Tag: entrepreneurship

  • Part 2: Why Businesses Fail

    Part 2: Why Businesses Fail

    Since 1980 onward, business plans have become standard staple in lending and investing. They provide, or so their supporters will argue, a standardized way to look at a business. Business plans require entrepreneurs to actually “plan” and they are the road map an entrepreneur uses from start-up through to a full -scale operation.

    So why is it then, that businesses with business plans still fail?

    There are several reasons. Oftentimes, the challenge is not in the business plan itself but in the strategy of the entrepreneur and in the broader business model.

    The first main reason that businesses fail, is that they are just generally bad business ideas. One of my favorite shows is the Canadian version of Dragon’s Den. Just watch one episode (the are available at www.cbc.ca) and see the sheer number of bad business ideas that exist. Bad ideas are bad for several reasons. The market for the product may be small or ill defined. The marketing or distribution strategy may be abysmal or non-existant and the entrepreneur themselves may be the biggest obstacle the business has.

    The second reason that the businesses fail, is cashflow. Entrepreneurs are great at predicting prospective revenue, but poor at understanding cash flow. They are so eager to get orders, that they will take any payment terms from their customers, even if it is at their own expense. I have seen entrepreneurs come to me and they offer 90 day payment terms for their customers, but have all payments due in 30 days or less from their suppliers. It does not take a rocket scientist to figure out that there is going to be a cashflow problem here. Unless the entrepreneur has a good line of credit, or a large degree of personal savings, this issue can mean the death of the business.

    There are many other reasons. Poor management. Inexperienced. Lack of contacts in the industry–take your pick. My favorite reason cited for the death of a business is poor planning. Poor planning by the entrepreneur.

    Planning in itself is not the answer. What these critics mean, but rarely get around to saying is risk mitigation strategies. Identifying what the Risks are to a business and confonting ways to change/challenge those risks is really where the crux of all business success starts.

    Article keywords: why businesses fail

  • Do I need a Business Plan? (Psst … You May Not) Part 1

    Do I need a business plan? I cannot tell you how often I get this question. Early in my career, I was an avid supporter of Business Plans. Not the business plan itself perse, but the planning process. Planning, in itself is crucial to the success of a business-or so I thought. However, over the years I have become more of a cynic.

    I have seen man well-planned businesses fail. These were businesses where the entrepreneurs wrote business plans, strategic plans, revised, reviewed and planned their hearts out. Some entrepreneurs plan for years before launching, but even the best laid out plan, can fail–and they do.

    I have seen many ideas, developed after intense all-nighters, go on to flourish and sell for seven figures within two years without ever having a single page of a planning document.

    What is the difference? Why is it that some can survive without a business plan and others seem to live and breath by their plans?

    The Evolution of the Business Plan

    To fully understand this this, we need to take a step back and ask, what has led to this business planning phenomenon?

    The answer can be found, both in our business culture and our communities. There are parts of the world, where business plans do not exist. Yet in North America, the Business Plan is seen as a crucial component of the business process–and the torment of Entrepreneurs and their Financiers.

    Years ago, when we wanted to borrow money for a new business, we went to our local bank-the one we had dealt with for years. The bank or lending manager knew you by name. He knew where you lived, your family, your Church and your habits. Further, many people had higher levels of personal savings. These were tapped and used at key moments such as this.

    Entrepreneurship in itself, was less common. One might run a family farm, a general store or small restaurant, but imagine the lack of bureaucratic read tape of the Wild West compared to setting up a business in a large urban city today? From non-existent to a nightmare.

    As our communities grew, as newcomers entered, as borrowing markets expanded, knowing everyone that we dealt with was harder. What was needed, was a rigorous, scientific process, that would standardize the objective financing process and introduce some scientific validity to what had previously been a very personal decision.

    Enter the business plan, the savior of the Financier and the Entrepreneur. Over the years, particularly since the 1980’s the use of the term business plan has skyrocketed. For example Google traces the use terms used in books from the 1800’s onward.

    Do I need a business plan?

    So, with such a long history, how can it still be unclear when a business plan is needed? Be sure to follow our blog for the answer.

    Do you have a business question for one of our experts? Be sure to tweet @carmenreis or get in touch with us – we would love to hear from you!

  • Ways to Kill an Idea – It Can’t Be Done

    Ways to Kill an Idea – It Can’t Be Done

    Ways to Kill an Idea – #1. It Can’t Be Done

    I recently hosted a conference on immigrant entrepreneurship, which was meant to drive home three key ideas:

    1. Fail fast, fail forward.
    2. Do not be afraid to think big.
    3. Do not let your immediate response to a new idea be “no”.

    Obviously, there are some things we should all say no to, but generally speaking, we are often to quick with the dreaded “no”. Specifically, we are far too quick at killing ideas. Our keynote (who did a fantastic job) left us with some ways as to how ideas are killed. While everyone began laughing at each item, it became clear that we’ve all heard them before for either one of two reasons:

    a) We heard someone say them, and couldn’t believe that they did, or;
    b) We said them ourselves, and looking back we weren’t entirely sure why.

    After this exercise, I felt that it would be fun to share some of these with you. While BCG originally entitled this “120 Ways to Kill an Idea”, I’ve trimmed this down to my favourites. Be sure to follow our blog for #waystokillanidea.

    Here goes #1: It Can’t Be Done.

    I can’t remember how many times I’ve heard this. A part of my gets quite upset when I hear this; another part wants to prove people wrong. Sure, some things can’t be done – i.e. I can’t flap my wings and fly to Mars, but most often we use this excuse in a poor context:

    This technology can’t be developed; This product can’t be marketed; This book/movie/game can’t be made appealing. Either way, this excuse is good for one thing: killing ideas. Remember, if you have a great idea, don’t let it be killed!

    – Rodolfo Martinez

    Do you have a business question for one of our experts? Be sure to tweet @carmenreis or get in touch with us – we would love to hear from you!