The key for any person starting a retail business is to avoid the usual pitfalls. They think “how hard can this really be?”
I am sure there are many of you who have seen various retail businesses come and go. Obviously, you want to be successful in your business or you wouldn’t be reading this post. The reason people make mistakes in business is that they do not do what they should do. They make decisions based on assumptions.
Recently, we spoke to Guy Kawasaki on The Daily Grind Podcast. Guy Kawasaki is an American marketing specialist, author, and Silicon Valley venture capitalist. He has been an entrepreneur, worked for Fortune 100 companies and he has been an advisor to many start-ups.
He identified his top ten+ list of mistakes entrepreneurs make when starting a business.
Guy Kawasaki: Many entrepreneurs believe that they will secure a share of the total market and in doing so they arbitrarily take a number like 1%. There are two fundamental flaws with this: Firstly garnering 100% of any market is not that easy and secondly, no investor wants to hear that you are only going to get 1%. (Contradicts #1.)
My Comment: You need to clearly understand the size of your market. If you are an online retailer, your market is far bigger than if you have a shop in a local mall.
Guy Kawasaki: Businesses scale too soon. They assume that they will not only attract the “magic” 1% of the total market; but also, they will continue to attract more and more customers going forward. Mr. Kawasaki has never seen a company die because it didn’t scale fast enough; instead, what he has seen are entrepreneurs running out of money because their expectations were not met in the initial stages and rather than scaling the growth back; they just kept on spending on expanding their market.
My Comment: Every new business has to have a comprehensive Financial Forecast with benchmarks in place to guide you through the initial periods and gauge future needs.
Guy Kawasaki: Focussing on processes and not on sales.
My Comment: Nothing happens in business until someone sells something to someone. You can have the best procedures in place; but if you don’t have sales it doesn’t matter.
Guy Kawasaki: An obsession with partnering. Partnering to Mr. Kawasaki means two organizations trying to compensate for their individual weaknesses by joining forces. Partnerships to him mean nothing. Again, there is only one thing that counts in a start-up and it is sales. Entrepreneurs should only focus on sales. Sales fix everything. If you want to be left alone by your investors then meet your numbers.
My Comment: If you think that finding a strategic partner is the key to your success, you are wrong. If you can’t do everything in the early stages of a business, then you are not qualified to start the business. Only after you are established and really busy should you look outside for help.
Guy Kawasaki: Pitching instead of prototyping. Entrepreneurs usually focus on the pitch to raise money. The key is the prototype. I would be more interested in a working prototype than a well-designed PowerPoint pitch. I can help people fix their pitch; but I cannot help them fix their prototype. If you show up with a prototype then you are showing the investors that you have a product to sell.
My Comment: This is the difference between an idea and a fully developed concept. You must have a fully developed concept or a prototype rather than an idea. You have to show your potential investors what you are selling and what makes it different from what your competitors are selling. In retail, it is the “thing” you have invented or an article of clothing or….
Guy Kawasaki: The optimal number of slides in a PowerPoint presentation is 10. You should present those 10 slides in 20 minutes. The ideal font size is 30 points or larger.
My Comment: We have created several PowerPoint presentations for our clients and every single client always wanted to put too much material on a slide. I think this is a great rule to follow. 10-20-30!
Guy Kawasaki: Entrepreneurs believe that they should accomplish things one step at a time and not move on to the next step until the current one is complete. For example, first you raise money, then you build a team, then you write the software, then you ship, and then you collect. Mr. Kawasaki believes this “serial” mindset does not exist. Realistically, it is all the processes moving at one time. It is a parallel process.
My Comment: You must be working on everything simultaneously. Every part of your plan involved is not mutually exclusive, it is instead interdependent. Marketing is affected by your forecast, and your concept drives your forecast, and your opening costs identify the money that you need.
Guy Kawasaki: Many believe that 51% ownership in a company gives them control of that company. They believe in board meetings and ultimately everything results in a vote during those board meetings. If they own 51% then they will win the vote. Mr. Kawasaki says that he has never seen this happen. The truth is, the moment you take outside money, YOU HAVE LOST CONTROL OF THE COMPANY and, by the way, it never comes down to a vote.
My Comment: People who put in the money have the control. What is 51% today may not necessarily remain at 51% because as the company expands and requires more $ your share gets diluted. Also, no one is going to put money into an organization if he or she doesn’t have a say in “how” and “where” and “when” it is spent.
Guy Kawasaki: Entrepreneurs believe that patents are defensible and make you bullet-proof. The most compelling reason to file for patents for start-ups is that it will make your parents proud. It takes 5‑6 years to file a patent. Just say in your presentation that you filed patents and that is it. Patents realistically will not help you because they have to be defended and that is a costly process and time‑consuming. If you are acquired someday, then the acquiring company will love it if you have patents.
My Comment: If you have developed a process or a “thing” that is unique then get it to market – be first to the dance. You are going to always have competition, but if you have “Kleenex”, then everyone else’s product will always be referred to as your brand name. Perfect!
Guy Kawasaki: Hire in your own image. If you are an engineering person then you should be hiring a salesperson – People who complement your skills.
My Comment: Re-read the above; as no truer words were written.
Guy Kawasaki: Befriending your Venture Capitalist. If you get funded by a VC, VCs are not your friends. It is a business and they are in the business of making money. Angel Investors – maybe – but not VCs. Just make your forecasted revenue as it is all what they care about.
My Comment: This is business. Keep your eye on the ball and deliver what you promised so that when you need more money, they will be ready and willing to invest in you again.