5 Regrets of a Failed Entrepreneur
1. Didn't define the customer accurately.
It never ceases to amaze me how many Entrepreneurs, when you ask them, so who is your target market can't give a clear answer. Or even worse they tell you that everyone is potentially a customer. If you don't know who your customer is, then they probably don't know who you are either, which makes it difficult for them to find you and buy from you.
The tighter you can define your customer, the sharper and more targeted your marketing can be. If you could serve everyone, you should still look to identify a group that you will aim for. It could be the most profitable, the most accessible, or whatever criteria you choose.There are probably few feelings worse than seeing your business go bust with a sea of untapped customers available.
2. Didn't leverage their network enough.
I know from my own experience that it can be hard to try to sell to your network, it doesn't feel quite right, or it can feel like your asking for charity from friends. But there are two quotes every Entrepreneur should remember.
“All things being equal, people will do business with and refer business to, those people they know, like and trust.” -- Bob Burg.
“Your network is your net worth.” -- Tim Sanders
Your network is an invaluable source of leads and should not be overlooked as they probably fall right into that know, like and trust category and will be a great source of referrals and potentially direct business.
When my own business was struggling, I was constantly on the lookout for new clients, in spite of the fact that 80 percent of all my work had come from my network.
3. Didn't sell aggressively enough.
Sales is tough and many of us, myself included, would much prefer to work in the business, rather than on the business. But spend too much time working in the business and pretty soon you will be out of business.
No sales, no business, it is as simple as that.
It's so staggeringly obvious when you are looking back over the wreckage of failed business, but sometimes we do not see it as when we are in the thick of it. Everyone should have clear monthly/weekly sales targets which are aligned with the overall business goal. And they need to be tracked and monitored closely, with any necessary adjustments made quickly if we want to be successful.
If you're not aggressive about sales, then you're not serious about your business being successful.
4. Priced services too low.
When it comes to selling services, those of us who have been working in corporate can easy fall into the trap of selling based on cost rather than value, using a simple cost plus model. But this puts us into the category of trading hours for dollars, which while ok, it's probably not going to set the world on fire.
We should look to price things based on the value that we can bring to the customer rather than just the cost of doing the work.
One of my biggest regrets was agreeing a contract with a client where I was charging them $1,000 per day, which for me at the time was my highest ever charge out rate. After working there one day, I had solved the client's problem to save them $500,000 per year, at which point they ended the contract, which meant I'd charged them just $1,000 for saving them $500,000.
Understand the value you bring and charge accordingly.
5. Focused on revenue not profit.
It's not about how much you take; it's about how much you keep. If I had a dollar for every entrepreneur that went out of business because they didn't understand their costs, I'd probably have enough money to retire comfortably.
It's good to be focused on revenue, but you also need to understand your profitability too, as it's profitability that determines the viability of your business. It doesn't matter how many widgets you sell if you're selling them at a loss, you will go out of business.
One client that I worked with, we just managed to keep his business afloat and then turn it around.
He first asked me to consult with him because he was taking $30,000 per month within just five months of starting his business and he wanted to increase that to $60,000 because there was great demand for his products. The first thing I asked was what's your profit margin, because if you're not making a good profit, doubling your revenue might not be a good move.
Unfortunately, the answer to that question was unknown. So we spent the next two weeks looking to get a better understanding of his costs and profit situation.
It turned out that he had a range of products which, depending on who supplied the components, varied in profitability from 5 percent to 50 percent and at that time his overall average profit was 10 percent. This meant he was working over 240 hours a month for $1,500 in profit, which is hardly a sustainable business model.
So rather than look to increase his revenue, we focused on switching out his less profitable suppliers to increase his overall profitability. This allowed him to achieve an average of 40 percent profitability, which increased his profit from $1,500 to $12,000 per month, without increasing revenue or work effort. This is a sustainable business and one which is worth growing.
Business can go bust for any number of reasons, but it's the ones that we could have avoided that will cause us most regret and leave us to dream of what might have been.
