Learn from My Recent Mistake
In terms of launching, growing, and maintaining your startup, where do you spend your time, energy, and money?
I'm not asking that question in order to enundate you with time management tips. Instead, my purpose is to encourage you to think strategically about your business for a moment.
To succeed you obviously need customers. And that means three things:
- You must have a product of service which they want.
- They must know about what you offer.
- You must offer your product or services at a price which they consider appropriate for the value that they receive.
Simple and straight-forward enough, right? So let's look at the processes which you use to accomplish these three essentials.
A host of variables shape these processes. But the variables all fall into one of two categories: things that you can control and things that you cannot. The more your success depends on variables outside of your your control, the higher your risk of failure. Let me offer a personal example.
Too Much of a Good Thing
Last year my leadership development firm brought in a number of new clients in the oil and gas industry. By mid-year they had became my largest portfolio of my new business. I'm sure you can guess what happened next.
When the price of oil plummeted the last half of the year, almost all of this business evaporated. Companies that had been cash-rich at the outset of the year were squeezing pennies by the fourth quarter.
One reason that you've not seen my inbox magazine in recent weeks is that I spent November and December re-energizing my marketing efforts to find replacement business. Fortunately I have enough diversity in my client base that the setback in this one industry was not catastrophic for me. But it did put a significant dent in my cash flow and my cash reserves coming into 2015.
My mistake, you see, was letting too much of my new business depend on something over which I had no control: the price of oil. With a little forethought, I could have avoided this dependency by pursuing opportunities in other industries more aggressively.
Overindulging in Low-Hanging Fruit
I let this dependency develop, in part, because opportunities in the oil and gas industry were so plentiful and offered such low-hanging fruit.
I live in Texas, where I'm surrounded by hundreds of small businesses which provide oil field services. Most of them mushroomed in size over the past five years. With this growth, their management talent has been stretched quite thin. This made them eager for the kind of management development programs that I offer.
You can see, therefore, why it was so tempting to focus on capturing these opportunities to the exclusion of pursuing openings elsewhere. In hindsight, I should have handled the temptation in a more balanced way.
Common Business Owner Mistakes
In this particular instance my mistake was allowing myself to become dependent on a commodity whose price I could not control. But we can make comparable mistakes in other domains of our marketing and business development.
Here are some ways in which I commonly see owners of startups depending too much on factors beyond their control:
- Relying on "word-of-mouth" marketing to bring them new customers
- Making premature purchases of equipment and services in the belief that "I'll soon be making enough money to afford this"
- Believing so strongly in their product or service that they are convinced that it will "market itself"
- Assuming that by hiring really sharp people, they will surround themselves with employees who can learn the business quickly without a lot of training
- Making no allowances for a health crisis or accident that might sideline them as the business owner for an extended period of time
- Putting too much dependence on revenue from one or two customers (or in my case above, too much dependence on one industry)
- Not having a structured way to measure the impact of their marketing dollars so that they don't know which of their marketing efforts create a positive return and which do not
- Being overly-reliant on one or two vendors for critical supplies or materials
- Counting on receivables to be settled on schedule
- Embarking on critical plans that depend on inflation being held in check
- Presuming that their competitive landscape (i.e., the number of competitors in their market) will remain unchanged for the foreseeable future
I could continue to build this list, easily doubling or tripling its size. My purpose here is not to offer an exhaustive catalog of these types of mistakes, but to illustrate how easy it is to put faith in factors beyond our control.
Focusing on the Controllables
Can we ever be free of such dependency? Of course not. We live in a changing and often unpredictable world. We can, however, minimize our exposure to the unpredictable by devoting our energy to things that we CAN control.
- I can't control whether customers will decide to buy from me. But I can control the amount of time I give to understanding my customers better and targeting my advertising toward their needs.
- I can't control where Google will rank my web site, but I can control how much effort I put into increasing the odds that search engines will give it high visibility.
- I can't control how many sales my employees will make, but I can control how much time I spend coaching and training them.
- I can't control whether potential customers will like my products or services, but I can control how I use feedback from customers to tweak, enhance, or diversify what I offer.
- I can't control seasonal swings in my business, but I can control how carefully I manage costs and expenditures in order to have adequate working capital during the slow part of the year.
Do you catch the gist of what I'm saying? Startups and small businesses put survival on the line when they rely too excessively on variables that they cannot control.
As much as possible, then, determine to build your entrepreneurial energies this year around the things most vital for your success. And within these vital elements, put your greatest effort into the things which you can control.
This article first appeared in Encore Entrepreneur inbox magazine on January 20, 2015.