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Having a "Souper" Business Plan to Avoid FailureTip! Talk to anyone that has been deeply and personally involved in a real business failure, and they will likely tell you that things became very clear near the end. There is nothing like winding down a business after catastrophic failure to help you step back and really understand the big picture with remarkable clarity. I've been a marketing consultant to over 3000 companies for over three decades. I've worked with mom and pop businesses and mega-corporations. Four out of every five of these, large or small, will fail. Most in the first year. These are scary, but real statistics. So, why all the problems? It all comes back to soup. Perhaps I should explain before you think this has turned into a recipe, which it actually has. A recipe for disaster. It begins with your mother, or more precisely, anyone's mother. She's been cooking up family meals for several generations. Now in her sixties, her grandson, Sam, an accountant, decides that her amazing Italian vegetable soup deserved more praise than from the family. It should be the basis for a fabulous new restaurant. Sam cashes in his life insurance and borrows against this house. He begins to investigate local commercial real estate locations and what a restaurant might cost to open. As he sizes up the kitchen equipment, furnishings, and insurance expenses, Sam coaxes Grandma into writing down all her famous recipes. After many attempts, the name, "Grandma's Kitchen" emerges as the front running name and a business is born. Six months later, the grand opening is scheduled and the whole family is excited. A menu is created around her incredible soups and an Italian theme is developed for the décor. It has everything: the home-spun atmosphere, the red and white checkered curtains and tablecloths, and Grandma will be in the kitchen.
The family gathers outside to welcome everyone into the newest gourmet delight with local reporters and others jamming the entryway. The first day is a huge success and there is excitement in the air. They love Grandma's soups. Sam is thrilled and returns to his accounting business because it's tax season and leaves the day-to-day operation with the remaining family members. Weeks, then months fly by and the crowds begin to thin. The family decides it's the summer and lots of folks are away on vacation. But it's faulty reasoning. That fall, they are still not coming in as compared to the beginning weeks. Even with some discount coupons passed around the local businesses, the customers are MIA. The business is going under as the bills pile up. So what went wrong? It's not Grandma's fault; her soup is still first-rate. But Sam failed to see the big picture. After all, he's just an accountant, not a marketing man. He did many things right. He picked a good location, a good product, well-designed restaurant, and great staff members. But he forgot the one critical element; the customer. More specifically, how to reach them and bring them in. Having an excellent vegetable soup is fine if you're Campbells and in every supermarket. But if your Grandma, what are you doing to attract customers? Where's the marketing and advertising? Tip! The third business failure factor profiled in the report, and a critical one, was Marketing. Over 64% of the businesses surveyed in the Marketing category failed because of owners minimizing the importance of properly promoting their business followed by ignoring their competition. The 80% failure rate stems from two things: (1) underestimating expenses and (2) overestimating profits. The profits are generated by sales, which come from customers brought in by advertising. Having the greatest soup in the universe won't bring in a single customer if they don't know about it. The smell only carries so far. Sam didn't do his Grandma justice by not having the money or foresight to plan for promotion. He figured word-of-mouth would do the trick. To some extent, it does. But one needs to have a continuous flow of new people coming in to assure success. Tip! An analysis of the reasons for business failure suggests that over 60% of all business failure is due to poor management practices. Therefore, include a precise and well-conceived marketing program, before you open those doors. There's no need to invest in a losing proposition and when there are easy ways to avoid failure. Then Grandma can be proud and you can enjoy watching her patrons as they line up for her soup. Bon Journo! Jeffrey Hauser's latest book is, "Inside the Yellow Pages," which can be viewed at http://www.poweradbook.com He was a sales consultant for the Bell System Yellow Pages for nearly 25 years. He graduated from Pratt Institute with a BFA in Advertising and has a Master's Degree in teaching. He had his own advertising agency in Scottsdale, Arizona and ran a consulting and design firm, ABC Advertising. Currently, he is the Marketing Director for thenurseschoice.com, a Health Information and Doctor Referral site. Tip! A complete business plan helps you get financing and includes a marketing plan, which addresses lack of marketing and insufficient financing, two more often cited reasons for small business failure. |
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