Apr 25, 201308:05 AMOpen for Business
with Jody Glynn Patrick
How NOT to start a business
(page 2 of 2)
It didn’t take long to explain the fatal flaws of her business. Price point (caused by packaging rather than goods), target market (should have, given her price point, been a specific wealthy demographic), distribution system … well, I could go on and on, and in fact, I did. During commercial breaks, I kept apologizing profusely to her, but the truth was, she lacked a business plan, business advisers, and business sense. Instead, she’d created an interesting money-pit hobby.
So here’s the moral of the story: If your little sister or your uncle wants to start a business and comes to you for encouragement, instead offer something of value like the advice to write a business plan. It’s a great exercise whether they intend to fund it using savings, a credit card, third-party funding, or the financial help of family, friends, and fools.
Plans should include a clear and simple description of products and services. Advise them to identify competitors and to zero in on their customer base, sales, and distribution strategy for reaching those customers – and then to double back to their pricing. Does it still make sense, given the cost of bringing their goods or services to market? And also, it’s imperative to create a detailed description of their capital and cash-flow needs (and then double the amount they think they’ll need). Finally, suggest they take that plan and run it up the flagpole with a trusted business adviser.
That is boring, I know, but your sister would do better to be a bored and successful start-up entrepreneur than to have an exciting example of a failed business.
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