HOW TO FAIL AT BUSINESS

One of the American dreams is to start your own business. And millions try. And most of them fail.

Your conventional “how to book” would advise you on how to succeed at your new business venture. Obviously these don’t work, since so many businesses fail.

So, starting out with your dream of being your own boss and getting rich, with the odds hugely against you, there is but one choice. Fail. But fail spectacularly. It is actually the truth that many people famous at success in business actually succeeded the tenth or twentieth time they tried. We don’t read about their failed ventures.

So here are some tips about how to guarantee your business venture will fail:

OVERESTIMATE YOUR GROSS SALES OR CASH FLOW :  This is one of the two most common reasons businesses fail. You think you will sell 100 hot dogs per day, or sell 1,000 books per day. And your price per unit of goods or services is above the discount stores, but heck, you’re a small business person and people will love shopping locally.

You make up what is called a “pro forma” showing your projected gross revenues. There is a rule business which actually succeed use---take your sales or cash flow projection and cut that in half for the year, with zero income the first 3 months. Reality will come closer to your minimal estimates, not your best case view.

UNDERESTIMATE YOUR COSTS OF BUSINESS: This is the second of the two reasons most business fail. You work night and day figuring out all your costs. Rent, electricity, purchase of goods, supplies, insurance, taxes, and so forth. If you make your estimates, then subtract your protected costs from your overly optimistic revenue projection, you will always show a profit in your first year. You obviously believe in the tooth fairy and Santa Claus and that the Republican Party will someday cut the cost of government.

There is only one thing certain about your cost of business estimates. They are wrong. No matter how hard you try, they will always be wrong. You might actually over estimate some costs, but you will mostly underestimate them. And you will discover, after you’ve opened your doors, there are lots of costs you never ever thought of.

Whatever was your initial cost estimate, smart and successful business people then double this number. You will still end up wrong at the end of the year, but closer to reality than otherwise.

PROFIT VERSUS LOSS: Using the most optimistic guess about revenue and your fantasy cost of business estimate, you will always show how your business will make a profit. At this point you are close to 100% chance your business will fail.

Now, if you cut your revenue projection in half, and double your cost estimate two things will likely appear. First is that your business will not make a profit, and second the question should emerge asking “why I am doing this in the first place?”

YOU ARE UNIQUE AND WILL OVERCOME THE PROBABILITY OF FAILURE: Now that you can see the grim prospects of your proposed business venture, you need to do one thing to guarantee your failure. Go forward with your business with the assumption you are unique. You are unique because of your special knowledge and skills and because you’ve always been lucky and you pray a lot. Whatever. Lightning doesn’t strike everyone.

Now that you’ve chosen the path of starting your own business, there are some additional steps to take to insure that not only will you fail, but you’ll do a lot of damage in the process.

TRUST BANKS:  I am assuming for purposes of this discussion you will find a bank willing to loan you some money to start your business. This used to happen, and may again some day.

In the event you actually find a bank willing to lend you money, trust them. However, what you really should trust them to do is raise your interest rates sky high, wipe out your line of credit, and generally do things after they’ve loaned you money to destroy your business venture.

BORROW MONEY FROM RELATIVES: Many small businesses start with loans from family members, and after the business fails, no one in the family ever speaks to each other again. Some might think that is a benefit.  Regardless, borrowing money from relatives insures higher levels of tension and anxiety, guilt, and fear of death if the lender is armed and dangerous.

DON ’T PAY MUCH ATTENTION TO THE SITE YOU CHOOSE FOR YOUR BUSINESS EXCEPT CHEAP RENT : Most failed businesses chose their locations solely on the basis of the cheapness of the rent. This is a sure fire way to fail, because cheap rent means “no traffic”. A little research will usually show how many other businesses have failed at your chosen location.

Other guaranteed failed location decisions to make include ignoring the general poverty of your surroundings, such as abandoned cars, burnt out store fronts and homes, and overwhelming presence of police in the area. One exception to this rule would apply if you are selling cheap hand guns.

Also ignore your neighboring businesses. If your neighbors are pawn shops and check cashing services you obviously have the perfect location for a  scones and latte operation.

DON ’T ADVERTISE: People greatly underestimate in their startup business budgets the costs of advertising and public relations. Don’t spend a dime for this nonsense.  Just put up your sign and open your doors and hordes of people will spot you from the street as they drive by at 40 miles per hours, screech to a halt and run into your store.

BE CHURLISH IN YOUR INTERACTIONS WITH YOUR CUSTOMERS: Assuming someone does find your business by accident, to fail you must guarantee that their first visit to your business will be their last. Be nasty to your customers. Ignore them when they walk into your store, talking on your cell phone or doing the New York Times crossword puzzle. Wait until they make some overt effort to get your attention before acknowledging their existence. Act like they are seriously disturbing your peace and quiet. Throw their goods on the counter, shove the stuff into a bag harshly, drop the stuff on the floor a few times. Or hire teenagers to staff your store.

LIMIT YOUR INVENTORY: Heck, you can’t compete with Wal Mart in price, nor with big stores with lots of goodies, so stock your store with just a few items. Do not consider what your competitors don’t have and stock to meet unsatisfied demand. Pick what you like to have around you, and only have one or two of anything you are trying to sell, so when a customer asks for an item, you can say “Don’t have”. Never offer to order anything for a customer, unless they are willing to pay full price in advance, which almost no one will be willing to do.

PUT LOTS OF SIGNS UP IN YOUR STORE THAT WARN CUSTOMERS: Instead of creating a customer-friendly environment, deal with the risk of shoplifting, damage to your goods by being handled, and post lots of warning signs all over the premises. Add toxic substance warning signs, no trespassing signs, check fraud warning signs, and electronic surveillance signs.

OPEN ERRATICALLY: Most businesses try and stay open at a minimum of 9 to 5 five days a week. Don’t have regular business hours. Have a sign on your door that says “Owners Will be back in 4 hours”. Open when you feel like it and close when you feel like it. Take lots of vacations using the money your brother-in-law loaned you.

HASSLE THE PEOPLE USING THE PARKING SPACES IN FRONT OF YOUR BUSINESS THAT DON ’T PATRONIZE YOUR BUSINESS. Typically stores have 2 or 3 parking spaces in front of the, which are never occupied by customers’ vehicles. The parking spaces are being used by customers of the other businesses around you. Leave notes on their windshields asking them not to park in front of your business unless they are a customer. Put a sign in front of each parking space that says “Customers Only”.

These are but a few tips on how to maximize your chance of failure. We welcome true life stories about how you failed.

Copyright 2010 by Hugh A. Holub