In surfing with my internet news reader app recently, I ran across a documentary about wingsuits. Apparently cutting out television a few years ago had deprived me of much knowledge of this insane activity that makes hang gliding and skydiving appear to be the sport of chickens. (Wingsuits give you the simulated anatomy of a flying squirrel so you can jump off a cliff and then either fall to your demise, or preferably glide until you land with a parachute in the last instant.)
I couldn’t resist mentally seeing a comparison to the approach some entrepreneurs take to starting their businesses.
The world of small business already suffers from the confusion and delusion created by the glamorizing of tech startup unicorns or Shark Tank inventors that makes gathering and spending other people’s money seem so easy.
But there is another approach that’s been around much longer and is coincidentally called “taking a leap.” The idea is that you stake your life savings on the brilliance of your idea, your bullheaded determination and intestinal fortitude. You quit a stable fulltime job and put all of your time and energy into your business concept. Some entrepreneurs seem to forget to even put on the wingsuit. Splat.
Alternatively, there are other paths to business ownership which are much more comparable to the kiddie carousel that parents ride with their gleeful toddlers. It’s not nearly as exciting of a way in, but there are some distinct advantages when it comes to risk management.
Step one: Don’t quit your job. Suffer a while longer, perhaps years, and (Step two) perform the feat called capital accumulation. You save up enough money to invest in a venture, while maintaining your other obligations.
Step three: Look for a pretty sure thing. Not every productive business need be a society-changing, heretofore unimagined innovation. The world will not be offended if you choose to buy an existing business or copy another proven idea. Something that you can manage part-time while you keep earning a steady paycheck is best. Yes, this dampens the rush of terrifying excitement, but your odds of success improve immensely. An established, well-vetted franchise system that matches your capabilities and resources is a great choice.
Step four: Only quit that full time job when working in your own business offers you relatively more financial security for a reasonably predictable time into the future. And only then should you consider using your additionally accumulated capital to tinker with new business concepts and ideas to spin off into other ventures.
An alternate route in this kind of journey involves employing a prudent amount of debt capital. A lender will demand a credible business plan which in most cases serves to keep crazy flying machines grounded.
All of these conservative prescriptions may sound like they’re for cowards without the courage to challenge the Fates. But to me it’s more like the choice between the high roller in the casino, or being the house, which enjoys the boring but dependable profitability of a couple of percentage points of advantage over the long run.
For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? Luke 14:28 KJV
This Bible verse is not about Jesus giving real estate development or small business financial advice but for the sake of some entrepreneurs I wish He would have. Sadly, it is not an infrequent occurrence that CEDF’s lending department receives applications related to stalled projects. The owner thought they had enough money but they ran out because of unforeseen responsibilities imposed by government regulations, increases in the price of equipment or materials, delays in construction, etc.
Sometimes these situations are obviously foreseeable, some are pure bad luck. But the common factor in three examples that I have heard about lately, and the element that makes these head-slappingly tragic is that a lease was signed before a carefully considered set of cost estimates was totaled.
Of course, you might say, you have to sign a lease and get possession of the space in order to start building, and only then do you discover the overruns.
But the scenarios I’ve seen aren’t the bad luck kind, they’re the reckless, hope for the best, “I’m sure we can finish for cheap” sort of problems. And they come up frequently.
Something in the impatient psyche of an entrepreneur makes them believe that the location they have chosen is the last one on earth suitable for their project. And naturally the landlord or leasing agent has revealed that several other serious parties are ready to commit and snatch the opportunity away. Indeed, they will never forget this one.
It’s often taken on authority that the right way to sell is to develop a consultative approach that makes you a trusted advisor to your customer. They won’t be able to bear using a competitor because of all of the warm and fuzzy advantages you bring to the relationship. It’s pretty well demonstrated that this is true.
But this article credibly explains why this goal is so often unreachable and that training provided to sales team members doesn’t stick long enough to make a difference. The problem is not with the sales staff or the training but the organizational culture. The author explains why talking a great game about being consultative with customers doesn’t stand a chance with so much of the work environment rewards the transactional approach.
Transactional selling can work too. But it makes it easier for customers to simply scurry away when they can use the internet to buy somewhere else and save a nickel. So unless you can build a transactional, high-volume, low-margin selling machine that beats all of your bigger competitors doing the same, it’s time to take a proper look at what is really required when we talk about serving customers and becoming an advisor.
Imagine racking up big debt and betting all on opening a small store only to find out the next day a big box competitor had come to town. Nick Tarzia, explains how he survived by finding out what his customers wanted and how it eventually led to success owning Awesome Toys & Gifts in Stamford and Westport.
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