The Biggest Myth About Business Success: Part One

Last week I attended the Business North West 2012 event at G-MEX Manchester. As I listened to one successful entrepreneur after the other gave what they considered their motivational messages about how it is possible for anyone to establish and run a successful business, an odd question popped into my mind. The question is this: is it possible for just anyone to start a business and succeed?

My answer to this question is simply no!

As I listened to many of those successful entrepreneurs giving their woe-to-win stories explaining how they overcame obstacles to succeed. I detected one similarity in all of their stories; not a single one of them explained how they did it.

It is easy to pump people up with motivational bla bla bla about how it is possible to achieve greatness bala bo balaba but without telling them how to do it, the cause is lost from the onset.

The biggest myth in the world of business is this: business is common sense. That is the biggest BS going around in the business world that is causing people to mortgage their homes and the future of their families to plough the funds into business ventures that are certain to fail.

If you attended the Business North West 2012 event or you have attended any event recently where you heard successful business people tell you that all that is required to succeed in business is to have belief and balls. Before going to tell your boss and telling him where to stick his job or mortgaging your house read the rest of this article.

Trust me on this one, just hold your fire until you have read the rest of this article because those guys did not tell you the full story.

Business is not common sense. I will repeat this point: business is not common sense. Business is a skill and a profession like any other profession; it must be learnt. The likes of Steve Jobs, Bill Gates, Richard Branson or Donald Trump did not start their business from literally nothing to multibillion businesses just by having common sense. What I keep telling all of my clients is this: the gap between one thousand pounds and a million pound is just a single idea or getting a single decision right.

However, you need to have that single idea or you need to be able to get that single decision right. The idea and the ability to get that single decision right do not only take common sense.

There are four elements responsible for the success of any business, whether it is the HSBC bank in the City of London or a toilet cleaning business in a dusty New Delhi.

The four elements are:

- Visionary leadership

- Good people

- Good system

- Good marketing system

There is a fifth element which is the glue that holds all of them together:

- A good business model

A friend of mine just received half a million pounds from his father to invest in any business he pleases. He identified three businesses and called to ask my advice as to which one would be the best one to invest in. I told him that he could invest in any of them and succeed. He tried explaining to me that one of them seems to have a good profit margin, the other was a cash cow with low profit margin and he was not very sure about the third.

What I told him was this: every business has a hundred percent chance of succeeding or a hundred percent chance of failing. Success or failure in any business is not the function of the type of business, the location, the economy or the product. Success or failure in any business depends on those four elements especially the fifth one.

Before Facebook, there were many social media sites. Why did Facebook manage to dominate all of them? Before Google, there were other search engines, today Google is synonymous is search engine; how did it happen? Is Microsoft successful because they have the best operating system in the world? Windows is probably the least secure operating system in the world, yet Microsoft dominates its rivals.

Facebook and Google are successful because from the onset their founders made the crucial decision of making their services free and then found creative ways of making money from their services. Microsoft's success stems from their ability to form alliance with other big corporations and governments.

What I have tried to demonstrate with the above examples is that success in business does not occur as a result of common sense or big balls, but the result of the above five elements that all of the successful entrepreneurs at the Business North West 2012 event failed to point out. Inevitably, it can be deduced from this article that, it takes more than common sense to succeed in any business venture.

Business - How To Be Set Free From Delays, Difficulties and Dead Ends

When I talk to potential business owners and even those who have been in business for at least 3 years it's interesting to hear them say how challenging business ownership is and that they thought it was going to be easy. Even though they have heard the statistics that start-up businesses don't survive the first two years of business and that data shows that only 5 out of 10 new businesses survive for 5 years, many are still convinced that it's a pretty easy road to tow. What they fail to realize is that ALL businesses, start-ups and existing, will face 3-D (delays, difficulties, and dead ends). One characteristic you must have as an entrepreneur is PERSEVERANCE because you will face many unexpected challenges in business and you must be prepared to handle them and set free.

Let's look at some examples of 3-D that businesses face and some ways they can be delivered.

DELAYS: You have been diligent in putting your business plan together and ready to take it to the bank for funding. Eager to get the business up and running the bank is requiring additional paperwork, financials, etc. So the funding process has been delayed from 2 weeks to 6 weeks.

