re running a business.
At the end of the day, it is not about whether Lady Luck shines on you. It is not about the hand you get dealt with. It is about how you play those cards you get. THAT is what will dictate whether you win or lose this. That is what will dictate how long you spend in the struggle zone.
So how best should we play?
A. Understand the RULES of the game
To me, honesty and integrity are fundamental to everything I do in business. There are those who do not consider this to be essential – that is their choice. I want to like myself and I want to be able to sleep each night knowing that I have done the right thing. I want to know that I have not intentionally or knowingly cheated anyone. People will do business with those they know, like and trust. Therefore trust is crucial. Without trust, you have no business.
How do you build trust? In its simplest form, think about this as a relationship. Ask yourself, how do you build trust in your various relationships e.g. with your spouse, with your friends, with your work colleague? Now apply that learning to your customers? That is why understanding human behaviour is crucial to getting you out of the struggle zone. No man is an island. You do not live in a cocoon where you can ignore people. As Dale Carnegie said, “About 85% of the factors contributing to … success is related to the ability to work effectively with people.”
B. Play to WIN!
Playing to win does not mean you will never lose. Nor does it mean that you become so cautious that you do nothing and take no risk at all. In fact, I can guarantee you that you WILL lose some of the time. The question becomes HOW you pick yourself up, brush off the bruises and continue playing. History is full of famous failures we can learn from. From Albert Einstein to Bill Gates, from JK Rowling to Steve Jobs to Walt Disney. They all failed miserably. Yet, every one of these “failures” came out stronger and more determined. They set their eyes on the prize and they went for it. How many people do you know who failed once and never picked themselves up? They give up at the first sign of resistance and possibly spend the rest of their life saying “I tried .. but it wasn’t meant to be”. Those are the businesses that never make it out of the struggle zone.
C. Keeping SCORE
You got to have a dream if you want to make your dream come true. Someone once said, “most people aim at nothing and hit it with amazing accuracy”. How true. Many see business as the ultimate lazy man’s dream. Work when you want (or preferably, not at all) whilst ordering your employees around and have them do the work. In reality, that does not happen. The fact is that you work 8 hours a day for survival. It is everything else above that propels you out of the struggle zone towards your success. Therefore, if you want to keep a score of how many hours you have to work, then I would suggest that entrepreneurship is not for you. I always did say, I love the freedom of being self-employed. I get to choose WHICH 60-80 hours a week I work 🙂. Having said that, if you love what you’re doing, you will never “work” another day in your life. Think about that!
D. PERSISTENCE is a virtue
As a baby, you tried walking. You got up. Took a step, wobbled and fell. Did you give up at that point and say “I tried, it doesn’t work” and you determined never to try again. Or did you get up and tried again. And again. And again. Until one day, you ran. This is exactly the same with business. You try out a new idea. It may work. It may not. You may have to change the approach. But that doesn’t mean you stop trying. Business is just like life. You get to try new things. Some work, some don’t work. Some need a lot longer before it works. And if you give up before you’ve given it a decent chance, then you can be guaranteed that the only outcome is a failure.
The elite sportsperson did not get to where he or she is without a lot of blood, sweat and tears. All we see is the glory as the winner stands on the podium receiving his or her Gold medal. We do not see the planning and the days and weeks of getting up at 4 am and swimming the laps, day in day out. We do not see the discipline of not always being able to indulge in the type of food that their friends enjoy. Nor do we see the discipline of the missed social nights out because they have to be up early the next day to train. The training program sucks but whether you like it or not, success is an iceberg. It is an on-going process. The sports people at the top of their game continue to train and they all have a coach.
3. It’s All About Self
Getting your business out of the struggle zone and the success that you are pursuing is ultimately dependent on you! There’s a saying, “To grow your business, your must grow yourself.” It’s about making sure that you do grow YOU in the following areas:
My mentor, John C Maxwell said: “Everything rises and falls on leadership.” However, knowing about leadership is very different to actually leading. Without leadership, all other business resources are ineffective. Leadership IS a learnable skill. In 21 Irrefutable Laws of Leadership, John Maxwell set out the laws you must learn to be the great leader you can be. These laws are the foundation of leadership. Learn them and apply them to your life. Each law is like a tool, ready to be picked up and used to help you to grow your business and achieve your dreams.
Your ability to communicate is an important tool in the pursuit of your goals. Like other skills, it is one that you can learn. Effective communication requires more than just the providing of information. When you do it right, it builds a great culture in your organisation, it fosters understanding, strengthens relations, improves teamwork and builds trust. And people buy from those whom they “know, like and trust”. Without trust, there is no sale. Without sales, you will not get out of the struggle zone.
Selling is not marketing. Selling is the action which converts the product into cash whereas marketing is the process of meeting and satisfying the customer needs. And selling IS a learnable skill. No business can survive if it does not “sell”. The fact of life is that we are all in sales whether we like it or not. As an employee, you had to learn to sell yourself to your potential new boss (a total stranger) and it wasn’t so hard, was it? You learnt that skill because you had to. Selling in business is no different. You are selling your services or products to a stranger.
D. Entrepreneurial Mindset
The biggest risk to YOUR success is thinking like most people think, to not treat people as your greatest assets. Your success and the quality of life that it supports can only reflect the quality of your thinking. You need to Think Differently. Do Differently. Simple to say, not so easy to do. Insanity is doing the same thing over and over again and expecting a different result. So, if we want a better result and we want to get out of the struggle zone, we have to change. The best way is to get yourself a mentor and coach. Whether you decide to do this with me or someone else, make sure you do that. You will not regret that. This is not something you can do by yourself by simply reading books or attending the occasional conference. That doesn’t work. I should know – I’ve been there!
ESCAPE FROM THE STRUGGLE ZONE
In many sports, winning an Olympic Gold is the pinnacle of your chosen sport. In business, the sky is the limit. It really is. there is always another challenge to conquer. It never gets boring. Not everyone wants to be a Mark Zuckerberg and build a Facebook empire or even a Warren Buffet and become an investment genius. Success is different for everyone. What does success look like for you? It’s time to dream. Dream big. Start small. And one day, you will turn around and realise that you did it! You moved your business through the struggle zone and you have a success story… Just like this Chinese girl from a lower middle class Malaysian Chinese family did.
About the Author:
Patsy Lim’s business and financial background (having qualified as a Chartered Accountant in 1980), together with her entrepreneurial spirit enables her to apply a potent blend of strong financial and accounting expertise, deep practical business experience, and entrepreneurial flair and creativity to complex business problems. As an entrepreneur, she understands the issues that an entrepreneur faces. So, unlike some accountants who only know the theory of business, Patsy has had hands-on experience of what it means to be IN business, to start a business, to grow a business, and most of all, to manage a business when times inevitably get tough!