Time and time again we see businesses fail. Wanna know why? Simple. Here are examples of reasons why businesses fail to take flight, or die after a few years of operation.
1. Fail-To-Planners
Okay here we have the biggest misconception in the history of mankind: There's no need to study business in order to run one. Sure, we see some good companies in the world founded by Engineers and Doctors (The REAL ones). What about the ones we don't see? The countless millions that just open shop, and inevitably die the next day? We don't because they don't live long enough for us to notice.
Problem with these Fail-To-Planners is their perception of business. They collect about RM100k, spend it all on rentals, interior design, and what-nots. They have the coolest idea in the world, that's to make their restaurant Different from others'. Their restaurants became so different nobody wanted to eat their food! And what about operational costs? Don't know what's that? And the first 3-5 months of running the business on a loss while developing awareness and getting people to visit your little cafe? Why 3-5 months? Simply because it takes that long for people to notice your cafe's existence and actually try it out.
7 out of 10 will close-shop by now. "Material prices too expensive. Location not good enough, all the realtor's fault. Partner left. Market not ready for our kind of product. Too niche. Customs don't allow us to import dolphin meat". All rubbish! If you've splurged all your initial modal on fancy interiors and famous chefs, where are you gonna get the money to sustain operating on a loss? I bet you didn't know you need to do that for 3-5 months right?
2. Fail-To-Marketers
You spent half a million on that dream restaurant of yours, and you refused to hire proper and professional marketing and advertising teams to run your campaign for you. "Ridiculous la! I also know how to take pictures and post flyers la! Save the money, I do myself". And all your staff will ever do is swat flies day-in day-out. Do not underestimate the power of marketing and advertising, and what the professionals can do that you'll never be able to figure out. Simply because they got that 'Useless Degree'. Coca-Cola tastes like shit. They're one of the biggest companies in the world simply because they turned that shitty sugar-water into the coolest drink in the world through marketing. Fosters Beer is by far the crappiest beer in the world. Same thing: marketing. And Absolut Vodka? Who would've thought the Swedish can make anything other than boring cars and cheap furniture?
You've got that Million stacked up behind the restaurant. But how many hundred thousands will you be ready to lose before finally calling it quits?
3. Fail-To-Sustainers
By far I think this is the most important criteria of failing in business. Why? Because it's like doing CPR on your dying wife from Ipoh to KL, and she ends up dying in the hospital, surrounded by doctors.
This is the Epic Fail Cycle of how your business will now die:
Problem: Not enough customers to sustain business. Running on loss
Solution: Blame it on bad season. Reduce costs to maintain.
Result: Food quality sucks. Not enough waiters to handle the crowd. Your remaining loyal customers don't return.
Solution 2: Maintain existing operations. Jack up prices to make up for loss, and hopefully can break-even.
Result: What some more?! Nobody will return la!
Solution 3: Spend cautiously on ridiculously stupid marketing campaigns to lure near-freeloaders to eat at your place and hang out there for longer periods.
Result: You've just attracted the one crowd you never want in your restaurant: Free Loaders. Too many people eat only during those times, and those who hang out will hog the already limited number of tables you have, ordering Ais-Kosong one after another for at least 3 hours.
4. Fail-To-Leavers
This I cannot blame you. Some people are born leaders, others try to make it, but majority of the people out there don't even know how to spell the word LEADER. Being a leader is being able to inspire, NOT direct and manage. Many don't quite know the meaning of these.
You're already 65. Rich like hell, and wanna retire and go on holidays with your wife before either or both of you die. You've been training this Protege for years now. You've seen him work, and he's good. You leave the company for good. 2 months later, it faces bankruptcy. You've got no choice but to return. You end up working until 83, retire and die swallowing an ice cube the next day on the way to your first holiday with your wife.
Advice
When things don't go right in your business, inject funds. Or find ways to make your business run more efficiently so costs can be cut from there. Don't ever direct extra income from your customers. Don't reduce workforce on sales departments (waiters included as they're your closest hands to the customers), as they're the ones who actually make money for you. This will only end in a further INCREASE in losses, for sure. If anything, INCREASE commissions on your sales teams to encourage them to work harder!
Marketing and advertising teams are out there for you to use. Don't stinge on them. Whatever their advise, absorb and process. Don't try to act smart and do them all by yourself. They can sell ice to Eskimos, and you can't even sell food to hungry people.
Good write up!!
ReplyDeleteTo be able to sustain 6 mths at least in every business after all initial cost have been paid up is one of the most important. i would recommend a year to be on the safe side. To have the money to sustain in case of anything, if you start making money within the first 4 mths good for you, then you will have the remaining 8 mths of cash stored aside for anything. If you dont make any money within the first 6 months you know you have 6 more months to try and make some before you pull the plug.
Every business will take a bit of time before profits come in. Remember its not profit if you make Rm10k in the first month when you have spent RM60k on initial set up and Rm5k monthly running cost, you will need 12 months to make back the cost. then you are talking about profits.
Marketing and brand positioning, this is one thing i think is one of the most important of things in the first year of your company (brand, product, etc). You will need to remember the few important things, who are your target audience, why those target audience, how are you going to attract those target audience, what will make then want you, why do they want you, what kind of positioning is best for those audience, etc.
Answer all those questions and market the brand or product to them. always have a clear target audience, there are too many people in the world to target everyone. You will need a proper direction for your target audience in order to build your brand or product position in the market for these audiences. Have a clear direction, proper target audience and brand position coupled with time and always follow through for your brand position and eventually your targeted audience will notice your brand because of how it was positioned.