The experiment was a failure and yet it hasn’t “failed” yet. But, from it and its failures, I can tell you what I know about business, small business, diy business, crafting and art and design businesses, home based and online based businesses, and any kind of authentic, unusual, new, innovative, invention based, creative, crafty or art business.
As long as that last sentence was, this one is simple – things said in business guides are different and mean something different in application.
You will work 18 hours a day, 7 days a week AND spend $300 – $400 dollars in cash each month for years BEFORE it starts making any money –
When a business book or sba guide says, most businesses are in the red for the first 3 – 5 years, it means you will be paying out of your pocket, household budget, savings or financial sacrifices to work and work and work to make money with it. That can be a few hundred dollars a month or a few thousand, but as the business doesn’t cover it’s own costs, let alone pay you, that extra money it absorbs like a bottomless pit comes from you just to keep doing business at all.
97 People Playing Bingo Lose out a Hundred – Same is true in business endeavors, including yours –
Second, when a business book, investor guide for institutions and investors, or anything else says that most businesses fail – that does include yours no matter what you do right or how much money you have going towards it’s success. It is kind of like playing bingo at a bingo hall. Yes people win and take cash home, but 97 people out of that 100 lost each night and went home with less than the money they had when they went there. Those statistics about starting a business are the same way, it means that for every success, thousands – literally thousands of people and businesses were on the losing side of the equation and walked away with less than what they had in the first place. And, it isn’t any fun.
If you don’t know who will buy it – you don’t have a business that will work – even if there are those who need or would buy your product or service –
Third, when a business book or sba manual says “who will buy your product or service?” as part of the directions in the business plan planner or other guideline to help your business, it means in an implied manner that if you don’t know, you don’t have a business – no matter how great the idea, invention, plan, concept, campaign or business. It could very well be that your business serves a need or is very desirable from potential customer’s standpoint, but if you can’t define who they are, where they are or how to get them to see what you are offering and don’t know who they would be, you don’t have a business at all. And you won’t have one that has any chance of succeeding at all without that one element, though it doesn’t tell you that in their text.
There are literally three sides of a coin and it takes using all three for it to work –
Fourth, for artistic and creative endeavors at some core level of the product or service being offered to the consumer, whether it is actual art or crafts, music, dance, writing, performance art, creative consulting, public relations or any invention, novelty, innovation, inventive approach or creative application of anything – doing it as a business is a three-sided coin. The face of it is studio time which includes creating and creative work on it plus learning, continuing to expand skills and knowledge, etc. The back of the coin is the business activities it requires which include marketing, promotions, accounting and learning to apply those online and in-person skill sets, etc. And the sides or crowned edge of the coin is the creativity and creative drive which supports the other two and is used interchangeably as applied to those completely opposite types of thinking and activities.
For every dollar you borrow, investors want 3x that dollar back in a very short period of time (2 – 3 years) –
And the fifth point is this – when a business article in a magazine or investor insight article in a book or online publication talks about what they want as a return on their investment if they even consider putting money into something and they admit a desire to really have 10x their original investment come back to them, but typically expect to get at least 3x their money back – it means that is what you are going to give them for using their money. It also means that in 2 – 3 years, when they want to receive the return on their investment given back to them, they will pull all of their money plus their 2x – 3x return on their dollars – out of your business all about the same time you need that money the most for the business to survive past the founding stage.
Track record isn’t about sales figures – it is about you getting a return on the investment you have made into the business plus some –
Sixth, when a business book talks about investors and bankers in the business community looking at track record and valuations for risk before putting their support behind a business, it means several unsaid things including that you must show a return on your own investment over and above what money and time you’ve put into it. If you put in time over the course of months and years into your business, it is represented as a dollar value, even if it’s comparable value per hour is based on the minimum wage of the moment. That is part of your investment in a monetary sum plus an additional “lost opportunity cost” of having done something else, or nearly anything else and made some money. That may seem intangible, but it really is not and it does represent a dollar or monetary value which you were investing along with your efforts and cash to do the business as you went along. That means, if you could’ve been sitting in another job making $40,000 a year and did this instead – then along with showing at least a minimum wage pay for the time you did invest in it, there is another cost actually represented of $40,000 for each year you didn’t go to that job and make that instead.
A profit cannot be derived in a vacuum – it must include a return on the dollar value of your time plus your money, plus it’s sustained operating costs AND something beyond that coming from the business to be considered “profitable” –
Seventh, when business books explain how a profit is derived on paper to show what your business is capable of doing financially, it means that the costs described above including a wage for your time put into the business plus the lost opportunity cost of spending each year doing this before it showed a profit, plus the actual costs of overhead and marketing, supplies and professional fees, postage and internet service, etc. combined in a dollar amount must be realized and exceeded – then there is an actual profitability.
