Is your business a one-trick pony?

If your business is a one-trick pony, it will die… unless you do something about it.

What is a “one-trick pony” business?

“One-trick pony” is a business that is dependent on the success of one single product or service.

How do you know your business is a one-trick pony?

If you have only one product or service, your business is a one-trick pony. If most of your sales are coming from one single product or service, your business is likely a one-trick pony.

The ultimate test is this: would your business survive if you removed your biggest source of revenue? If your answer is “no”, your business is a one-trick pony.

Why do one-trick ponies die?

Businesses that depend on a single product or service die because products and services have limited life spans. No single product or service can live indefinitely. They all follow the inevitable product life cycle and ultimately die. It’s not a question of what, only a question of when.

What can be done about it?

Product lifes can be extended using multiple marketing strategies, but this can not completely avoid the ultimate demise, only postpone it. Once the underlying technology supporting your product or service is replaced by a superior one, know that the end is near.

The only way to guarantee your business’s survival, is to stop being a one-trick pony. And, the only way to stop being a one-trick pony is to expand your product/service range while, at the same time, ensuring that they are not all based on the same underlying foundation.

When to start adding new products/services?

If having multiple products/services is not already part of your initial sales funnel, you should consider adding new products or services as soon as you reasonably master the art of selling and start getting customers. The sooner this happens, the better.

A very important thing to understand is that these not necessarily need to be your own products or services. You can just as well promote complementary products sold by other (non-competing) businesses in exchange for an affiliate commission (referral fee).

Expanding your product/service range and/or promoting other businesses’ products will not only increase your business’s chances of survival by becoming less dependent on sales of one core product, but also improve your bottom line, increase your customers’ lifetime value and strengthen your relationship with them.

What’s your story?

Is your business a one-trick pony? If yes, what are you going to do about it? If no, I would love to hear your story and find out more about what impact adding new products/services had on your business.

Product life cycle

What is a product life cycle and what marketing strategies are appropriate at each stage.

No product lasts forever

The most important thing to understand is that no product lasts forever. There are ways to extend a product’s life cycle, but eventually, every product will become obsolete at one point in the future.

Additionally, as economic conditions change, competitors launch new assaults and the product passes through new stages of buyer interest and requirements, different strategies are required in order to expand the product’s life and profitability as much as possible.

Product life cycle

The concept of product life cycle is based on the following observations:

  • Products have a limited life.
  • Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller.
  • Profits rise and fall at different stages of the product lifecycle.
  • Products require different marketing, financial, manufacturing, purchasing, and the human resource strategies in each stage of their life cycle.

The typical product life cycle follows a bell-shaped curve that is a function of sales and profits over time. This curve can be divided into four stages:

  1. Introduction – a period of slow sales growth as the product is introduced in the market. Profits are nonexistent at this stage because of the heavy expenses incurred with the introduction.
  2. Growth – a period of rapid market acceptance and substantial profit improvement.
  3. Maturity – a period of a slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased marketing outlays to defend the product against competition.
  4. Decline – a period of sales and profits erosion.

Product Life Cycle: Bell-shaped Curve

Product Life Cycle - typical bell-shaped curve

When product sales don’t follow a bell-shaped curve

While the bell-shaped curve is typical, product lifecycles can exhibit many different alternate patterns. For example:

Growth-slump-maturity pattern – after a period of strong growth, sales decline dramatically only to stabilize at a certain level. An example of a product that exemplifies this is the electric kitchen knife. The sales of electric kitchen knives grew rapidly when first introduced and then fell to a much lower level. This lower level has been sustained by late adopters buying the product for the first time and early adopters replacing the product.

Cycle-recycle pattern – the period of growth and subsequent decline is followed by another period of growth and decline. A good example here are drugs. The pharmaceutical company aggressively promotes its new drug resulting in the first growth cycle. When sales start declining the company gives the drug another push, which produces a second cycle. The subsequent cycles are usually off smaller magnitude and duration.

Scalloped pattern – here sales pass through a succession of growth periods based on the discovery of new product characteristics, uses, or users. Nylon sales, for example, display a scalloped pattern because, over time, new and a new uses have been discovered—parachutes, hosiery, shirts, carpeting, etc.

