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.

wow, great post. you have a very nice sense of humor about life that is very refreshing. i especially like your jewelery store anaology. while i'm not a big fan of diamonds, i could see myself opening up a floral shop, and it would probably follow the same guildlines. although i seriously doubt i'd be selling that many flowers lol, its still the same principles.

do you have a blog, or write elsewhere?

Here's the reasons.

Poor research prior to start up.
Underfunded.
Inexperience.
Poor or inappropriate training.
Poor management skills.
Insufficient hours worked.

And sundry other elements that impact on a start-up like a competitor opening with a similar product or nearby.

Also, if there was a simple checklist with all things needed to start and run a successful business, we'd all have our own fortune 500's.

The amount of intangibles needed as well are just as numerous. Things no book or amount of formal education would be able to teach like instincts, creativity, drive, vision, diplomacy, and common sense.

I think Motive plays a huge roll in a businesses success or failure. As well as luck. Who knew, 50 years ago, that a computer (or 2 or 3) would be in every house and office?

"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."

People also seem to follow the conventional method of business startup too much for these days. With many businesses you really should just go out and sell. Then if sells are good, you can build a real business around that. Not all businesses can be started this way, but many can. Business savy folk just contact their network and get signed contracts to buy the product and violia new business! People spend too much money creating a business plan, retaining an accountant, marketing firm, etc. before they even know if there is a market for the business (product). Remember, not all businesses can be started this way. But one thing is for sure without sales, I doubt any business will do well.


"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""

Yes, this happens to me also. I have been trying for a while to find entrepreneurs in my area of the country to team up with and I get the same sales bullsh_t at the meetings and events that you get. It is as if the goal of the various small business agencies is to prevent entrepreneurs from getting together instead of helping them connect.


"...reason is because people mistake enthusiasm, desire and ambition with actual substance."

Actually, those are the only substance needed. Everything else you need can be gotten one way or another. You may have to beg, borrow, or steal. But if you have enough desire, you'll find a way!


"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."

Another reason to sell first! If you can't get customers by bringing your product to them, then you're probably not gonna' get them to come to you.


"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."

This falls under the "whatever it takes" approach. If you have to paint yourself orange and stand next to the road giving away samples, then do it!


"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."

Here again, not all businesses can be started without a conventional approach. But, maybe the next day you could be on the corner with a box of retail items ready to sell. If you can't make enough sales on that corner to save enough money to get a storefront then you don't have a good buiness (product).


"I've always been a big advocate of internet and service oriented ventures precisely because I've always been a big stickler about overhead."

Those are good businesses to start under the non-conventional method I've been talking about.


"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."

Your only investment in bootstrapping a business is the cost of the product and maybe not even that if you're smart! So, you should have very little money spent before you find out whether the business idea is good or not.

If you have a business idea, just pick up the phone and start selling. Or get in the car and start selling. If you can't sell your product, then you probably can't sell the idea to investors either.

I think you misinterpreted the meaning of my post. This was not the definitive guide to solve all the problems associated with start ups; just my nonsensical ramblings about what I personally thought were the biggest pitfalls of the naive entrepreneur. Also keep in mind the entire post was conceived and written at 3 in the morning while waiting at the airport.

But if you'd like to go into more detail on some of the finer points, lets.

"People also seem to follow the conventional method of business start-up too much for these days."

Aside from the obvious spelling and grammatical errors, please elaborate on the 'conventional' business start-up. Are you referring to the one that is started on a shoestring budget with only a dream and hard work to bank on? Or maybe its the one that is begun with hundreds of millions of dollars of VC funding and endless focus group testing and multimedia blitzes that announce the arrival of the product months before it ever hits the market. Or perhaps its one of the millions that fall somewhere in between.

"With many businesses you really should just go out and sell. Then if sells are good, you can build a real business around that."

If all you want to do is sell, then you are salesman, not an entrepreneur. The pitfall of this argument is that the only trait needed to start a successful business, is a good product or service and a smooth sales approach. But one forgets all the intangibles required like foresight and planning, keen instincts of the market and your competitors, the ability to crunch numbers like an amateur mathematician, strong marketing and advertising, and even proper record keeping. (And if the IRS doesn't scare you, remember that in the end, they were the ones that took Al Capone down ) And don't think these are skills that you just 'pick up on the way'. Some are born with them, some forge them through years of climbing the corporate latter and learning business from the inside, and some are only strong in certain areas and hire talented people for the rest. But even if you go that route, another trait is required of you: The ability to delegate.

