The views expressed in Guest Opinions represent only those of the author and are in no way endorsed by Richmond BizSense or any BizSense staff member.
Recently an old friend I had not seen for a couple of decades told me about some troubles she had and how she had overcome them.
Later I thought about how much more useful her story was than all those holiday letters I get every year chronicling the new house, junior’s new doctorate degree or the round-the-world trip my friends just finished.
The same is true in business.
There has been a warehouse full of books written about what makes businesses successful, and you can find a lunch meeting every week with a speaker from the latest fast-growing company. Each seems to have the answer to success.
But listen to them carefully. Usually, their stories are filled with examples of how they avoided pitfalls or built something better based on a mistake or failure.
They might talk about how they realized that the market for cellular phones was growing, but, if you probe a little bit, you will find that they spent the past six months liquidating their inventory of fax machines.
There is no shortage of mistakes you can learn from. The difficulty is in recognizing opportunities and making them relevant to your needs.
To get you started, here are some of the tips I have picked up from observing real difficulties faced by my clients:
Cash flow is usually more important than profit. The best example of this was a business plan I wrote for a highly seasonal business. Based on their projections of profits, they needed $250,000 to launch a growth plan. Based on monthly cash flow, they needed $750,000.
Sales projections are never “conservative.” Almost every new business person says that his or her projections are conservative, but almost no one ever makes them. More importantly, no experienced investor or other colleague will believe you anyway.
A deal isn’t closed until your bank account says it is. Anything can — and will — happen to a deal. I worked with a client who did not sell his business because key executives of the acquiring company died in a plane crash two weeks before closing.
A “slow no” rarely turns into a yes. People actually hate to say no to an enthusiastic entrepreneur. They put it off as long as they can. Don’t make plans or allocate too many resources to people who keep you hanging.
It’s easier to sell a solution than a “better idea.” If people don’t perceive a need for a product or service, you are unlikely to convince them yours is better. Think “ice makers to Eskimos.”
You always have competition. Just because no one else does what you do, that doesn’t mean you don’t have competition. Wasn’t it just a few years ago that the Times-Dispatch thought its biggest competitor was the afternoon paper?
You can also learn a lot from the mistakes of people you don’t even have to meet. It’s not hard to spot opportunities to learn from people in the news, sports and politics. For instance, Accenture has hopefully learned it is not wise to tie its brand too closely to a sports figure.
Finally, use your own experiences. This doesn’t mean that you have to make a lot of mistakes before you have any useful information. It means you should look to your own experiences with other businesses and organizations. For instance: What have you learned about the importance of customer service from your wireless carrier?
The best thing about learning from mistakes is that you will never run out of study material.
The views expressed in Guest Opinions represent only those of the author and are in no way endorsed by Richmond BizSense or any BizSense staff member.
Recently an old friend I had not seen for a couple of decades told me about some troubles she had and how she had overcome them.
Later I thought about how much more useful her story was than all those holiday letters I get every year chronicling the new house, junior’s new doctorate degree or the round-the-world trip my friends just finished.
The same is true in business.
There has been a warehouse full of books written about what makes businesses successful, and you can find a lunch meeting every week with a speaker from the latest fast-growing company. Each seems to have the answer to success.
But listen to them carefully. Usually, their stories are filled with examples of how they avoided pitfalls or built something better based on a mistake or failure.
They might talk about how they realized that the market for cellular phones was growing, but, if you probe a little bit, you will find that they spent the past six months liquidating their inventory of fax machines.
There is no shortage of mistakes you can learn from. The difficulty is in recognizing opportunities and making them relevant to your needs.
To get you started, here are some of the tips I have picked up from observing real difficulties faced by my clients:
Cash flow is usually more important than profit. The best example of this was a business plan I wrote for a highly seasonal business. Based on their projections of profits, they needed $250,000 to launch a growth plan. Based on monthly cash flow, they needed $750,000.
Sales projections are never “conservative.” Almost every new business person says that his or her projections are conservative, but almost no one ever makes them. More importantly, no experienced investor or other colleague will believe you anyway.
A deal isn’t closed until your bank account says it is. Anything can — and will — happen to a deal. I worked with a client who did not sell his business because key executives of the acquiring company died in a plane crash two weeks before closing.
A “slow no” rarely turns into a yes. People actually hate to say no to an enthusiastic entrepreneur. They put it off as long as they can. Don’t make plans or allocate too many resources to people who keep you hanging.
It’s easier to sell a solution than a “better idea.” If people don’t perceive a need for a product or service, you are unlikely to convince them yours is better. Think “ice makers to Eskimos.”
You always have competition. Just because no one else does what you do, that doesn’t mean you don’t have competition. Wasn’t it just a few years ago that the Times-Dispatch thought its biggest competitor was the afternoon paper?
You can also learn a lot from the mistakes of people you don’t even have to meet. It’s not hard to spot opportunities to learn from people in the news, sports and politics. For instance, Accenture has hopefully learned it is not wise to tie its brand too closely to a sports figure.
Finally, use your own experiences. This doesn’t mean that you have to make a lot of mistakes before you have any useful information. It means you should look to your own experiences with other businesses and organizations. For instance: What have you learned about the importance of customer service from your wireless carrier?
The best thing about learning from mistakes is that you will never run out of study material.
Stan-
You are right on the mark. There are many books and study guides on the market about how organizations used systems, processes, or methodologies to increase sales or reduce costs. My personal bias is that mistakes create an emotional response that we do not want to recreate. I do think it is important to become exposed to mistakes that others make as they build businesses because we run into many of the same issues. Being exposed to those issues before they happen or having someone to turn to when they do can make all the difference.
Good article Stan