We all have that friend that tried to go into business for themselves but wound up back in Corporate America instead (and if that “friend” is yourself, well, you don’t have to own up to that here).
Truthfully, most of the people that start a new business will fail.
This is an unfortunate pseudo-statistic (that has real research behind it, I assure you), but it is one that you must keep in mind if you want to succeed. The important thing to do is to take heed of the mistakes your friend made and not repeat them.
After years of going to school by day and baking in her tiny apartment by night, Kate decided that she was ready to follow her passion and go where her talents led her instead of pursuing a career as a teacher (which she had been studying for). Her dream had been to own a bakery and, after we graduated from college together, she set out to find the perfect city in which to establish her first location.
This is Kate’s story…
After finding the perfect spot in a chic neighborhood and getting the money to lease her space (her parents were very generous and funded her loan themselves), Kate went to town designing the interior of the store. Even though she cut corners financially by designing the space herself, she made sure to work closely with her contractor to ensure that everything was up to code and 100 percent safe. After the project was complete the inside of that store sparkled.
When she opened her doors…
When she opened the doors to her new store, Kate began getting orders for the kinds of things that she had never intended upon making – she started out as a cake store that specialized in cupcakes and special occasion cakes, but before long she was also making cookies, brownies, toffee, and even doughnuts. Though she thought that this extra business would help her keep the money coming it, it really only served to complicate the company’s production of goods.
Before long, Kate had a brand that reflected nothing about the actual company she had built. Even the logo was off base. Even worse, her staff was disrespectful, untrustworthy, and difficult to maintain (more on that in a moment).
To top it all off, she had never gotten her website up and running, so once that initial rush of orders came in her business quickly declined after the novelty of the new bakery wore off in the neighborhood. Less than a year after opening her bakery, Kate had to shut the doors to her dream business.
Where it all went wrong…
When I spoke with her about where it all went wrong, she highlighted three issues that are common to many start-ups, but contributed heavily to her own company’s demise.
1. You do know what you do… don’t you? The key to creating a great start-up business is to clearly define your company’s purpose so that consumers will feel comfortable with investing in your products or services. Kate knew when she started out that she wanted to make cakes and cupcakes, but she failed to hold her business model steady. Of course, part of growing as a company is to be flexible and answer to the changes of the market, but Kate never firmly established the identity of her company to begin with.
In retrospect, Kate should have stuck to cakes and cupcakes until she had the resources necessary to expand her products. Having a clear idea of what your company is capable of providing is key to keeping it afloat, as doing too much too quickly can spread your resources thin and force you to give up on your venture altogether.
2. No heavy makeup… I mean no visible tattoos… I mean just come to work, it’s fine. This sounds like the kind of thing Kate would say to her employees. The truth is that, as well as she can cook, she really did not have the control she needed over her staff to keep them in tip top shape. The hiring process is meant to give you the chance to see how people’s personalities will integrate with your own staff, as well as how they will respect your company, your authority, and the image of your brand. The process is meant to gauge their response to your standards and ONLY hire them if they indicate a commitment to upholding the rules.
Even if Kate were a tad bit heavier handed with her employees, the fact remains that she had no real list of standards. As outdated as this may seem, it is crucial that business owners outline what is and is not acceptable before starting the hiring process. For a bakery, visible tattoos should not be a big deal, but it is a big deal for people with longer hair to keep it up and for employees to dress cleanly. When coming up with your own standards, think about what you would like to see if you visited your own business. The most important aspect of this process, though, is to never waver from your rules unless changing them permanently.
3. Sure we have a website… it’s… uh… would you like a business card instead? The first rule of modern business is that you MUST have a professional, informative, and attractive website. The information age is all about the Internet, keyword searches, and doing a bit of research about companies before investing in them – which is why it’s imperative for you to build a website that accurately reflects your brand. Had Kate done so, her business would not have slowed and she may have been able to hold on for another few months, or at least buy some time to address her other issues and get her business organized.
The big question that many start-ups face in this regard is how? If you aren’t a writer you surely don’t want to risk ruining your company’s reputation with misplaced modifiers and horrible spelling. Take the lead of many other business owners and invest in a professional website. You, your clients, and your marketing strategy will be glad that you did.
Why did Kate make these mistakes?
Why did Kate give up on her dream when she was so close to making it happen?
Well, the most obvious answer is that they are ill-prepared. Disorganization is a key component in the failure of many start-ups, and these three areas are where this problem meets with the outside world, where consumers and competitors can see that you don’t have it all together. Though you may get caught up in the early victories of your new business, you must remember the importance of having all of your policies, procedures, and marketing materials intact before fully launching your brand.
Consider Kate’s situation: no one would have known if her kitchen was disorganized, if pots and pans were everywhere, or even if she was a month behind on imputing her expenditures into her books. Though these mistakes could have cost her money, time, and energy, they certainly would not affect the reputation that her company had.
Additionally, they would not even be considered by individuals thinking about hiring her to make a wedding cake or bake cupcakes for their son’s birthday party. What did ruin her business was the fact that her disorganization, and really her lack of a solid business model, was visible to her clients. When they walked into the door they knew that she was not prepared to handle all of the orders that she was receiving and that her staff was not committed to their jobs, to the brand, or to their boss.
To make matters worse, Kate didn’t provide a point of contact between her own business and potential clients. In today’s market, you MUST have a website and, in many cases, a regular presence on social media networks, if you want to keep your business going. This is the number one way to attract clientele and keep your revenue positive.
Not everyone has to go through what Kate has, though, if they maintain an organized and thorough approach to their business plan. Kate and I have already discussed where she went wrong and she is preparing to develop a new business plan to reinvest in her dreams. The bottom line is that when you own a start-up you cannot let even the smallest of details escape your attention. With a cohesive business model, a solid set of standards for your employees, and well-developed and brand-reflective marketing materials, you can ensure that the face of your business is successful – even if it might be a little messy behind the scenes.
Over to you – did you ever know someone like Kate? Have you shared a similar experience? Leave a comment and tell us about it!
Terry Crenshaw covers economic trends in the United States and writes for www.peterorszagsite.com. Terry is especially interested in tracking the ideas of Peter Orszag and other economic experts as the economy attempts to recover from the recent recession.
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GREAT advice for startup businesses Terry; particularly the specialisation in the early stages of the business and knowing exactly what your business represents.
Hey Danny, hope you’re well, thanks for a great feature as usual!