Style, fashion and fad

Style, fashion and had each display a different lifecycle curve.

Style – a basic and distinctive mode of expression. Once invented, styles can last for generations, going in and out of vogue.

Fashion – a currently accepted or popular style in a given field. Fashions pretty much follow the typical bell-shaped product lifecycle curve.

Fad – are fashions that come quickly into the public eye, are adopted with great zeal, peak early, and the decline very fast. Fad acceptance cycle is short and they tend to attract only a limited following.

Product lifecycle on an international scale

Lifecycle of the same product can be in different stages in different countries because product adoption occurs throughout the world at different rates. Sometimes it may happen that a late-adopting country can produce the product more economically and become a leader in exporting the product to other countries.

For example, Chinese manufacturers often copy US products and sometimes even become exporters to the US and start competing with the original US manufacturers. To prevent cases like that, the best defence is for US manufacturers to become global marketers and open production and distribution facilities in countries with large markets and/or lower costs. As a result, they are able to not only produce the product cheaper, but also expand the product lifecycle by moving the product into countries that are getting ready to use it, long before copycats emerge.

Marketing strategies

Each stage of the product life cycle requires different marketing strategies.

1. Introduction stage

The introduction stage is characterized by a low sales, higher costs per customer, low or negative profits and few if any competitors. The type of customers buying the products are usually the innovators.

Your marketing objective during the introduction stage is to create product awareness and to entice the customers to try the product.

Your choice of marketing strategies is quite broad here as you can use up to four different marketing variables at different levels. These variables are: price, promotion, distribution, and product quality.

For example, using the high and the low levels of just two marketing variables: price and promotion, you end up with an array of four possible marketing strategies:

Rapid skimming – the new product is launched at a higher price and promoted heavily. The idea behind charging high price is to recover as much profit per unit as possible. The high promotion helps to accelerate the rate of market penetration. This is a good strategy when a large part of the potential market is unaware of the product, when those who become aware of the product are eager to have it and can pay the higher price, and when the company faces potential competition and wants to build brand preference quickly.

Slow skimming – the new product is launched at a high price while keeping the promotion at a lower level. The high price helps to recover as much profit per unit as possible. The low promotion keeps marketing expenses down. This strategy is a good choice when the market is limited in size, when most of the market is aware of the product, when buyers are willing to pay a high price, and when potential competition is not imminent.

Rapid penetration – the new product is launched at a low price and promoted heavily. This strategy makes sense when the market is large and unaware of the product, when the most buyers are price-sensitive, when there is strong potential competition, and when the product can be manufactured cheaply.

Slow penetration – the new product is launched at a low price while keeping the promotion at a lower level. The low price will and courage rapid product acceptance. Low promotion costs will bring profits up. This strategy makes sense when the market is large, highly aware of the product and price-sensitive, and when there is some potential competition.

2. Growth stage

The growth stage is characterized by rapidly rising sales, rising profits and growing number of competitors. The typical buyers are early adopters and the cost per customer is average.

Your marketing objective during the growth stage is to maximize the market share.

Your choice of marketing strategies during the growth stage include:

  1. Improving to product quality, styling and adding new features.
  2. Adding new models and flanker products to protect the main product.
  3. Entering a new market segments.
  4. Increasing distribution coverage and entering new distribution channels.
  5. Shifting from product-awareness advertising to product-preference advertising.
  6. Lowering price to attract the next layer of price-sensitive buyers.

The main trade-off you will face during the growth stage is between high market share and high current profit. Your best strategy will include foregoing maximum current profit in favor of building a dominant position in the market.

3. Maturity stage

Maturity stage is characterized by peaking sales, stable or declining number of competitors and high profits. Your typical consumers will be the middle majority and your costs per customer will be low.

Your marketing objectives during the maturity stage includes maximizing profits while defending your market share.

The typical marketing strategies during the maturity stage include:

Market modification – expanding the number of brand users and/or increasing the annual usage of the brand. The number of brand users can be increased by converting nonusers, entering new market segments, or targeting competitors’ customers. Increasing the annual usage of the brand by current customers can be done by getting the customers to use the product more frequently, getting them to buy more volume per occasion, and convincing customers to use the product in more varied ways.

