Beating the Odds

In the last article, I mentioned that most new businesses fail, and even when they don’t, they take a while to generate profit. So if you are trying to start a new business, it’s a lot of hard work, money in, and no guarantee of success. So how do you beat the odds?

If most people who do something fail, you should do something different. That’s just common sense. What a lot of people do when starting a business is they save up enough money, or take out a loan, and dive right in, quitting their day job and dedicating themselves to the business.

According to research, about 42% of the failed businesses or startups cite “no market need”. This makes sense. If you just jump in, you haven’t done much market research, have you? You are pursuing your dream and doing what you want… but is it something other people need? How would you even go about finding? Next big reason, at 29% is running out of money, or mismanaging the funds – which makes sense as managing money and accurately predicting costs is a learned skill. I could go through all of these, but I want to focus on these two, and how to avoid it.

What I did when I started out was, I had a day job, and I was doing the business on the side. I was buying and reselling the bag signs while I was looking for clients. My initial investment was time and 100 pieces of lawn bag signs. And I was also using websites like Kijiji to list products that I would be reselling, which is free. Back in the day, bag signs cost $500 plus tax for 100pcs, so it was a much heftier investment than if I was doing it today, for $250 plus tax. But still, $500 is not that much money to invest. And I started getting calls almost right away from them, so I was past the first hurdle – I knew there was a market need for this product.

From there, I’ve been slowly growing the business. I quit my day job when the business was generating enough income. I would buy equipment when I saw that there was enough demand to justify the expense. I would hire more people when I saw that I couldn’t do all the work myself. This made my expenses manageable, since I was always looking at numbers which were real, and not just calculated expected expenses and profits. And also, as the business grew, my skills at managing the money developed as well, I was not suddenly overwhelmed by large numbers.

So many people have expectations of making giant leaps, but what I find works for a lot of people are small steps. Business is less of a building, and more of a garden, and so you must be a gardener as well. You can plant the seed and water it, and give it time (a lot of time and hard work), you can prune the plant and give it direction, but ultimately the shape it takes (or not!) is up to the environment, and it will end up surprising you. And whatever failures or setbacks along the way, they will not be so catastrophic, because you’ve been taking many steps, testing the ground, gaining experience and insight into the market state, with minimal risks and expense.

Start small, see what options you have, and go from there. Don’t hang on to your vision too much, let it adapt to the reality of the world around you.