DELIVERY: Be proactive and eliminate the delay. Make sure you have all your financial documents prepared. Ask the bank their requirements beforehand so you are not scrambling to find the information. Usually, they request the following:

Balance Sheet

Income Statement

Cash Flow Statement

Business Documents

Detailed list of assets and proposed collateral

Personal Financial Statement

Credit Reports

3 years of personal tax returns

Business Tax return (existing businesses)

Business Plan and Marketing Plan

Sources and Uses Plan

Loan Request Package

DIFFICULTIES: A common problem for many business owners is that they think they can do everything on their own. They use the excuses of "I can't find qualified people" or "Nobody can run my business like I can. I don't trust anyone with my baby" or "I can manage this alone until business grows". This "one-man band" strategy may seem like a way to keep costs low at first, but it's not the smartest way to ensure long-term success. They become the little rat on the wheel that is going nowhere. Business operations become more difficult to control as time progresses. Plus being a "one-man band" does not give you the opportunity to work outside the business because you are inundated with handling the day to day operations.

DELIVERY: Utilize your network of contacts or social media to find referrals for qualified, professional employees. If you cannot afford to hire a lot of employees contact trade schools, colleges or universities for interns. They may be available for free or a small stipend.

DEAD ENDS: The business is at a standstill, sales have declined and the need for your product or service has diminished. Your business has come to a dead end.

DELIVERY: A few options come to mind. First, revisit your business plan! It is your roadmap and could offer suggestions on next steps. If you don't have a business plan-WRITE ONE! This may be the reason your business is in the situation it is because there was no plan of action. Second, consult with a business advisor to assist in identifying the problem and consider solutions. Do you need to target different customers, change your pricing structure, leverage the existing infrastructure, etc.? Third, see if there is an opportunity to change directions and create a derivative (a specialized company created out of a broader company). For someone who has a computer sales business the derivative might be a computer repair and maintenance business.

Use Key Performance Metrics to Run Your Business

Do you use Key Performance Metrics to run your business? One of the truisms I've come to believe wholeheartedly is that no business owner is good at every aspect of owning and operating a business.

To be a little clearer, the skills to own and operate a business are many and varied. What tends to attract a business owner to operate their own business is a self belief that they can do one or two aspects of running a business very well and either hire the skills they lack or learn these with time.

I have also firmly come to believe that too many business owners do not understand well enough how their business is performing and more importantly, what they could do to make this task easier for them.

By law, every year a business must submit a tax return to the IRS to state how the business performed. Most business owners outsource this task to a professional such as a CPA or Enrolled Agent. Some choose to create and file their own tax return which is perfectly fine as long as it is done correctly; especially if at some point they want to sell the business. It will almost be impossible to sell a business if the tax returns are not accurate as a bank will not consider lending against the business to the buyer/borrower and the buyer will not take the risk of buying the business if they are not comfortable with the quality of the tax returns of the business.

What's important, though, which I see many business owners missing, is that the financial data of the business provides a gold mine of information. Tucked in the Profit and Loss or Income Statement is critical information about the gross sales, the gross profit, the net profit or net income before taxes and taxes to pay the government to arrive at the net income. However, this document often has other documents that collect and manage the data that rolls into the Profit and Loss and this is where the gold mine exists.

With a little initial time and effort, a business owner can have their book-keeper isolate what I call Key Performance Metrics or KPM's and have these provided on a weekly or monthly basis to allow the business owner to know the direction the business is traveling and what, if any, adjustments they need to make. The KPM's will vary with each business and generally fall into specific buckets. Some examples include the total number of calls, the total number of calls to place orders, the total number of calls to cancel orders.

The KPM vary with each business but they only reveal themselves by looking for them and then paying attention to them. There is a great expression - if you cannot measure it you cannot manage it.

And so that's my challenge to you. What are your KPM's? You don't have time to collect this data? If you don't have time then delegate it to someone you trust and just as importantly, put aside a specific date and time each week or month to go over it. The numbers don't lie and will tell you more about your business in the quickest time possible to provide your greatest return on time to manage and run your business.

Andrew is a 5-time business owner that helps entrepreneurs exit or enter business ownership. His services include helping owners sell and/or buyers purchase an existing business or consult on purchasing a franchise. He also provides certified machinery and equipment appraisals and business valuations.

Andrew currently holds the Certified Business Intermediary (CBI) designation from the International Business Brokers Association (IBBA), the highest credential awarded by the IBBA and the Certified Business Broker (CBB) designation from the California Association of Business Brokers. He also holds a Brokers License with the California Department of Real Estate, is a member of the Sacramento Metro Chamber of Commerce and the Chair of the Sacramento Chapter of the California Association of Business Brokers.