Product modification – stimulating sales through quality improvement, feature improvement or style improvement. Quality improvement aims at increasing the product’s functional performance, such as durability, reliability, speed, or taste. Feature improvement aims at adding new features that expand the product’s versatility, safety, or convenience. Style improvement attempts to link these the product’s aesthetic appeal.

Marketing-mix modification – involves modification of other marketing-mix elements, including price, distribution, advertising, sales promotion, personal selling, or services.

4. Decline stage

This stage is characterized by the decline in sales. Sales may plunge to zero, or can stabilize at a low level. The reason sales decline could include a number of reasons, such as technological advances, shifting consumer tastes, increased domestic and foreign competition, etc. The result is overcapacity, price-cutting and profit erosion.

Your marketing objectives at this stage should be to either reduce expenditures and milk the brand, or strengthen your position to dominate the remaining market.

Before you can set your marketing strategy, you need to identify the weak products first. Next, you want to analyze the behavior of your competitors in the given situation and their competitive strength in that industry.

Once you have done your data collection and assessment, you can select from the following :

  1. Increase the overall investment in order to dominate the market and/or strengthen your competitive position.
  2. Maintain the overall until the uncertainties about the industry are resolved.
  3. Decrease the overall investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening the investment in lucrative niches.
  4. “Milk” your investment to recover cash quickly.
  5. Divest the business quickly by disposing of its assets as advantageously as possible.

Product life cycle pitfalls

The product lifecycle concept is useful for illustrating product and/or market dynamics. It also helps to pinpoint the main marketing challenges in each stage of a product’s lifecycle.

However, it is not always obvious what stage of product lifecycle a product is in. A product may appear to be mature when actually it has only reached a temporary plateau prior to another upsurge. Additionally, the frequent changes in technology and marketplace can further affect the product lifecycle pattern or even completely change it.

In fact, the product life cycle pattern can be dramatically affected by your choice of marketing strategies. In other words, unless your market intelligence data undisputedly point to a particular product lifecycle stage, more likely than not it is you and your choice of marketing strategies who decides what stage your product will be.

Reference: Kotler, P.: Marketing Management. Analysis, Planning, Implementation and Control. 9th Edition (Prentice-Hall, Inc. 1997)

The real reason why startups fail

Could there be just one single reason behind most startup business failures? I happen to think so.

Almost everybody is familiar with the statistics: 50% of startups will be out of business before they are 5 years old. A little bit less known fact is that the rate at which companies fail decreases substantially as the companies age.

First two years are critical

Below is a graph showing how that 50% failure rate is spread over the years, depending on the age of the company. The data comes from the official business statistics provided by the U.S. Census Bureau and is an average for the years 2000-2009. The vertical axis shows the percentage of companies going out of business. The horizontal axis represents the companies’ age.

Distribution of business failures based on age

U.S. Business Failure Rates

Source: U.S. business statistics

As you can see, almost 1 out of every 4 establishments failed during its first year of operation. However, the chances of survival increased significantly as the establishments grew older. This is an indication that the most critical period of any company’s life is its first year (or two) of operation.

Why do they fail?

But, why do so many startup businesses fail during those first couple of years? And, how many reasons could there be for those failures? If the articles on this oh-so-popular topic are to be your guide, you will inadvertedly end up with the impression that there are a pletora of factors.

Here’s a typical sample:

As the list of articles grew, so was the number of reasons in them. However, while reading the articles, I couldn’t shake off the feeling that most of the failures can be attributed to just one single cause.

The real reason: not enough of sales

So, here’s my hypothesis: the real reason behind most startup failures is their inability to sell enough of their product or service and/or sell it at a sufficiently high markup to sustain and grow their operation.

By the way, this hypothesis is not based on any hard-core research. Rather, it’s a pure observation made over the course of years of “being out there”. Since I don’t have any research data to (dis)prove this hypothesis, the next best I can do is to present my arguments.

So, below I’m listing some of the most frequently listed reasons for business failure along with my own comments.

Lack of experience

To suggest that lack of experience causes businesses to fail is almost the same as suggesting that driving cars causes them to crash. A complete nonsense.

