This is the last day of 2020. For many of us, it could not come soon enough. It has been a challenging year, to say the least. Many small businesses have suffered during the pandemic. Markets have shifted beyond our imagination. People are now working from home. The word Zoom has become a verb. Almost everything can be delivered to your door. As a business consultant for over 10 years, I have seen the way we do business evolves and how products and services are made and delivered change rapidly. The 3-D printer has allowed smaller players to enter the new product market. Online purchases have become part of how we shop. Amazon is now the largest company in the world.
When this pandemic started, many of my clients were devastated. They had been forced to close their doors through no fault of their own. Most small businesses have little operating capital. In Colorado, the average community-focused restaurant had only 16 days of operating capital. Panic was rampant. Then the EIDL loans and the PPP forgivable loans came in. The business owners focused on using that money pivot their business model in many cases. Small restaurants that had built their business model on community added take-out and delivery to their options. Websites got revamped. Loyal customers supported their local businesses. Many limped through the summer with outdoor dining, takeout, and delivery. At the same time, the layoffs continued and people filed for unemployment and many reassessed their situation.
Then a surprising thing happened. The majority of my new clients wanted to start a business. That was unexpected. Many had been dissatisfied with their job for some time. Others still had jobs but did not believe the job would be long lasting. Some had a hobby that they would love to somehow turn into a business. Others just wanted to create a second revenue stream. Some saw opportunities in certain markets. Entrepreneurship was “alive and well” in 2020.
However, most of us never took an Entrepreneurship course. We were taught to be employees in school. Get a set of skills and then find an employer who needs those skills. Now, more and more people are exploring a new opportunity-owning their own business. Doing that successfully requires a whole new set of skills. You may be an accountant or engineer. You may be a carpenter or a plumber. You may found a hobby that you would like to turn into a profitable business.
Here are some HARD TRUTHS:
HARD TRUTH #1 – 80% of all new businesses fail within the first 5 years.
HARD TRUTH #2 – Not every idea for a business is a good one.
HARD TRUTH #3 – Not everyone should be a business owner.
HARD TRUTH #4 – Passion is not enough.
It is not enough to make money. The business model has to make enough money to pay its debts, market to customers, pay for the product or service to be delivered, insurance, phone, rent, and various other items before any money comes to you as the owner. Owners get paid out of profit. Being busy does not mean making a profit. As we have found out in 2020, being able to pivot your business model at a moment’s notice is also a requirement. Owners must know their target market and follow the trends of that market. Owners must understand what their financials are telling them or not telling them.
Owning your own business also requires a mindset change from employee to entrepreneur. That is a lesson on its own. Starting your own business can be expensive.
Most businesses fail for the following reasons:
- Lack of Enough Cash
- Lack of Management Expertise or Guidance
- Inadequate Financial Management
- Marketing Strategies Not Defined.
As you can see three out of five of those reasons involve cash management. Another focuses on marketing. In order to start and run a successful business, you must take on many duties including, but not limited to Accounting, Marketing, Brand Awareness, Social Media, Production, Client Management, Office Admin and the list goes on. That’s what we do in the eL3 Plan Forward class. We teach you how to design and execute a financially viable business model before you invest your funds.
