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dot-com crash of 1999, but a pandemic is what we all got, so I’ll play the hand dealt to me.
others won’t and a few reasons they will fail — even ones that, before all of this, appeared to be having major success. Far too many businesses are really houses of cards. They look cool and big, and can even be flashy, but they can be knocked down with ease. Some of the following are telltale signs of a business without a stable foundation: single sources of leads into the business (e.g., Facebook marketing only); little or no marketing; few systems and processes; massive cash outflow; horrible gross margins; no focus on customer service, relationships, communication, etc.; poor sales follow-up; massive churn; word of mouth as a primary marketing strategy; no, or very limited, customer data; and massive personal and/or professional cash burn rate and/or debt. Another issue is that far too many businesses don’t know their numbers. You have to know your numbers. Sometimes the numbers suck, and it’s not fun to see problems in your business, sales process, or operations. But this is the language of business, and by looking at and understanding your numbers, you can figure out where the problems are and what you need to do to fix them before something like a pandemic hits and wipes out your company. Another area that will cause people to fail is just a bad business model. For example, if you’re in a business that only allows you to have a 30% gross profit margin and you have to spend 28% on overhead, you’re screwed. That would be a business model issue. If you have a low transaction value and a high customer acquisition cost, then that would be a business model issue. If you can’t hire people unless the economy sucks because you can only pay $10 an hour or else your business breaks, then that is a business model issue. So many people fall in love with the idea, the product, or the service and then struggle for years trying to make a business work that was doomed from the start because no customer is willing to pay what the business needs to charge in order to make the whole thing work. Or, the market is so small you can barely find customers. One major challenge that will be the nail in the coffin for many is they have no relationship with their customers or prospects. As I’ve been preaching for years, building relationships is crucial, and many business owners are really just annoying pests to their customers and prospects. They have zero relationship with them, and the only
I remember when I was about his age feeling like those were worthless assignments. Now I get what they were trying to teach me: Ask questions. One of the best ways to get to the right answers, I’ve learned, is to first ask the right questions, and from the questions you ask, determine the right answers. This is so important for long-term business success. One way I use those critical thinking skills as an entrepreneur is by working on what questions I should be asking myself, and once I have the answers, I play devil’s advocate to try and make sure I’m not missing any holes. This is why working in a mastermind can be very beneficial — you have someone who has their finger on the pulse of business, can ask good questions, and guide you to the right answers. Then they poke a few holes in those answers to make sure they truly are correct and, hopefully, even help you implement some of those correct answers. At the start of the pandemic, I went through a major review of my business. What’s working and what’s not working? What do I like and what don’t I like? How do I wish things would work? What would make The Newsletter Pro a better company for employees, customers, and shareholders? In my review, I found areas of opportunity that at one point had me scratching my head asking, “Why didn’t I see these things earlier? What do I want for myself in the future?” Sometimes taking a step back isn’t a bad thing. To be fair, a pandemic isn’t the step back I would have asked for. My vote would have been for a long sabbatical followed by a week at a spa with some friends or maybe even a normal recession like the
As a quick side note to the above statement, the weekend before I wrote this — but well after doing the initial exercise I talked about above — I asked one other question I think is important for all entrepreneurs to ask: What holes did this pandemic show you that you can fix in both your personal and professional life? You can plan all you want, but the moment the rubber meets the road, not everything is going to go as planned and you may wish you’d done more, spent less, made different decisions about something like not shorting the market as aggressively as you should have, etc. OPPORTUNITY AND FAILURES One thing I know about any recession is that there is a major opportunity. So many businesses won’t make it. Before I go into the opportunity I see, I want to point out why so many businesses will fail so that when the opportunity comes your way, you don’t make the same mistakes that doomed the folks before you. FAILURES The most likely reason for business failures after this will be some combination of a poor business model and an ineffective entrepreneur. I’m not trying to be a jerk here, but those will be the broad categories. Let’s drill down a bit and look at the why in more detail. First off, far too many people are leveraged to the max. I was chatting with a friend a few days ago about why some businesses will make it and
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