First of all, there is no guarantee that having prior business experience will save companies from going bust. Additionally, business education is no guarantee of business success, either (see my post on why MBA graduates are ill-prepared to start a business).

Second of all, even if experience increased your chances of success, the likelihood that somebody starting a business knows absolutely everything about that business and market is practically zero. In conclusion, everybody lacks (at least some) experience related to the business they are starting.

Finally, experience by definition is a something that can be obtained only by actually living through it. So, you cannot have experience without having experienced it, first. In other words, experience is not a function of success or failure.

Insufficient capital

Running out of money is a very commonly cited reason for business failure. And yes, nobody can dispute that a business cannot operate without cash or credit. On the other hand, it’s the sales that funnels cash into your business.

Therefore, going out of business because you ran out of money, essentially means that you weren’t able to bring in enough cash by selling your product or service. So, instead of blaming your business failure on “insufficient capital” blame yourself for not focusing enough of selling.

No business plan

If by business plan we mean the written document that VC firms are asking for, to blame a failure on nonexistence of such a document is laughable. I mean, how many people who are starting a business do actually write a formal business plan? 1 out of 100? Less?

You do need a clear idea about what you want to do, how much it will cost you, where the money will come from, etc. But, you don’t need to write it down following some artificial template and give it a title “the business plan”. In fact, most startup companies I know, haven’t written down anything at all and many are doing very well.

Poor location

True, if you choose to locate your business in an area that nobody visits, is too expensive to maintain, or is not frequented by your target customers, you will have difficulties to sell your products and services effectively.

However, there are many ways how you can increase your sales even if your location isn’t optimal. Furthermore, in the age of the Internet and online commerce, a successful business can operate even without any location, whatsoever. And, of course, there always remains the possibility to move to a new and better location.

Insufficient demand

Maybe you fell in love with your own product and disregarded the market trends. Maybe you priced your product right out of the market. Or, you didn’t price it high enough and your customers thought it must be of substandard quality. Or, you were targeting the wrong group of people. Or… it could be any of the other 100’s of explanations of “insufficient demand”. However, the bottom line remains: no matter What explanation you choose, blaming your business failure on insufficient demand is just another way of saying “we didn’t make enough of sales”.

Poor accounting

The more complex your business model and money flows, the harder it is to do the accounting in a way that is not only correct from legal standpoint, but also in a way that provides useful information for business decision making. The unfortunate reality of today, however, is that many businesses—starting or established—have zero or only very vague idea about their real expenses. In such circumstances, it’s no wonder that they run out of money without actually noticing.

“Keeping close tabs on expenses” is actually the other side of the same coin that also carries “selling enough product or service”. You cannot have one without the other. You can never sell enough if you don’t have a clear idea of your outlays because it’s only a matter of time before your out-of-control costs catch up with you.

So, there you have it. Am I right or am I wrong? I want you to be the judge and also tell me what you think. So, please make sure to leave a comment below.

DigitalPoint Forums

DigitalPoint Forums, because of their popularity, are usually the first destination for entrepreneurs looking for business forums online. I have recently tested DP Forums in detail. Here’s the good and the bad of what I found…

The good

  • Big. Have you ever posted a question in a forum only to receive no replies? Well, that’s not going to happen on DP forums. With its 455,000 members and 15,000,000 posts, these must be one of the largest forums on the Internet. Its size alone guarantees a lively community. And, lively is exactly what you get on DP forums. There are literally hundreds upon hundreds of new posts added every single day.
  • Standard layout and features. Like most other forums, DP forums too has a standardized design. Navigation and use is familiar, easy and intuitive. No surprises around the corner.
  • Fast replies. Because of its popularity, almost every single thread goes into double digits of posts in a very short period of time. Sometimes as fast as within 24 hours. The reply time on DP forums is one of the fastest I have ever seen on any public forums.

