Each year, an average of 130,000 new businesses enter the Canadian market. Unfortunately, the latest stats show that each year, 140,000 businesses fail. In fact the probability of a new business being in business five years later is less than 50%.
It’s an alarmist opening line, yes, but did we catch your attention?
Good. If we still have it, let’s try to understand this crippling phenomenon. In my experience of advising new businesses, I think it’s crucial to understand why and how these new businesses are formed.
Two explanations crop up again and again – let’s look at Joe and Jane. Joe lost his job at a factory and it’s slim pickings in the classified section of the paper. But he knows he’s always been a great plumber around the house (or carpenter, or chef or hairdresser…) so he decides to set up a business and do that full time – take the plunge, so to speak.
Alternatively, Jane is miserable in her current sales job. She hates her boss, her commute, her coworkers, and especially the office coffee. She sits in her cubicle thinking, “Why not set up my own business, and be able to control my own destiny?” So she takes a mortgage on her house or borrows from her rich uncle and sets up her own sales shop. Jane, and the thousands like her, do it because they believe that since they know how to do their specific job, it will be easy to find people who will pay them for the service.
Unfortunately for the Joes and Janes, this often doesn’t work because the new business owner’s focus is on the work that needs to be done setting up the business rather than on the customer, and it’s the customer’s needs that the individual is trying to fulfill.
It’s my belief that the best way to start a business is to have a clear picture of what it’s going to look like when it’s finished. That is, when it’s up and running and operating successfully: what will your business look like?
Over the next few blog posts I’ll take you through the 10 most important decisions you should make before you spend your first dollar on your business. Or, at the very least, you should have a clear understanding of how you are going to resolve key issues before you go out and start renting space, borrowing money and hiring people…and buying a better coffee machine.
I welcome your comments, questions and feedback. And most importantly, your input. This business services consulting blog is for clients – current and potential – and I would enjoy addressing the questions you want answered.