Do not get me wrong, a strong product and the ability to push it lies at the core of what a business is, but to think that is all you will encounter along the way is as naive as thinking the outside walls of a house are all that matter.

"People spend too much money creating a business plan, retaining an accountant, marketing firm, etc. before they even know if there is a market for the business (product). Remember, not all businesses can be started this way. But one thing is for sure without sales, I doubt any business will do well."


Last time I checked, writing a business plan was free, unless you wanted someone else to do it for you. And why would an accountant and marketing firm not be necessary? Are you going to crunch all those numbers yourself? Are you going to be the sole creative genius behind all your advertising? Even if you're going to be the ultimate green light behind any and all marketing approaches, two and three and four heads will always be better than one.

As for the last argument about sales, what about business that do not have a product to sell? Like say, consulting. Or a motivational speaker. Last I checked, the barber down the street didn't sell me anything. Even those Geek Squad guys at your local Best Buy aren't pushing any product. But these businesses are selling the exact same thing as the used car salesman down the street: Solutions to problems. I don't go to the Gap to buy clothes. I go to the Gap because I want to be hip and in style with the rest of America. I bought a Toyota rather then the other models because I wanted fuel efficiency, reliability and strong resale value. Why do I drive 15 miles to Target while Wal-Mart is 3 blocks from my house? Because I'd rather pay a few cents more for the products and get a clean, well-lit store with friendly and knowledgeable sales staff, well designed and unique products and small lines at the check out. People don't buy products or services, they purchase reasons.

["...reason is because people mistake enthusiasm, desire and ambition with actual substance."]

"Actually, those are the only substance needed. Everything else you need can be gotten one way or another. You may have to beg, borrow, or steal. But if you have enough desire, you'll find a way!"

I did not state that to downplay those qualities. I stated it because sometimes entrepreneurs get so worked up over that 'brilliant' idea of theirs, that when it goes to markets and fizzles or doesn't have the desired effect on mankind they thought it would, they give up in frustration and move on. There is no substitute for proper market analysis, constructive feedback and good ol' common sense.

"Your only investment in bootstrapping a business is the cost of the product and maybe not even that if you're smart! So, you should have very little money spent before you find out whether the business idea is good or not."

Please define 'bootstrapping' because there are many more costs associated with start up than just the product. In fact, like is stated in my signature, sometimes the product doesn't even matter.




Do not take this reply the wrong way, it is not meant to state that I have all the answers and as always, its just my views on the world. But if you're going to dissect a post, please be sure you have a better idea of what the person is talking about than he does.

Good post. Good read.

"I think you misinterpreted the meaning of my post. This was not the definitive guide to solve all the problems associated with start ups; just my nonsensical ramblings about what I personally thought were the biggest pitfalls of the naive entrepreneur. Also keep in mind the entire post was conceived and written at 3 in the morning while waiting at the airport. "

I could easily tell what the post was. I'm not business savy by no means, but I know it takes more than a small post on a forum to be a "definitive guide" to business start ups.


"Aside from the obvious spelling and grammatical errors, please elaborate on the 'conventional' business start-up."

My grammer and spelling are not the best. But I'm usually thinking of new ideas and innovations at the same time that I am posting. A conventional start up as I see it is the "I need a fully defined business plan, a bunch of sales people, a full-time lawyer, an full-time accountant, $1M capital (for expenses), a big office (or store), and a whole lot of other things because my business is going to grow sooooo fast I won't be able to service my customers without all those things."


"Are you referring to the one that is started on a shoestring budget with only a dream and hard work to bank on?"

No, I don't consider that to be a conventional start up.


"Or maybe its the one that is begun with hundreds of millions of dollars of VC funding and endless focus group testing and multimedia blitzes that announce the arrival of the product months before it ever hits the market."

Yes I would consider that a conventional start up.


"If all you want to do is sell, then you are salesman, not an entrepreneur."

I didn't say that *all* you needed to to was sale.


"The pitfall of this argument is that the only trait needed to start a successful business, is a good product or service and a smooth sales approach."

What else do you need to *start* a business?