Unfortunately, this is where the good ends and the bad starts…

The bad

  • Lack of moderation. While two out of six sections on DP forums appear to be dedicated to general business issues, every single forum is heavily biased towards Internet marketing. Even sub forums such as General Business contain threads titled “I need an online job to earn money” or “some places the buy premium websites??”. And, there are no moderators in sight to keep the forums clean and topically relevant. As a result, business owners who don’t have online presence and are not interested in Internet marketing have hard time finding relevant stuff on DP forums.
  • Poor default user settings. The default settings on DP forums automatically subscribe you to every thread that you participate in. Unfortunately, these default settings also include instant e-mail notification every time a new post is made to those threads. As a result, you are flooded with e-mails as soon as you start participating. To avoid that, you have to manually change your general settings to ensure that your default thread subscription mode is “through my control panel only”.
  • Lack of meaningful exchanges. Being extremely popular has also its disadvantages. It appears that with so many replies so fast, barely anybody reads anything more than the original post in the thread and they thoroughly ignore the rest. The result is that, while each thread has a lots of responses, there is virtually no discussion. And, as we all know from experience, it’s the discussion—exchange of opinions and arguments—that make forums such a valuable resource.
  • Bad advice. My biggest complaint with the DP forums, and the main reason why I’m rating it so low, is that a lot of advice given in the forum threads is very poor. Furthermore, it is virtually impossible for a layperson to differentiate between bad advice and good advice. This problem is further compounded by the lack of discussion mentioned above.
  • Don’t know who to trust. It is not unusual on DP forums to find members with several hundreds (even thousands) of posts to their name. Yet, the badges assigned to members based on number of their posts, have totally meaningless names, such as “Hand of A’dal” or “Champion of the Naaru”. Additionally, moderators and admins are practically invisible on DP forums. Yes, users can rate each others’posts, but the icon you need to click on to do that is so small and so nonintuitive that basically nobody uses it. The result is that you don’t know who to trust as there is no built-in way to judge members’ experience and knowledge.
  • Hard to establish authority. Following on the previous points, not knowing who to trust also means that anybody who wishes to use DP forums to build their own authority and name in the marketplace, we’ll have a very tough job.

Using DP forums for marketing

To test the power of DP forums, I used a simple sentence in my signature line that read, “Visit my personal blog at chodak.com”. From the day I joined on April 19, 2011 until today I made 87 posts. From these posts, I received altogether 25 visitors to my site and one subscriber to my e-mail list.

Granted, my signature was a very simple one and didn’t carry any marketing punch whatsoever. But, considering the fact the DP forums has Alexa ranking of 185, I consider 25 visitors out of 87 posts a very poor results. Although, to be fair, I don’t expect other forums to perform any better.

Conclusion

My conclusion is that the DP forums are a waste of time for business owners who are not specifically focused on Internet marketing. And, even if you are online based, you will need to do additional research into your questions outside of DP forums if you are not sufficiently Internet savvy, just to make sure you’re not going to act on bad advice. My rating for DP forums is 2 stars out of 5 (the only reason I don’t give it a single star is because of its ease of use and standardized features).

Download Jay Abraham books for free

Jay Abraham—one of the top marketing consultants in the world—is preparing an online comeback and wants you to have his two most recent business books for free. Make sure you do!

“Getting Everything You Can Out of All You’ve Got”

Jay in his own words:

It’s 376 pages of highly specific, example-filled “here’s-how-you-can-do-it-right” instruction and guidance.  It also contains something like 336 total examples, case studies, illustrated analogies to help make it easy to apply. This is the book that Stephen Covey, Seth Godin, Harvey McKay, Tony Robbins, Brian Tracy, Marty Edelson, Ken Blanchard and 25 other experts all unhedgingly endorsed. Jay Abraham

An excerpt from a random review:

Actually, this is a two-books-in-one volume: an insightful explanation of how to increase personal as well as professional development, and, an uncommonly useful book on marketing. Rating either, I would give it Four Stars. Ranking the combination, I rate it higher. Abraham promises to provide “21 Ways You Can Out-Think, Out-Perform, and Out-Earn the Competition.” He delivers on that promise. If fully understood and properly applied, the 21 “ways” (actually strategies) will help almost everyone to become a better person as well as to increase the value of what they produce; perhaps indirectly but significantly, their business associates as well as family members can also be among the beneficiaries. Robert Morris (Dallas, Texas)

