I don’t get it. The world is filled with new or potential business owners who haven’t grasped a very basic principal. When you don’t know what you’re doing you’re setting yourself up to waste a boatload of money.
The Biggest Knowledge Gap For Most New Business OwnersBy far and away the biggest knowledge gap for new business owners is in the area of risk mitigation. Most don’t see it at the time. For many (most?) new business owners risk mitigation is about controlling expenses. Knowing that it will take some time for revenues to start coming in, they try to avoid any “unnecessary expenses.” An example of an unnecessary expense would be paying for a business coach or mentor during the startup phase. This decision flies in the face of logic. Risk mitigation is about avoiding expensive or sometimes deadly mistakes. Here’s an example.
Learning To Start A Business Is Like Learning To Skydive
Let’s say you decided that you wanted to go skydiving. You go out to your local airport where they’re offering Skydiving Experiences and you’re presented with two choices. On the left is the discount version. For $100 they’ll take you up and you can do the jump solo. But here’s the catch. When you walk in you see that the parachute is laid out on a table and the pack that it goes in is beside it. The pilot comes in and says, “Okay, there’s your parachute. Wrap that up, put it in the bag over there, strap the pack on your back. Then meet me at the plane and I’ll take you up to 7,000 feet. When we reach altitude we’ll open the door and push you out.”
Not A Chance
Now I’m pretty sure that you would not take them up on that offer. So you head over to the second business. This service costs $500. The person greeting you goes over the process they use. “First of all, we are going to show you how to pack that parachute, but we’re also going to make darn certain that it’s packed properly. We’re going to give you training, show you how to land properly and to brace yourself. We’re going to explain how the mechanisms of the of the parachute works, so you’ve got a clear understanding of it. We’re going to introduce you to a tandem jumper because it’s your first time jumping out of a plane. It’s pretty scary to do that yourself and probably not the smartest idea, so your experienced jumper will jump with you the first time. In talking to this person you realize that he has done what you want to do. Just like you he learned from an experienced skydiver and now he’s helping others learn.
Why Should A Business Be Any Different?
If you decide to go and jump out of a plane you’re certainly going to take the second offer. And people do that every day. Why should a business be any different? Yet so many wannabe business owners buy into the idea that you can start a business for a few hundred bucks. Money is precious and can’t be “wasted” on a paid mentor. It’s really ironic, because as soon as they start the business, the first thing they do is spend money. New owners jump in with both feet and starts spending money on short term tactical objectives. They have no problem dropping big bucks on website designs, social media advertising campaigns, or one size fits all business formulas that promise instant results. A whole lot of the money they spend is wasted. And many times the business fails.
The True Cost Of Starting A Business
People need to start telling the truth about the real cost of starting a Business. Even if you monitor expenses tightly, you will end up spending $50,000 to $75,000 in the first three to four years. It’s just the way it is.
It’s just that most people spend this money piecemeal, usually in an effort to increase revenues. When it doesn’t work they just spend more. There can be many different reasons why a business is not generating sufficient profits or cash flow. Blindly spending money on new websites, marketing campaigns, or consultants offering guaranteed results (without a real guarantee) rarely work. The stress starts to build and before long the entrepreneur starts to think about quitting.
Pay A Little Now Or A Lot Later
The consequences of jumping out of a plane with no training and a parachute that is not properly packed are obvious. The consequences of starting a business without the help of an experienced mentor are not so obvious. The results for the business can be just as tragic. Can you do it on your own? Absolutely. But the numbers don’t lie. Most people that take that path are out of business within 5 years. Of those that survive, many end up working long hours for minimum wage. It’s your choice. Pay upfront and mitigate risk, or face a much greater risk of financial loss and even business closure.