Business Start-Up Killers or How to close your business in five steps!

Having been in business now for nearly eight years, I recently had pause to consider why typical businesses don’t succeed in the local market in Taiwan or anywhere. This list includes some of my observations:

1. Poor Financing

Most business owners here in Taiwan budget enough money to open the business, but they base income projections and the related decisions on the most rosy of circumstances in the first three months. The result is often that the business will close within 3 months because the businesses have run out of cash, and haven’t built up enough customers on a returning basis to pay for the basic costs. If you’re planning to open any business, remember to consider several scenarios and prepare for different results.

When we opened our business, we had very low estimates of income in the first six months; and we were financially comfortable with the idea of paying costs until the business could support itself. Part of that was a realization that salaries for the bosses (the only staff at the time) would be token only.

Solution: Always budget for a period at startup in which income is less (much less) than your expectations. Don’t forget to include unexpected startup costs. Be bullish on these because best-case scenarios rarely occur.

2. Missing the Mark

It’s amazing how many business owners only look at the superficial aspects of running a business. Yesterday my wife and I ate in a coffeeshop that had newly opened. The coffeeshop had a great location, and lots of potential. But when we walked into the store, everything LOOKED fine. It’s only when we ordered the food that we noticed the LOOK of the store was quite different from the reality. The staff were untrained, didn’t know how to greet customers, the drinks we ordered were pricy (for that kind of service) and really didn’t measure upto drinks at half the price in better restaurants (no flair), and the management seemed too busy doing the work to notice what was missing: an atmosphere, good service, and passion for the foodservice business. Oh, well.

The restaurant was called O Sole Mio and had a very pretty facade with a decent counter area, and much of the right equipment, too. Its location was on a major route around the north coast of Taiwan just outside Jingshan. In reality, most people would only stop once as we did.

Solution: Focus hard on the quality of the food or service that you produce. Make sure that they are up to scratch. And be your own harshest critic.

3. Location, Location, Location

That’s right. We’ve seen great businesses with potentially good profit margins killed by their locations. Why? Because the location chosen for the business ate up most of the businesses income. The business owner had chosen a high traffic location to maximize the market exposure. Result: he ended up paying over the odds for rent. When it turned out the product wasn’t that great, initial business interest fell away, and word of mouth didn’t occur.

A bakery opened across the road from our community and fell victim to this situation. Worse: the baked goods were quite unexceptional, and there was little reason for customers to cross the road to shop there, when TWO very good bakeries were less than 100 yards away. It shut in less than three months.

Solution: Choose a cheaper location, and create such a great product that people will go out of their way to find you. Once you have the quality, margins, and cash, then rent a mainstream property.

4. Hiring Staff

This has to be the biggest bugbear of any new business. Why? Finding good staff is an ongoing nightmare for our school from the first year that we opened. We have recruited actively most of the past eight years, but many of the applicants have been less than desirable. Even those we vetted carefully and who came to interview and do demos with us were in most cases unsuitable. We hired the best of those interviewees, but in reality only one or two of those we hired had the passion to be an excellent teacher.

Of course, hiring and training are both essential. When you hire new staff, it’s important they be trained properly. This is an aspect we seriously underestimated as we expected our hires to have the same passion and skill as we shared. This expectations have been tempered by our experience.

Solution: you have to be prepared to hire selectively, manage directly, and fire decisively. Poor staffing and staff who are unmotivated and interested only in their salary both will seriously undermine your business.

5. Freebies, Giveaways and Discounts

Over the years, we have noticed that some promotions work and some promotions look like they work. You have to learn to tell the difference.

  1. Freebies – Giving away products and services for free rarely generates a good client-base. Why? Because you will always attract people who like ‘free’, and who will shrink at the first sign of a bill or invoice. If you are going to do freebies, make sure it is tied to something that is purchased. And clearly state that these are introductory offers only.
  2. Giveaways – Giving away products may work for toothpaste and shampoo. It will likely not work for your business. Why? Because you will have to give away a lot of samples just to get some leads. Be careful with what you give away.
  3. Discounts – Discounts also can be used to attract attention, but you need to be careful in how you manage them. Otherwise you will find that you have to offer permanent discounts to keep customers who ‘thought’ that the discounted price was the regular price. Worse, as we found out, some customers will tell others that that is the pricing.

Solution: Clearly limit the duration, type and extent of your promotions. Make sure that your discounts, freebies and giveaways are closely tied to those you are trying to attract. And manage your cost basis effectively enough that you can still have a decent mark-up after your promotion. Otherwise, you will find it difficult to service those accounts properly.

One of the biggest reasons that you need to avoid these ‘killer promotions’ in the long term is simply that you will end up in a bidding war either with your own pricing or with a competitor’s. You should have confidence in your pricing structure. Aggressive promotions will create initial surges of interest, but may undermine the future of your business, the quality of your products, and your reputation.

These five issues are all issues that I’ve dealt with in different situations. They did not all pertain to my current business, but I’ve seen how the effects of these bad decisions can effectively ruin a nascent business, even one that has passed the first two years. Do let me know if you have any additional suggestions for this list.

February, 2008: Financial Results – a quiet month

After January’s stellar month, February has really settled back and results are only approximately half of January’s. That is of course to be expected.

I had hoped that my free download would entice visitors to download the top twelve subscriptions. Well, it hasn’t quite worked yet. But I’m going to keep plugging it, because I think it’s a useful way to promote this blog. I’m planning to up the number to 20 subscriptions, but so far I only have six more good suggestions. So now, I’m running a poll for the remaining 2 positions in the list. Do vote!

