The Four Sins of Running Our Business

I’ve been reading the 10 stupid mistakes made by newly self-employed. It’s a good list that all business people should look at! I think our business has made several of them at least recently.

There are four that are worth looking at in my context. Click on them to read about them in context at Steve’s website.

1. Selling to the wrong people.
2. Spending too much money.
5. Assuming a signed contract will be honored.
9. Failing to focus on value creation.

We’ve had over the years some very troublesome customers, yes, even customers who we treated very generously, with free samples, free materials (a considerable expense to a language school), easy payment terms, and generous price reductions. However, these self-same customers have on occasion thrown them straight back in our face. We found out that we had been selling to the wrong people, and we had spent considerable time and money selling to them.

We’ve also spent quite a bit of money on the wrong things. Our first mistake was to hire too many people to work for us. Our increased use of staff led to bigger budget requirements, in staff and in taxes, for us. This would have been alright. We thought that the staff hiring would help us, but in some respects, it has actually hurt us much more because it impacted the nature of our marketing. People had heard we were good, so they came to us for their schooling. However, they often came looking for a particular teacher partner. Perhaps the staff didn’t have quite the same attention to their kids as they had expected, so they left disappointed in some ways.

Unfortunately, when we hired staff, we also found problems in number five. Our staff failed to understand that they were continually expected to be responsible for themselves, show up for work promptly, work hard, whatever. Staff however are human, and they display some of the quirks for laziness, gossiping, tardiness, etc. We failed our staff and ourselves by not recognizing the problems earlier and dealing with them. Moreover, I think we failed to manage some members of our staff due to language barriers.

We have been trying to create value on our product, language teaching, but I think our biggest failing has been not getting the message out there that our teaching works, that our students do get results, and that it is good value for money. All of these are challenges in themselves.

Kenneth

JoelMaxwell: The Fall and Rise of Success?

I recently found this incredible story of how a regular guy got $556,000 (archived only) in debt. I was intrigued that this was so easy for him to do. The original blog is now missing, and the story is now unavailable at JoelMaxwell.com

It intrigues me that our societies now treat debt so lightly and make it so easy to get for personal use, for business use, for investment use, and FOR SPECULATION. I do sympathize with a number of the problems he had as they are very easy for eager business owners to fall prey to: overexuberance in the first months, unexpected expense, unforeseen cash flow issues, high leverage of debt, but mostly lack of a Plan B, if things didn’t work out. In fact, having a Plan C and a Plan D to fall back on is always a good idea so that if you can’t get your Plan B, then there are still other options that don’t include borrowing even more money.

Our business nearly got put out by the unexpected advent of SARS, and we didn’t have much time to prepare for it, as we were forced to close for 2 weeks. We were fortunate: no debt, malleable costs, and a willingness to sacrifice. But it could have been much worse than it was. Guess what, we haven’t learned yet either.We’re only now planning to set up emergency funds, and create a wall of financial security for the business… It’s going to take a lot of time and a lot of learning for me, I’m not particularly savvy at this kind of things, so the learning comes at some cost to myself. But it must be done.

I do admire Joel’s resilience to bounce back in a desperate situation. And so I am supporting him with positive thought waves and wishing him well.

Kenneth

Business Management

I have a very stubborn friend that reckons his biz idea - lets call it X - is a sure thing

he has little biz sense but is super keen, he has done no research on investment amount, demographics, market size, pricing etc etc. he simply thinks its a good idea

I have three or four things to say about this guy:

1. Of course, one of the problems in Taiwan is that people opening business most often don’t make adequate provisions for poor cash flow in the first 3-6 monthsj of their business plan. They often run out of cash after that period, and go out of business, even when they have a great product. I’ve seen many good business go to the wall in surprisingly short order.

2. Having said that, planning things can in some cases kill enthusiasm. We westerners tend to overplan for things to the point that the idea just dies from the weight of planning. A little spontaneity can really help get a business going. So I wouldn’t completely knock him without knowing such sketchy details as you have provided. Perhaps he’s prepared to roll with the punches, and see how things go.

3. Perhaps he isn’t worried about making a mistake or mistakes. Often, the fear of mistakes prevents entrepreneurial activity, and the planning covers the fear by claiming it is impossible. The best entrepreneurs plan, do, make mistakes and learn from the whole process, even if they decide their business didn’t work the first time.

4. So in some ways, I admire entrepreneurs who keep trying because making mistakes is a sign that one is willing to learn. But one has to be willing to learn something from each mistake, otherwise you are just banging your head against a brick wall, no?