“The Sticking Point Solution”

Jay says:

[This book] teaches any business owner how to move your business from stagnation to stunning success in today’s challenging marketplace.  It shows you the top nine reasons why most businesses struggle, stall, stagnate or get stuck – AND exactly, precisely, specifically the action steps to immediately take to turn that situation around. Jay Abraham

An excerpt from a random review:

This book provides instantly actionable strategies and tactics for increasing revenue and profit with virtually zero risk. Jay Abraham has taught for years the awesome power of unconventional marketing and it’s ability to produce immediate breakthroughs in sales and profit.  The stories and examples demonstrating precisely how this can be done are compelling. Richard

How to know if your business idea has potential

There is only one way to find out for sure if your new business idea is a winner or not. Do you know what it is? Hint: it’s not market research.

Problems with market research

Researching your market before you launch a new product or service is absolutely essential. The more relevant, accurate, reliable, valid, and current information you can collect about your competition and about target audience, the better prepared you will be to make critical decision. But there are three big problems with market research:

1. It’s expensive

Even if you opt not to conduct primary research—i.e. to go out and collect original data yourself without relying on any third-party sources, secondary research—i.e. collecting information already gathered from third-party sources such as marketing research reports, company websites, magazine articles, and other—also takes considerable time and money to carry out. And, whenever you add a new research question, the time and cost needed to perform the research increases, proportionally.

At the same time, until you take action on your research results, you will never see any return on your investment. Therefore, the more time and money you spend on research, the more you stand to loose. The only solution is to minimize your research scope to cover on the most essential stuff and focus on taking action as soon as possible.

2. You’re never done

It is a simple fact that no research data is 100% perfect. Some data might be slightly out of date, other come from an unverified source, yet other are not comparable with the rest because a different methodology was used to collect it. Furthermore, some research questions could not be answered because there was not enough information available and a bunch of new possible questions came up during the research that weren’t looked into at all.

As soon as you finish one market research project, you immediately get about a zillion ideas for what to research in the next one. The result is, you never feel you’re done researching and that you need just a little bit more information before you can make a decision. This is called “paralysis by analysis” and it is one of the biggest enemies of wannabe entrepreneurs. If you give in, it will not be your competition to beat you, but your own inaction. Don’t let that to happen!

3. It’s not reality

Most market research relies on using historical data and/or surveying small part of your target audience to predict how your product or service idea will likely do in the marketplace. The results of this research can be very useful, but you need to understand that they are just that—predictions. The reliability of the research predictions  will depend on large number of variables, including for example the quality and reliability of research data.

Can you sell it?

My main point is: no matter what the results of your market research are, the reality could be very different. Therefore, the only surefire way to know if your idea will really work is to actually test it in the marketplace. That means, you need to go out and sell it.

Should you skip market research? Not at all! But, you need to make sure to research only the absolutely essential questions while your focus should be squarely on getting your product or service out there in front of real flesh-and-blood customers.

Why most MBAs are ill-prepared to start a business

MBA graduates make good candidates for mid-level managers of larger companies. But, MBA programs generally lack a key component that makes them not worth it for people who want to start their own businesses.

The Master of Business Administration (MBA or M.B.A.) is probably one of the most recognized and best-known management qualifications in the world. Having an MBA can accelerate your career, prepare you for promotion or help you have a complete career change. An MBA degree is recommended (and often required) for many executive, management, finance, bank, marketing, accounting and human resources jobs.

But, is getting an MBA a good choice when you want to start a new business? My answer to that question would have to be a “no.” The reason is, most MBA programs don’t teach you a squat about selling despite that fact that selling is the most important business skill for a start-up entrepreneur. Selling is what fuels business growth and should be every start-up’s top priority.

So, why MBA schools don’t teach it? Or, do they?

