Nobody wants a business venture to fail or even be mediocre. Most entrepreneurs dream of creating a business that can, at the very least, provide a comfortable lifestyle for them and their family. If you enjoy what you are doing, that’s an added bonus.
According to Bloomberg 8 out of 10 small businesses fail within the first 18 months of existence. There are several reasons for why this happens, but there is one idea in particular that summarizes many of those reasons. That is, business owners oftentimes lack the understanding (and subsequently wisdom) necessary to make the right decisions regarding their business.
Of those businesses that go beyond their first 18 months, only a very small percentage become “thriving”. Those that do not thrive either fail or are mediocre.
I know…sounds like I’m just stating the obvious. As obvious as it may sound, in reality it’s not so obvious or we would see this trend change.
The graph below illustrates the success/failure of the over/under investor. Of those that succeed they have a convergence point of understanding. This means that they have a competent grasp on all of those things that make their particular business successful.
You could replace type of investor with any variable and success will always be the result of understanding.
So then, what is it that we have to understand to make our businesses successful?
Understanding can be broken into two parts that apply across the board no matter your industry.
- A proper view of the market
- A proper understanding of ROI (return on investment)
A proper/practical view of the market: competition and collaboration
Most businesses owners understand the basic economic concept of competition. Competition usually manifests itself through one of two ways: through innovation and cost. As competition among companies increases, both their ability to innovate increases and/or the cost for the consumers decreases. This is a fairly standard way of understanding how the market functions.
However, being competitive only helps the consumer, not the business owner. In fact, competition can send businesses to an early grave. Equally important to understanding competition within your industry is understanding your company can begin collaborating.
In the great business book titled The Cluetrain Manifesto, we learn the importance of properly understanding the marketplace. The marketplace is not simply an abstract concept meant to explain certain behaviors within a collective group. Instead, we learn that markets are “conversations” that are taking place between people. Moreover, they are inherently social entities that are driven by the power of relationships.
A proper understanding of ROI (return on investment)
ROI or Return On Investment is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.
I can remember on several occasions as a child how frugal my grandfather was. He hated to spend money on things he deemed not worthy. As a factory worker in the automotive industry he worked hard for every penny he had. However, one day in particular stands out in mind and I have never forgotten it. He was going to purchase my class ring for me and as we were looking through the brochure I found one that was very cheap (I mean I figured it pained him to even spend the money on something so trivial). I pointed to that one and said this is the one I want. He turned to me and said in his old grumpy raspy voice “no! I don’t think so boy, if you are getting a class ring you’re getting one of good quality!”
I have never forgotten the subtle principle at work here and use it to this day. When it comes to investing you have a few types of people:
The Scaredy Cat: this person is afraid/paranoid of investing any money and usually has to be convinced over a period of time that their investment is a good idea.
The Contemplator: this person has to think for long periods of time about the nature of the investment; attempting to understand all of the risks at stake.
The impulsive shopper: this person is like an impulsive shopper. They don’t spend a lot of time thinking about the investment; if it looks good and useful, they invest.
The Sage: this person is neither impulsive nor do they take a long time to make a decision. They know when they see a good investment because they see the risk/reward ratio is in their favor.
The quality of your website reflects the quality of your product
It still surprises me that there are business that exist and either don’t have a website; or they have one, but they have no web presence. Then are those who understand the importance of having a website, but don’t understand the “concept” of a website. They think (perhaps subconsciously), that their website just has to exist on the internet and that is all they need.
Perhaps even more shocking is the lack of ongoing investment they make in their website. Creating a simple static website is throwing your money away unless you also market that site. Creating an online store to sell your products is pointless, if you are not also marketing your site on search engines.
You will NEVER receive a good return on your investment in developing a website unless you also create a web presence. Creating a web presence is twofold: first, it’s the ability to diversify your websites accessibility across several mediums. Remember, the market is social. So too is your web presence. Moreover, you should be pursuing every avenue of social marketing that makes sense for your industry.
Second, the website must be dynamic and evolving. If you have a static website where nothing changes for the most part, then search engines think your site is irrelevant. However, if you have revolving/evolving content on your website, then you have the appearance of relevance. This is both important for search engines as well as the user.
You have to put as much care into your web presence as you do your physical presence. For some reason most people think of a website as secondary, when it should be almost primary. You have not only a larger marketplace, but a larger group of people to collaborate with.