Small businesses can learn a lot from studying why big
Of course, the difference between small businesses and big
is that we are almost invariably under-capitalised – which is why we are small.
Few of us have as much money as we would like when we start up: if we waited
until we did, we would probably never start up. Money comes only with success.
Established big businesses, however, ought to have their own
money – unless they are grand illusions built on credit.
So they cannot claim under-capitalisation as an excuse if
Instead the fashionable excuse is to blame “the recession”.
Yet periods of reduced demand are a fact of business life.
They should be built into any business model. Recession on its own should not
destroy a business. It merely exposes the weakness of its existing strategy.
Take, for example, the sad demise of the British
spin-off of the successful American chain of bookshops, Borders.
The basic concept behind Borders was to make bookshops in
prime locations more open, accessible, and customer friendly – to the extent of
subletting coffee shops within the bookshops to well-known franchises.
In all fairness, this was a very good concept ...ten years
Since then prime location property prices and rates –
property taxes – in the UK have increased out of all proportion with common
sense. The same decade has also seen the growth of mail order booksellers –
most notably Amazon – who have been able to reduce prices because they do not
have to bear those prime location costs.
The combination of increasing costs and decreasing market
share is bad news at the best of times. Decreasing demand – which was itself
foreseeable – is simply the coup de grace.
Failed businesses need to learn to stop looking for someone
else to blame. Business is risk. Sometimes those risks do not pay off. Accept
it. When a business fails, make no excuses. No one is listening. No one cares.
Instead, turn failure into a positive experience. Be honest about what you did
wrong. Perhaps the whole thing was a bad idea from the start. Perhaps the idea
was good but you handled it badly. Either way, once you have identified your
error, move on to your next business, knowing that you are stronger because you
will not make that same mistake again.