Like I said yesterday, time has been on my mind lately. Time affects small businesses in many ways. Yesterday I spoke about time management. Time also has a great affect on expectations.
Whenever I get involved with a start-up or a young business, people (both inside and out of the business) have times attached to the business’ success. They believe that small businesses are destined to struggle for a set period of time, only to magically prevail if they can last beyond that timeframe.
There are two very basic, and equally wrong assumptions with these beliefs.
1. Businesses will struggle for the first __ years.
2. The struggles will go away (or at least dissipate) after those first __ years.
We have all seen and/or read about an entrepreneur who takes an idea in his/her basement, and turns it into an instant success. No, it doesn’t happen all the time, or even most of the time, but it does happen. So, why does every small business need to go through 1, 3, or 5 years of misery before being able to turn a profit?
There are some businesses that will naturally succumb to this more often than others. Inventory-heavy retail stores will have substantial start up costs that can take some time to recoup. However, I believe that in many cases, struggling through the first few years is simply a sign of bad planning.
The biggest problem is trying to build a business that is entirely based on volume. Your small business needs to find a way to make a profit, even $0.01, whether you have 1 customer or 1,000,000. In the beginning, that might mean a very lean operation. Maybe you have to work out of your basement, advertise through free channels such as social media, and pay higher costs on materials than if you were buying in bulk. It won’t be glamorous, but if you ramp up slowly and efficiently, you won’t have to burden yourself with the big loans that so many entrepreneurs foolishly take on.
As for the 2nd assumption, time does not heal all wounds. Just because you’ve found a way to survive the first 3 years doesn’t mean you will suddenly start seeing positive numbers on your financial statements. As I mentioned before, if you have a retail or manufacturing business with unavoidable start-up costs, then time might be on your side. Planning well, and seeing yearly surpluses will eventually clear up your debts and give you the profits you were waiting for. But if you start off on the wrong foot, time will only magnify your mistakes, and cause you to sink further and further into debt.
What I’m trying to say is this. Although success never truly happens overnight, don’t let your dreams and your success be dictated by misguided “truths” about small business. Just because many entrepreneurs take years to see a profit doesn’t mean you will. If you streamline your operations in the beginning, and go in with a smart plan, there’s no reason to ever see a loss on your balance sheet.