To say it another way, if you can’t get the original investment you’ve made (which includes all of those costs mentioned above across the time you’ve been doing it) plus its current operating costs plus something beyond that amount – it isn’t profitable, isn’t returning your own investment and consequently, won’t be expected to return the investment money someone else may put into it – so they won’t.
Telling a story about your business, yourself in context of the business, your products, or your services does not mean where were you born? –
Eighth, when a business article or guide explains how products, services, marketing materials and online profiles about the owner/s must “tell a story”, it does not mean your life story, nor does it mean to tell the story about the product and what all that product is. It means something else more closely aligned to a “hook” sort of like the last few scenes in television dramas and sitcoms that happen just before the commercial break.
It is a brief and interesting reason to come back and look, to see more, to want to know more, and to have something to talk about that is interesting to others. It is not necessarily the benefits of owning the product or having the service, but it can include those and yet, doesn’t have to convey them at all.
It is likely why Lady Gaga wore a “meat dress”, and everyone talks about it repeating her name in the story and reminds people of her music and what she does and what outrageous style and fashion her brand uses on stage and in personal appearances and in the media. All that from simply showing up in a dress made of meat. That is telling a story and guerrilla marketing at the same time.
A small business according to the SBA and bankers means a business of $3 – $5 million in sales, not smaller than that – even a startup –
Ninth, when the sba or a banker or investment group talks about a small business, they mean a business earning $5 million a year more or less, not $30 or $300 or $3,000 or $30,000 or $130,000 a year in sales. That is the truth. When small business loans and mentoring programs are offered, even those described as being available to poor credit candidates with low credit scores, or to small business enterprises and minorities, startups, or cottage businesses – they do not mean you, or me or anybody you know.
The business loan packages intended for underserved or low credit score applicants trying to start a small business actually require nearly the same level of credit score and credit worthiness as any standard business loan – nearly the same score within a few tens of points plus thousands or home equity as collateral. And, for a business to qualify for a “small business loan”, it must be able to generate, or reasonably accurately be expected to generate sales in the $3 – $5 million range, not less. And, that is what they mean by small business.
If you can’t show that your friends and family threw thousands of dollars into your business, the business community won’t want to either –
Tenth, when business and sba guides, business funding articles and business classes talk about seeking money for funding from friends and family first, it actually means that they look at that as important to convey whether people you know trust you enough to get it done – and gave you their money. It is used as an indicator of your trustworthiness, your ability to persuade or convince or “sell” the value of your business to those people you know AND it shows that if you can’t get that money, banks and investors would be wise to stay away too.
It doesn’t tell you that when you read it and if like me, your friends and family members are about sick of hearing how your business is doing while telling you for the umpteenth time why it won’t work, can’t work, isn’t going to work, isn’t Degas or Picasso or Michelangelo or the Beatles or Sting or Frank Sinatra or who the hell ever, or isn’t comparable with the written works of James Michener or Tolstoy or Tolkien or the filmwork of James Cameron, or the merchandising quality of Macy’s and Saks Fifth Avenue, etc., ad infinitum – then the last place you would want to try and get money to support your business would be those people among your family and friends.
But, it won’t read like that to business community resources from the sba to bankers to investors and investment gurus. It will read that you couldn’t get their trust and belief, that they know you and don’t consider you trustworthy to get the job done or that they are willing to risk their money betting on you to win. That is how it will read – like a big “steer clear” sign.
Even if you do everything right whatever that may be, it still might not work just because reality is like that –
And, last but not least – it is a certain kind of Cinderella thinking that causes blogs, business books, sales books, marketing tools books, business magazine articles and authors in general about business things to offer you or me with the idea that if we will do all the right things and just believe, that it will work. It means that if it isn’t working, then it must be because we didn’t do something right or we didn’t believe enough or we didn’t think positively enough or we weren’t diligent enough or we weren’t worthy of the task somehow. But, that is not possible nor likely.
First of all, none of us have that much control over anything and secondly, that belies the central fault in the thinking that if we do it good, then good things will come from it. Well, it can but it might not – that is reality. And, of which it is a part of why there are human beings engaged in this endeavor of business and art, creativity and inventing, innovating and marketing – rather than machines. It is because the flexibility of human thought and drive is necessary for it to work and without it – no man-made machine or software program can match it and get that job done.
None of those business books tell you that very effectively but it is what it means when they say in those books to be flexible, think on your feet, look for the opportunities and grab them as they present themselves, tailor the product and service to the marketplace / to the customer / etc. It is what it means when those books say, “carve out a niche”, “tell a story with your product”, “grab onto a trend” or “customize your products and services to an existing trend>”.