To find out, I took a look the 2011 curriculum of two of the most famous MBA schools in the world: London Business School and Harvard Business School. Here’s what their curriculum looks like:

London Business School Harvard Business School

Core courses:

  • Ethics and Corporate Social Responsibility
  • Corporate Finance
  • Data Analytics for Management
  • Discovering Entrepreneurial Opportunities
  • Financial Accounting
  • Understanding the International Macroeconomy
  • Global Leadership Assessment for Managers
  • IT for Business Value
  • Global Leadership Development Programme
  • Language Learning
  • Management Accounting
  • Managerial Economics
  • Managing Organisational Behaviour
  • Marketing
  • Operations Management
  • Strategy
  • Understanding General Management

Electives:

  • Accounting
  • Economics
  • Entrepreneurship
  • Finance
  • Languages
  • Management Science and Operations
  • Marketing
  • Organisational Behaviour
  • Strategic and International Management
  • University College London electives

Source

Required curriculum:

  • Finance I
  • Financial Reporting and Control
  • Leadership and Organizational Behavior
  • Marketing
  • Technology and Operations Management
  • Business, Government, and the International Economy
  • Strategy
  • The Entrepreneurial Manager
  • Finance II
  • Leadership and Corporate Accountability

Elective curriculum:

  • Accounting and Management
  • Business, Government & the International Economy
  • Entrepreneurial Management
  • Finance
  • General Management
  • Marketing
  • Negotiation, Organizations & Markets
  • Organizational Behavior
  • Strategy
  • Technology & Operations Management

Source

Pretty impressive, isn’t it? Yes, it is. And, most of what you learn will definitely be helpful to you as an aspiring entrepreneur. But the complete lack of attention to selling—even if it is touched upon in other lectures or projects—doesn’t make getting an MBA degree a worthy investment in my eyes. Especially not, if your goal is to start your own business.

Just to make sure I didn’t miss selling somewhere, I dug deeper into subjects like Marketing, Management, Operations and Entrepreneurship. However, I didn’t find a single mention of selling. Not even how to manage a sales force! Personally, I don’t understand this omission at all and consider it inexcusable. After all, it’s sales that fuels a business. And, not just any business. Every business!

If you have an MBA degree or consider getting one, please don’t take this personally. But, what this experience taught me is that MBA schools don’t appreciate the importance of selling and they are not worth your hard-earned money, unless you plan on working for somebody else for the rest of your life.

Biggest mistake business start-ups make

Ever wonder why so many business start-ups fail? It’s because they spend most of their time doing secondary and tertiary activities, instead of focusing on selling their product or service.

Why do they do it? The main culprit is bad business advice. Just take a look at this random checklist of tasks business start-up are advised to do:

  1. Brainstorm business idea.
  2. Research the business idea.
  3. Write a business plan
  4. Write a marketing plan.
  5. Choose your business name.
  6. Check if the name is available (nobody else has right to it).
  7. Register the business name and get a business certificate.
  8. Check if the name is available as a domain name.
  9. Buy the domain name.
  10. Check zoning laws.
  11. Choose location and rent space.
  12. File partnership or corporate papers.
  13. Obtain all required licenses and permits.
  14. Reserve your corporate name.
  15. Register state and/or federal trademark.
  16. Register copyrights.
  17. Apply for patents, if applicable.
  18. Get business phone installed.
  19. Determine how your health insurance will be covered.
  20. Obtain adequate business insurance.
  21. Apply for sales tax number.
  22. Find out about labor laws if you have employees.
  23. Apply for employee identification number.
  24. Find out about compensation.
  25. Open a business bank account.
  26. Have business cards and stationery printed.
  27. Purchase equipment or office supplies.
  28. Order inventory.
  29. Order signage.
  30. Order fixtures.
  31. Get an email address.
  32. Find a web hosting company.
  33. Get your web site set up.
  34. Have sales literature prepared.
  35. Get listed in Yellow Pages.
  36. Place advertising in newspapers or other media.
  37. Call everyone you know and let them know you are in business.
  38. Other.

What’s wrong with this list? It’s making novice entrepreneurs believe that—once they have all the required paperwork in place, office space rented, equipment purchased, glossy brochures printed, flashy web sites developed, and everything properly insured and registered—they are in business and, from that moment on, hordes of customers will flood their gates with open wallets ready to spend. Unfortunately, nothing can be further from the truth.

