This is Part 2 of an article series that tells the story of what I learned from several businesses that I’ve started.
The idea was to create a business model to overcome the restrains of my previous business model. Publishing a newsletter would allow me to grow a year round monthly income and hiring employees as needed - unlike the previous seasonal business. I could build a system with specific job functions that one day could be done by someone other than me. That was the plan, to build a business that would allow me to move into the role of the owner, who is free from the day to day tasks.
The plan was to create a newsletter that targeted the local Christian community. The market was in need of a solution like mine because the local newsletter was basically ignoring the Christian community, in a town with a high density of churches. Before a started, I meet with several of the leading pastors to get their feedback on the idea. It was almost unanimous that something needed to be done for the community. Churches needed a channel to communicate with the entire community of believers and believers needs a medium to be informed about what was going on throughout the entire community. The market was ripe.
Well, it didn’t work out the way I planned. After two years of trying to build a readership large enough to support advertisers, I just couldn’t get everyone in the larger Christian community to agree on anything. I was excited to create a profitable business model that would surpass my previous profitable business, but in the end, I lost about twelve thousand dollars and two years worth of work.
What I did learn was how to build a website, because I needed a website to support and market the newsletter. The knowledge I gained became very helpful at my job as we needed someone to build a website for a product. I used my knowledge to gain respect and a reputation for knowing about new technologies, which led me to an unexpected promotion.
I later realized even though this business failed, I learned more from it than from any other business that I have tried – and this is still true to this day.
Trial and Error
I learned that trial and error are common in the world of entrepreneurship. Many entrepreneurs find a market by trial and error. They just start trying to sell something and eventually fail. In the process, they learn about the competitors, customers, suppliers, distribution channels and the delivery process. After several failed businesses, they become experts. They now know how the market works and how to create their own leverage. This is sometimes a long a painful process, which is why it usually take an unusual amount of will, vision and determination. But, I think it eases the pain a little if you know this ahead of time.
Finding a niche market to exploit and grow is not easy. Many times entrepreneurs find the competitors are too strong and need to move on to other markets. Others find a unique idea or process that gives them an edge (leverage) against the existing competitors, which they can couple with hard work and focus to build their business around.
If you are going to use ‘trial and error’, be sure not to invest all your money – because you are likely to fail several times. One of the biggest mistakes when starting a business is to put it all on the line. In his book, “The Innovator's Solution”, page 221, Clayton Christensen says it this way;
”Entrepreneurs rarely get their strategies exactly right the first time. The successful ones make it because they have money left over to try again after they learn that their initial strategy was flawed, whereas the failed ones typically have spent their resources implementing a deliberate strategy before its viability could be known.”
I was fortunate to have followed my own advice as given in the introduction article of their article series.
“A good strategy is to first go to college, second work for someone and get out of debt, and third start a business with money that you can afford to lose. More than likely, the business will fail.”
I didn’t need the money that I investing and lost, so after folding the business I was free to try again after my pride healed.
Business Model Constraints
The business model was successful in its mission to overcome the constraints of my previous business model. The problem that I ran into was unforeseen at the time that I started the business. The market refused to accept my solution, even though they verbally said they would before I started. The problem was that the industry was changing. I started a publication business at the time when the Internet began it’s strangle hold on the publication industry – which is still impacting it today as the Internet has become a much cheaper way to publish and distribute information. It was the wrong time for a new publishing business. My product, as good as it was, was not enough to offset this major industry change.
Primary concepts that I learned
The primary concepts that I learned from this business were;
Clearly define the problem you are solving – When I was replacing concrete sidewalks in my first business, it was clear to everyone when a sidewalk needed to be replaced. But, when I was trying to get someone to subscribe to my newsletter, it was difficult to convince them that they absolutely needed my product and they couldn’t get this information anywhere else.
Claim your budget dollars – When selling a new product to someone, I learned that it was very important to link your product to a budgeted item. Otherwise, if there is not a related item in a business’s budget for your product, than they cannot spend money on it. At best, you can convince them to add a line item to their budget for your product next year. But then, you have to wait until next year to get the sale and hope the customer is still interested and the item has been approved in the budget. A much better idea is to link your product to an existing item in the budget, with a lower price than whatever competing product they are spending money on.
Failure is part of the process – Like I said before, even though this business failed, I learned a tremendous amount from it. Most importantly, I learned that it takes failure to figure things out.
Finding good suppliers is very important – In the process of this business, I found many suppliers for things like website hosting, graphic artists, online photos, business cards, office suppliers. I found good suppliers and not so good suppliers. Finding good suppliers takes time that I was not expecting to spend, which is why having better suppliers can be a competitive advantage. Having too many suppliers can also increase your costs to manage them and give your competitors an advantage with lower costs. Supply management is a large task within large organizations and this business taught me why.
Why I needed a corporation – I ran this business as a Sole Proprietor, just like my first business, because it was easy to setup. But, as I started to buy assets and wanted to add employees, I realized why I needed a different business type. Employees add a lot of risk to a business, risk that I am personally liable for as a Sole Proprietor. A Limited Liability Company and a Corporation both provide legal protection limiting the liability of the business to the business assets. The personal assets of the owners are much better protected, which is what I needed because I didn’t want to risk my family becoming homeless if we were sued. I also wanted more help from my accountant because I had assets like computers and printers, with a useful life that was longer than one year. I came to this conclusion after reading several books on taxes, accounting and business structure – although I wasn’t until my next business that I would create a Corporation.
Over the last decade I have found myself lacking knowledge about so many business tasks that I have probably read 80-100 books. Finding the extra time to read this many books and the discipline to learn the information is itself a competitive advantage, because few people have the time or the willingness to constantly gain knowledge. Most of the best books that I have found are listed on the ‘Books’ page of this blog.
Next article: Businesses I’ve Tried and What I’ve Learned - Part 3: Software
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