If I could sum it up in one word, I'd have to say, 'naiveness'. Lack of a business plan, lack of a sustainable business concept, lack of foresight and planning, lack of knowledge, lack of self esteem, lack of understanding payroll and overhead, lack of this and lack of that. It all centers around some form of being naive.

My two cents about why I think most people suck at starting a business.

When I go to entrepreneur get together's, networking sessions, marketing forays, and read the boards here, there is a common thread that sticks out in all of them. Some putz shoving his business card in my hand with the tag-line "I have a revolutionary business idea I'm about to drop onto mankind, and all I need is a little bit of money to get things rolling." Or, "Make millions with my product/sales pitch/internet site/m2m/insert generic-get-rich-scheme-here"

Now by no means do I sum up all entrepreneurs and small business owners like this, nor do I think all of these ventures will fail. Just most of them. And the reason is because people mistake enthusiasm, desire and ambition with actual substance. These things are the gasoline that power your venture, and yes they are important. But without a proper car that will last you year in and year out thru good weather and bad, you'll just be a guy on the side of the road holding a can of gasoline and a fist full of dreams.

I think we live in such a sizzle before the steak type of world it's very easy to start living day to day with our heads in the clouds and crossing off thing's we'll do when were rich. We spend so much time imaging ourselves laying around on a yacht all day and drinking Kristal by the bottle, that we forget about the all-nighters we'll have to pull, the cold calling, the ulcers from all the uncertainty and stress. Your own business is no picnic in the park and don't let anyone tell you otherwise. You reap what you sew in this world, and there are very little circumstances to the contrary. And that's just the time you'll be putting into the venture on the ground floor stage. Now we get to the fun stuff.

Of the many things I think people are naive about going into new ventures, it's that they think they'll somehow magically have customers lined up at their storefront when that sign is turned around from closed to open on the first day. Maybe its because you think you have such a revolutionary idea or business plan, that somehow people will just come to your store like magnets from the sheer awesomeness of your product/service. Let me be the first to inform you that this will not be the case. In fact, if no one knows about this new venture when you first open, there'll probably only be 3 people who know your store even exists. You, your mother, and the person you're leasing space from, and the last is debatable. So its all about getting the word out. How ever your choose to do it, be it from previous clients, networking, marketing or plain ol' advertising, people won't know you exist until you tell them. (And I'll save all of those for different rants)

The next thing you get to figure out, is how much your overhead will be beating you up every month, for a year. Because it will probably take that much time just to get a pathetic trickle of customers to walk through your door.

I've always been a big advocate of internet and service oriented ventures precisely because I've always been a big stickler about overhead. It's the single, biggest reason I've personally seen new ventures go under and its a very simple formula really. If you pay $2 in overhead every month, but only take in $1.50 of profit, you have a 25% loss for the month. And it only gets worse as the venture gets bigger. For example. You decide you're going to open up a glitzy and glamorous jewelery store in the mall. You'll have some of the nicest jewelery around with a beautiful store front and the friendliest sales team around. You might even offer some pieces of your own, who knows? And lets say you pay $50,000 a month over a period of a year for rent, payroll, insurance, storefront, utilities, security, taxes, items you took a loss on and had to liquidate, interest on the loan, oh and the 25% or so of the $50,000 a month you can kiss goodbye to advertising and marketing, so forget about that money. And that's just naming your top expenses.

Now lets say the word got out about your store and you had a solid grand opening and you sold a quarter million dollars worth of jewelery. Hooray. With the average mark up for jewelery being about 35%, you just made a gross profit of about $77,500 for the month. After your overhead, knock that down to $27,500. Now lets say the next month you don't do so well, and only sell $150,000 worth of jewelery. For the second month, you have a net profit of $37,500. But your expenses for the month are $50,000, so you just took a loss of $12,500. So selling a hundred thousand dollars less in revenue means you just went from being $27,500 in the black, to being $12,500 in the red for a grand total of only making $15,000 on total revenues of $350,000, for two months worth of work. And if your second months tread continues all year, even though you would of sold almost $2 million dollars worth of jewelery, you know have a year-end paper loss of $110,000.

And considering 94% of Americans make less then a six figure income, it will probably take you the better part of a decade, if not flat out bankruptcy to clear that up. And that's just in one year. Imagine if you let the bleeding go on for 2, 5, or even 10 years. Sometimes I think the same gene that lets us believe things will eventually turn around and end up all right at the end of the day, is the same gene that kicks in for compulsive gamblers in Vegas. Sure I just lost a ridiculous sum of money, but if I keep rolling the dice and pushing in more chips, eventually I have to win. Right?

Don't get me wrong folks. A good idea, is a good idea, is a good idea. But sometimes it's better to just leave them at that: an idea.