HENCE, THE TITLE OF MY BLOG
I used to read books about business, and subscribe to magazines like INC. or ENTREPRENUER, until I realized that when these guys talked about small business, they were talking about businesses with dozens, if not hundreds of employees. What my store really is, is a Mom and Pop business, (or, in my case, a Pop business, with a half-time employee) and there are little or no books and articles about us. Probably no money in it, just as there is no money in Mom and Pop businesses.
The biggest problem is that all Mom and Pop businesses are so unique that it is almost impossible to draw any broad conclusions. Each store is strongly affected by the personality of the owner, his or her motivations, resources, individual skills. One owner might be great at ordering, but horrible at people skills; another might be a great store layout designer, but unable to stick to a budget. One may be a great wheeler-dealer, the other may be a steady, reliable presence.
These books and magazines (which really exist to just sell more magazines), can be actually dangerous to the small guy. One of the worst business decisions I ever made was to create an incentive program for my employees based on an article I read. Complete disaster.
You begin to realize that all the common wisdom is suspect.
1.) Half of all businesses go out of business within 2 years. Well, it seems to me that most all business last 2 years, even if they are failing from day one. Spread that figure out to 75% of all business fail within 8 years, and I'd believe it.
2.) You should have 3 months (or 6 months or two years) income saved up. Yeah, right.
3.) You should expect to lose money for the first 2 years. Also, yeah, right. Look, if you have enough money saved for 6 months income, and can afford to lose money for two years, why are you opening a mom and pop business? It will take a decade or more just to get back to even. Whatever you were doing before that was giving you those kinds of resources, you should keep doing!
4.) Advertising. Like throwing money into the ocean, but every newbie bites.
5.) Lower your prices to sell more! Cut prices in half and make up for it in volume! Only if you're Walmart, kiddoe.
6.) Or the opposite of #5, you should Keystone, be able to get double your investment. Not in the same world as Walmart, kiddoe.
7.) Turn your inventory at least 5 times a year. These days I feel lucky to turn my inventory over ONCE a year.
And on and on. Almost all the common wisdom about small business is suspect. To me, at least.
The best book I ever read about a 'small' business was, GROWING A BUSINESS, by Paul Hawkens. His basic premise was that you start small and cheap, learn your business, and then grow.
That isn't what's happening downtown. These stores are starting as fully developed concepts, with all the inventory, fixtures and storefronts shiny and new. Looks great. Except the owner really doesn't know what is going to happen, does he/she? Estimates of sales are going to probably be too high or too low, and he/she will have to adjust. If the basic concept is flawed, so much money will have already been sunk into the business that it will probably be too late to change -- that is, if the owner actually catches on to the flaws soon enough and, even more importantly, is willing to make the hard decisions.
Making these necessary changes is difficult for any owner, but nearly impossible for an absentee owner. One of the dead giveaways as to whether a Mom/Pop business has a chance to succeed is whether the owner actually works in the store. I will challenge any small business to survive if the owner isn't there at least 40 hrs a week, (Minimum!). It's a Mom/Pop business, which are by their very nature designed to support a Mom and a Pop! (Hence the title of my blog.)
I want them to succeed, but I fear they will be disappointed in the results.
Thursday, December 14, 2006
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