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So let’s deal with the money, first this month. Parts 2 and 3 will deal with the traffic, and challenges. But I’ll post these over the next few days.

Income this month has been less, but the variety of sources is quite impressive. I’m pretty sure now that I could easily extend both the range and the depth of each source, if I had more time to do it.

* Bank Interest: $26.25
* Dividend Income: $78.22
* Consulting Income: $250.00
* TLA – $74.49
* LinkWorth – $63.50 (for three sites)
* TopSpots – $1.00
* Blogging – $96.25
* Total = $589.98*
*there are a few other residual sources but they generally don’t generate much, like Voxant, NetAudioAds, etc. that generate only a few cents a month. In addition, some sources that generate a lot one month, but nothing the next are not included.

Unfortunately, I’ve not been very aggressive in getting extra interest generated. I have nearly $150,000 sitting in the bank, and another US$2500 sitting in a broker’s account, and still another $700 sitting in another account earning 0%. I’ve not invested these at all. So that’s pretty dumb. I don’t know why I haven’t got around to doing that, but I DO know that it’s costing me at least 2.5%pa now (or $16pm). And that’s not including any capital appreciation. This is a situation I will rectify.

Also the list of sources of income isn’t complete. For example, some of my customers buy hosting from on my server: no accounts have become due this month; nor have I had any new customers. According to my plan, developing a part-time income from work is important. I have had several contacts for part-time work in Taipei, but it isn’t something I’m able to do just now. I’d love to switch my teaching load from full-time to part-time, but it’s not possible. So…

Total Income Generated

Naturally, this means my total generated by blogging now jumps to $9020.37. Also, my revenue from writing reviews and buzzes has dropped from over $200 per month to just $96.25. In fact, last month I only wrote two reviews in February. It seems the Google Grinch is still out and about.

Expenses

The blog currently only has a few expenses such as hosting through Dreamhost’s VPS system and it works well. Of course, Domains and I own about ten or so all need to be paid for annually and Paypal Fees. I currently don’t advertise, though I may do so soon again.

* hosting – $49.50 (est.)
* Fees – $6.15 (Paypal, Commissions, etc.)
* Content, Development, and Traffic – $89.00
* Total = $144.65*

*These figures are estimates as final figures haven’t been received for some, and other commissions are invisible having been deducted at source.

Other factors that are beginning to affect me more directly now is the weakness of the dollar vs. the NT$. In fact in the past week, the NT$ has dropped by nearly NT$1. It’s now trading at a little under NT$31 to the US$. I’ve been using the value of NT$32.5 for a long time and I found it a good approximation. But no longer.

Consulting and Advising – Combining Blogging and your Career

Teaching: It isn’t all about grammar and vocabulary!

I’ve been a teacher of ESL (if you’re American) or EFL (if you’re not) for more than years now than I have fingers and toes, and in that capacity, I’ve been privileged to teach people in Taipei City and Taipei County from all walks of life: business men and women, clerks, company workers, pc engineers, sales staff, students of all ages, bankers, doctors, nurses, etc. Despite teaching English, I often find myself advising and consulting with my clients on learning English rather than just simply teaching vocabulary and grammar (or other prescriptions of language learning).

New Vistas: New Paths

It was still a surprise when I found myself in the role of consultant for someone I’d never met, and in a field that I was less familiar with: blogging. Recently, I’ve been involved with setting up, administering and writing for a blog as a supplement to a static website. Naturally, this is a market that is going to grow leaps and bounds in the coming few years, until Web3.0 takes over. Since I’ve been involved in computers for many years, and been working in blogging on and off since 2004 pretty much as my passion, I found that I’ve come to learn and know a little in a wider range of areas: blogging, marketing online, online tools, wordpress software, writing, etc.

Consulting: Opportunities in All Areas

I’ll be revealing more about the project as I work away on it, and as it’s going to be a challenge coming up with refreshing and interesting posts. Something I’m looking forward to doing. For those of you looking into creating online income, consulting is an option that is open to many bloggers though it may not be easy to go head to head with the big guys out there. If you have experience in a professional or business field that is much more specific, you could still find many opportunities to put your blogging skills to good use online and offline in the field of consulting, but particular to your specialty whatever that may be.

Did this happen to you, too?

But it isn’t the first time I’ve found that people are interested in what I have to say about a range of subjects; nor is it the first time someone has suggested directly or indirectly that consulting may be a career choice for me? In fact, one of the reasons I started InvestorBlogger dot com was because I found that many people were struggling with the same financial problems I was. While I hadn’t found the ANSWERS per se, I had found some ways that worked for some situations, and I was eager to share those successes.

Blogging: Opening New Paths?

It was only when I started blogging that I began to discover the core of my interests, and for me, blogging became not a didactic process (me telling you WHAT to do) but a dynamic and very personal process that helped me to further my interests in a number of areas, as well as help my readers. Too often when I read other blogs in the field of money & finance I hear the voice of the blogger shouting: “Do this” or “Don’t do that!” … as if it were the 10 Commandments… and I am repelled because I KNOW it isn’t like that.

There are more ways to peel a potato or cook an egg than one. It’s only by accepting and understanding that that we can begin to see alternatives: new ways to write, new ways to learn, new ways to share, and new ways to make money. It’s not a cookbook or a book of instructions, rather it’s a pantry with ingredients, some raw, some part-cooked, some chilled… We’re the chef whose job it is to combine, create and re-create what is there.

(ed. Post backdated to fill space in yesterday’s calendar!)