March 2011 | Bigg Success

Monthly Archives: March 2011

Entrepreneurs Can Be Too Skinny

Written on March 22, 2011 by George Krueger & Mary-Lynn Foster in Entrepreneurship

The weight loss industry generates over $60 billion a year in sales. And, of course, losing weight is one of the most commonly cited New Year’s resolutions.

But for entrepreneurs, being too skinny may cost you money – at least when it comes to your point-of-view.

Listen to George & Mary-Lynn discuss this post on The BIGG Success Show! Click the player [4:43m]: Play Now | Play in Popup | Download

Who cares about the product?

Take the salesperson we know who became the Sales Manager and then the General Manager of the local branch of a large public company. There’s just one problem – he’s running a creative business but he has no respect for the artists! It’s all about sales for him.

He’s agnostic about the product. He thinks the customers don’t care either. So he doesn’t show any interest, care or concern for the people who create the product. He just expects them to do more and more and more.

Morale is low. He keeps cutting costs because sales are falling. And everyone wonders why. This is a true story. The names have been omitted to protect the guilty!

Who cares about profit?

Let’s not single out sales people – it could be someone from another functional area of the business. It costs you money to keep a skinny point-of-view.

Even if you somehow manage to make a profit, you won’t make as much as you could if you were more broad-minded. And you’ll lose money when times get tough.

Who cares about shareholders? Or customers?

Finance types talk about maximizing shareholder value. Marketers remind us that we need to be customer-centric.

They both get so busy promoting their point-of-view that they fail to see the BIGG picture: They’re both right. And they’re both wrong.

Maximizing shareholder value is a worthy goal. Theoretically, shareholder value is maximized by balancing the interests of the various stakeholders – customers, employees, suppliers and investors. However, this isn’t necessarily the case. In the short run, the share price can rise by short-sighted actions which lead to short-term profits that aren’t sustainable.

Focusing on the customer is also critical. You must find a group of people or businesses looking for a solution to an unsolved problem in order to succeed. However, you have to be able to deliver the solution profitably. Otherwise, the better you are at marketing, the more money you will lose.

Who cares about delivering on promises?

This all leads us to our final point – you have to understand the operational side of your business to succeed as an entrepreneurial leader. Everyone makes promises. Most of the time, Operations has to deliver.

You can promise the world. You can crunch numbers until blood comes out of them. But it doesn’t matter if you don’t deliver upon your promises.

Who cares about the BIGG picture?

As an entrepreneurial leader, you deliver upon your promises by first understanding the BIGG picture. Then you can make sure all of your leaders understand your whole business. And then they can help your employees get on board, too.

When everyone has a broad view of your business, they can weigh in with more substantive ideas. It’s not a skinny view but it is a view that will fatten your wallet!

A new program to bulk up your bottom line

We have a complete e-learning program for Chambers of Commerce to offer their members as part of the dues they’re already paying. In other words, it doesn’t cost Chamber members a single penny.

We have a great group of experts writing articles on all areas of business, all designed to help you make more money and grow your business.

At this time, we’re only offering this program through Chambers in the United States. If you’re a Chamber member, send us an e-mail at bigginfo@biggsuccess.com.

Tell us the name of your Chamber and we’ll help you get access to this e-learning program for small businesses. It will help you bulk up your bottom line!

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Tags: audioblog, bigg success, Business, creative business, entrepreneurial leader, george krueger, Management, marketers, mary-lynn foster, maximizing shareholder value, sales, shareholders, the bigg success show

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Is Getting a Job Riskier Than Starting a Business?

Written on March 21, 2011 by George Krueger & Mary-Lynn Foster in Entrepreneurship

We were recently walking through the retail business area of our campus – our campus “downtown” you might call it. In the middle of the main block, two storefronts in a row were boarded up.

It’s a reminder that small businesses fail. The dreams of two or more entrepreneurs were unrealized. Lives were disrupted. Money may have been lost.

The most cited number is misinterpreted

Like us, you’ve probably heard it over and over again. It usually goes something like this:

“Starting a business is risky. Ninety percent of all entrepreneurial ventures fail within the first year.”

Some people say two years or five years. It doesn’t matter; the number is daunting.

We think the origin of this number stems from The State of Small Business: A Report to the President for the year 1994. We got it via Entrepreneurial Finance by Janet Kilholm Smith and Richard Smith.

The 90% number so often quoted is a misinterpretation of the data. The research actually showed that nearly 91 businesses ceased operations for every 100 startups, on average for the five years from 1990 to 1994.

To understand the misunderstanding, let’s say 100 new jobs were created in the past year while 91 people got laid off. Would we say we had a 91% job loss rate? Or would we say the net gain is 9 jobs?

When it comes to jobs, net gains are reported. When the subject is startups, the failure rate is cited. Why the difference?

The actual failure rate of startups

Scott Shane takes a different approach in his excellent book, The Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By. His data shows that, if 100 entrepreneurial ventures were started today, the expected number of failures each year would be:

While his numbers look a whole lot better, the odds are still stacked against startup entrepreneurs. But statistics are funny things.

The failure rate for employees

The Bureau of Labor Statistics recently released the results of a long-term study on labor market mobility. You can go to their news release if you want the details. In general, they showed that if 100 people started a new job today, only 67 would still hold that same job in a year. In five years, only 32 will hold the same position in five years.

So the survival rate for jobs is lower than the survival rate for startups!

We can hear the chorus of objections.

Some of these employees may have been promoted.

Others may have elected to take another job – maybe even a better one.

Of course, some were involuntarily let go.

Even then, many of them may have been eligible for unemployment.

In any case, they didn’t have money at risk like entrepreneurs do.

The number rarely discussed

Well said! However, it also highlights what we often ignore when we cite statistics about the failure rate of startups:

Some of the startup entrepreneurs may have ceased operations for a better opportunity – as an employee or an entrepreneur.

And then there’s the statistic we haven’t talked about yet. In fact, almost no one ever talks about it. Its source is the same as the 90% statistic mentioned earlier.

Only 9% of startups cease operations with unpaid obligations, on average.

Few entrepreneurs actually walk away owing money. They may have lost what they invested. However, no one else did. Suddenly, entrepreneuring doesn’t sound quite as risky as we are led to believe by popular lore

Freedom or security is the age old argument. It turns out there are risks in both employment and entrepreneuring. Successful entrepreneurs are masters at risk mitigation.

You can reduce the risk of leaving your job with a little advance preparation. Test yourself against these 10 signs you’re ready to quit your job and start a business. And check out The Entrepreneur Equation by the amazing Carol Roth.

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