If you are running your own small company or trying to start a new business, you already know it can be an unpredictable and stressful way of life. If you’re considering starting out on your own, are you having nightmares about the potential risk? Are other people telling you not to do it? Do your parents, spouse, and friends think you’re crazy? I can empathize. I had an accountant tell me I wouldn’t make it. I even had business leaders tell me my plan for their industry was unworkable. But here I am, almost fifty years later, and Paychex, the company I launched back in 1971, continues to grow every day, every month, every year. The thing is, you can manage risk. And, you can beat the odds trust me.
There are many things you can do that will help you reduce your chances of failure; here are five that have served me well over the years.
Constantly Think Business
If you are a natural entrepreneur, you’ll always be thinking about business. For instance, if you’ve ever sat next to a food truck eating your hamburger and counted the number of patrons purchasing food and then multiplied this by the average spent and then extrapolated what the business owner would earn in a typical lunch period, you’re probably an entrepreneur. If you then went further and estimated their operating costs and calculated their net profit, you are definitely an entrepreneur—even if you don’t realize it.
If none of the above comes naturally, you need to train yourself to think like an entrepreneur. Developing this sort of thinking, and practising it, will increase the odds of your next venture being successful.
Choose a Recurring Revenue Business
Your chances of survival and long-term growth are better in a recurring revenue business. In the late 1960s and early ʼ70s I found myself working as a salesman for a payroll processing company, not because I had a passion for the industry, but to earn enough money to support my family. Payroll processing, on the face of it, is not a very exciting business, but I soon learned that it offered the ability to sell a service to a customer and then repeatedly deliver that same service week after week, month after month, year after year to that same customer.
If you sell a piece of art, or some jewelry to someone, at some point they may, only may, come back and make another purchase. This means you are constantly looking for new customers. If on the other hand you sign a household up for bottled water and you deliver every week to them, that’s predictable recurring revenue. In business, that’s pure gold.
Understand Your Business
If you watch reality television, you will have seen those shows where people open a restaurant or a hotel with little to no experience. It makes for good television because they always seem to make a catastrophic mess of the business. The truth is that starting a business when you have no experience in the industry is lunacy. If you do, you are stacking the odds against you right from the outset. According to the U.S. Bureau of Labor Statistics one in five businesses fail within the first year and one-third fail by year two. To beat the odds, spend some time working in your chosen industry. Learn what makes it tick—from the inside.
Keep Your Business Plan Real
Business writers regularly advise entrepreneurs to write a formal business plan; my advice is don’t bother writing a business plan that would double as a door stop. My initial business plan for Paychex was one page. I calculated what my operating costs were and discovered how many clients I needed to sell to break even. In many ways it’s that simple. If I’m a retailer selling popcorn, how many people do I need to come through the door and buy my popcorn to allow me to pay all my bills and give me an income? The rest is strategy, useful but peripheral. I’m not saying you shouldn’t understand every aspect of your business and industry but my advice is to focus on the key points and financials that demonstrate the viability of your business concept and cut the rest of the verbiage. In short, cut the fluff and keep it real.
Realize You Are in the Sales Business
One of my favorite statements about business is: It’s Not a Cash Flow Problem-It’s a Sales Problem. One of the biggest mistakes entrepreneurs make is they overestimate their ability to sell their product or service. Once they open their doors or hang their shingle, they believe the world will beat a path to their door. Take it from me, that just does not happen. Today, Paychex brings onboard close to thousands of new clients a week, but it took me four years to get my first three hundred! If you really want to beat the odds and be successful put ten times more energy into selling what you produce than just about anything else.
Anyone can start a business, then sit back and either watch it lose money or begin to provide a profit—that’s called gambling. I suggest putting a little effort into stacking the odds in your favor.
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