Yes, after you do all of the above, you might have a business… on paper. But, not in reality. In reality, you just spent a couple of months of your time and several thousands of dollars of your funding on setting up a nice shiny cover for an empty box that should be your business. I say empty box, because you still didn’t do anything to prove that all that investment was worth it. You still don’t know if your business idea is viable. So, why spend all that time and money before you are sure they are warranted?

Don’t make the mistake of thinking that your most important task as a starting-up entrepreneur is to file forms, rent space or buy office equipment. No! Your most important task is to focus on selling: finding buyers for your product or service, learning as much as you can about them and then using the proceeds from your first sales to find more buyers and to improve the product/service.

Now, don’t get me wrong. I’m not saying you shouldn’t file required forms, register trademarks, rent office space or print stationery. You should and you will. In fact, you will probably need to do most, if not all, of the things on the list above. But, you need to have your priorities right.

What I’m saying is that your top priority should be selling your product or service and that everything else should be subordinated to it. There are at least 3 good reasons why selling should consume most of your time and energy:

  1. Learn about your target audience — only through direct interaction with your potential customers you can learn who they are, what their needs are and how you can help them solve their problems. Nothing (and I mean NOTHING) is more important to the future of your business than to know your customers.
  2. Prove your business idea — researching on paper, collecting statistical data and making “informed” assumptions and extrapolations is still better than nothing. But the only way to prove a business hypothesis is to go out and test it in the real marketplace. Because reality is often very different from plans and assumptions, the sooner you find out what the real world does to your business idea, the better for you. At worst, you will save yourself time and money that you would have otherwise wasted had you follows some stupid checklist. At best, you will discover how to become profitable long before you get into debt.
  3. Get cash flowing in — selling your product or service is the only way to get money into your business profitably. And, since you need money to run (and grow) your business, the sooner you start selling, the better for you.

Put simply, selling is not only the most important skill you can possess as an entrepreneur. It should also be your top priority in a start-up business. So, look at your daily activities and make sure that at least 80% of your time is spent on selling and only 20% on everything else.

One business skill to rule them all

There is one specific skill that every entrepreneur must master. If you learn it, your business will flourish. If you ignore it, your business will perish. What is it?

Countless research teams studied what makes entrepreneurs succeed. Also, walk into any bookstore and you will find isles of books filled with “surefire” advice on starting and running a successful business, including checklists to determine whether you have what it takes to be a successful entrepreneur.

Pretty much all of this research and checklists are in agreement about what makes a successful entrepreneur. They say you must be action-oriented, well-organized and a good analytical thinker. They also say you should be attracted by challenges, enjoy being in leadership roles, passionate about your ideas… the lists of skills and traits go on and on.

However, what most of them don’t tell you is that there is one specific skill that is far more superior than any other on any of the lists. In fact, it’s so important that your entire business depends on it. What is this “one skill to rule them all”?

That skill is selling.

It doesn’t matter that you might have the best product or service in the world. If you cannot sell it, you will be out of business as soon as you run out of funding. The simple truth is: you need cash to operate. Cash pays for everything: product manufacturing, service delivery, employee salaries, supplier fees, rental fees,  electricity bills, equipment, office supplies, stationery… everything. And, the only way to get cash flowing in is to be able to sell what you offer.

Don’t believe the saying “if you build it, they will come.” They won’t. History is littered with failed products that were far more superior than their competitors. And, in most cases, the reason for their failure can be squarely attributed to the lack of attention to selling.

Selling is the most important skill that you must master as an entrepreneur. Becoming good at selling means learning who your customers are, what makes them tick and how to convince them that your product or services is the best solution to their need or problem. Mastering selling should be your top priority. It should be what you are spending most of your time on. Always keep in mind that you don’t have a business until you can prove that there is need for your product or service. And, the only way to prove it is to sell it.

Perfecting your product or service can come later. Once your marketplace told you there is potential and once you have the money to spend. If you’re just starting out, put away designing your logo, buying office furniture and selecting a fax machine. What you need to be doing right now is learning as much as you can about selling and then putting into practice what you learned.

Every minute of your time spent on (studying and practicing) selling will pay off in spades. I promise you that!

Selling

Selling means giving something of value in exchange for something else, usually money. Buying and selling are two sides of a transaction. From a management viewpoint, selling is part of marketing, although the skills required are different.