"But one forgets all the intangibles required like foresight and planning, keen instincts of the market and your competitors, the ability to crunch numbers like an amateur mathematician, strong marketing and advertising, and even proper record keeping."

Those are good things to know, but not *necessary* to start a business. The tax man even allows doing business before having needed licensing as long as you get proper licensing by the end of the current period. That is a very vague statement, but my point is one of the oldest business related organizations in the US knows people can and do *start* businesses quickly without extensive planning and forethought. An entrepreneur is someone who jumps on an opportunity quickly before someone else does.


"And don't think these are skills that you just 'pick up on the way'."

Sure you can, if it were as complicated as you elude to, people wouldn't learn ways to cheat so easily.


"Some are born with them, some forge them through years of climbing the corporate latter and learning business from the inside, and some are only strong in certain areas and hire talented people for the rest."

I guess it depends on the person. But I agree hiring talented people to help is a good idea when they become needed.


"But even if you go that route, another trait is required of you: The ability to delegate."

Yes, if your bootstrapping efforts pay off, you'll probably need employees. You'll then need to be able to delegate tasks.


"Do not get me wrong, a strong product and the ability to push it lies at the core of what a business is, but to think that is all you will encounter along the way is as naive as thinking the outside walls of a house are all that matter."

I never said it is all you will encounter. Remember we're talking about *start ups*.


"Last time I checked, writing a business plan was free, unless you wanted someone else to do it for you. And why would an accountant and marketing firm not be necessary? Are you going to crunch all those numbers yourself? Are you going to be the sole creative genius behind all your advertising? Even if you're going to be the ultimate green light behind any and all marketing approaches, two and three and four heads will always be better than one."

I agree more heads are better than one. But you seem to keep mixing long term efforts into a conversation about *start ups*. The title of your original post is "My rant about why people suck at: Starting a new business.".


"As for the last argument about sales, what about business that do not have a product to sell? Like say, consulting. Or a motivational speaker. Last I checked, the barber down the street didn't sell me anything. Even those Geek Squad guys at your local Best Buy aren't pushing any product. But these businesses are selling the exact same thing as the used car salesman down the street: Solutions to problems."

You'll need to restate this before I can answer, because you start the paragraph differentiating between a product and a service, but then turn them back into *one thing* at the dealership.

"I don't go to the Gap to buy clothes. I go to the Gap because I want to be hip and in style with the rest of America. I bought a Toyota rather then the other models because I wanted fuel efficiency, reliability and strong resale value. Why do I drive 15 miles to Target while Wal-Mart is 3 blocks from my house? Because I'd rather pay a few cents more for the products and get a clean, well-lit store with friendly and knowledgeable sales staff, well designed and unique products and small lines at the check out. People don't buy products or services, they purchase reasons."

I agree. I bought a Corvette because I wanted the technology. BTW, it got 31.8mpg highway on my trips to and from Florida 970 miles. It had 350HP and ran 0-60 in 4.7 seconds. Rethink the Toyota, I know they are nice but you could have something that lets you know you're alive every day that you drive it :-)


"I did not state that to downplay those qualities. I stated it because sometimes entrepreneurs get so worked up over that 'brilliant' idea of theirs, that when it goes to markets and fizzles or doesn't have the desired effect on mankind they thought it would, they give up in frustration and move on. There is no substitute for proper market analysis, constructive feedback and good ol' common sense."

Yes, get it to market as quick as you can to make sure there is a market! Why can't selling act as part market analysis, constructive feedback and help with gaining good ol' common sense? I realize not all products lend themselves to the "just sell" approach.


"Please define 'bootstrapping' because there are many more costs associated with start up than just the product. In fact, like is stated in my signature, sometimes the product doesn't even matter. "

Bootstrapping : The new wave of entrepreneurship making people rich overnight without any "old money" to start with.


"Do not take this reply the wrong way, it is not meant to state that I have all the answers and as always, its just my views on the world."

I don't take it the wrong way. This is a discussion board not a book called "The Definitive Guide to Business Start Ups" having your name as the author.


"But if you're going to dissect a post, please be sure you have a better idea of what the person is talking about than he does."

That is a matter of opinion. I want everyone to give me their feedback on my posts. Maybe I'll see that they don't understand and help them to gain an understanding. During the discussion, I'll probably learn something from them.

Great thread! just let me add sacrifise to the list.