Are You Gambling With Your Business?


Over a year ago, a client of mine sold a very successful business. It had been in operation for 14 years. It was profitable and provided the prior owners with a nice lifestyle.

Within a year, the new owner is “on the ropes”. Now some of you may blame the economy. I know differently because I know what really happened.

He didn’t take care of customer service issues with current customers and he didn’t go out and bring in new customers. And even when he was gently informed of this by several clients and business owners (me included), he blamed others for the problems.

The prior owners were constantly marketing and they really weren’t what I’d call experts at it. But they stayed in front of their customers and made new prospect calls every week.

The new owner was “overwhelmed” and spent too much time micro-managing employees and being overly concerned about equipment. (If his business was busting at the seams, then he should be concerned with tinkering with the equipment for more efficiency but if you aren’t running at full capacity…..you’ve got BIGGER problems!)

He should have been overly concerned about making sales. Now, his business is listed for sale and the broker says “Make offer. Owner must sell”.

The reason small businesses don't survive the first two years is because the owners generally have used up all the working capital learning how to run a business. Some call that "under-capitalized". I call it "owner's education" paid for with the owner's investment.

Really, though, its “gambling”. New business owners “gamble” their investment because they don’t know how to run a business….and in many cases are too starry eyed to seek good advice.

If you want to start or buy a business, first determine why someone would do business with you. Most people go about it backwards...that is, they have an idea to start a restaurant, let's say. However, there are already hundreds of the same type in their town. What is going to make customers choose your business over others?

What is your unique positioning? How are you going to keep customers coming back time after time? If you think that "good food" and "good service" is the complete answer, your business will fail.

If you want to succeed:
1. first identify a market
2. understand customer wants
3. build a complete marketing system to attract and keep customers.

Easy? No. Do most people know how to do this? No.

Should you hire an advertising agency or PR firm to help you? No. They don’t know how to do it either. They’ll just charge a big fee for the graphic design and “award winning” ads. What you need is results not awards.

Go to the library and start reading books by great marketers and business experts like Michael Gerber, Dan Kennedy, W. Clement Stone, Claude Hopkins, Joe Sugarman, etc. Then decide to go forward...or not.

I provide customized sales, marketing and operational plans for my clients to increase the value and sale-ability of their businesses. The biggest value gained is through making a profitable sale and systematizing your sales and marketing processes.

Before you can sell a business for a good price, you have to make a profit. Profit equals value. And it doesn’t matter how many fixed assets you own in the business. If you can’t make a profit with those assets, your business is only worth the liquidation value of the hard assets.

Banks will finance profitable businesses. Buyers will buy profitable businesses.

How do you make your business profitable? You must make a sale that is in excess of expenses. And you must do it over and over again. Consistently.

You must also KNOW your customers. This means:

  • Name
  • Address
  • Buying habits
  • Frequency
  • Value to you

Most businesses don’t track this and then when the economy changes, they wonder where their customers went. If you KNEW your customer, you could prevent this.

That's where the systematized STRATEGIC marketing plan comes into play. No plan, no sale, no profit, no value. If you aren't willing to invest in your education BEFORE you start your business, then don't start one.

You might as well go to Vegas and put all your money on the craps table. Your luck will be about the same.

Don’t run out of money figuring out what works. Be smart. Educate yourself about sales and marketing before it’s too late or hire the right people to implement it for you. This is critical. It’s not easy. But if it was, everyone would be wealthy.

Successful business owners are the toughest, most resourceful, resilient people I know. Think of John Wayne and you’ll start to get a good idea of what character traits you’ll need to run a business. Tough, honest, fair, did the right thing, did whatever it took. He sometimes got shot or beat up…but he always fought back. Are you John Wayne?

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