Its one thing to have a great business idea…
The more I think about the fact that 98% of new business start-ups fail the more I wonder what was it that drove them to the wall without consideration of the driving power. After all, if during that first year they had monitored performance and perhaps altered direction, then perhaps, just maybe, the number would be lower.
Now I plead forgiveness from those who have indeed gone bust through no fault of their own, but I got to reading and thinking about how such dreadfully stressful outcomes could be avoided and came across a book called the Zig Zag Principle by Richard Christensen, who it turns out has written a book on exactly the same point.
In my own business life, my Variance analysis was my bible, which confirmed that I was on or (just as importantly,) not on, budget and plan.
In his book, Christensen who has helped set up 32 business ventures recommends thinking about profitability first.
He also says “make failure efficient” – now this I had to read as I can only guess at what he really meant, but he explains that he will give an idea 3 months (what only 3 months I hear you shout) to turn into profit and if he can’t achieve that he deems it a failure, but an efficient failure in that he’s not wasted months and months on an idea that’s dead in the water – certainly an interesting stand point.
Target and goal driven is the way he drives his businesses setting percentages of revenue and monitoring them. 65% to staffing, structures and procedure for example and 25% to sales, expansion and growth, but an interesting comment is his recommendation to slow down
Slowing down he says can be achieved once goals are set and a slower rate of activity can produce some great results as you have more time to get it right – more planned and less reactive.
All in all though an interesting read with some great ideas. My own thoughts? (as you ask…) create a detailed budget specifying what you are going to spend and what you expect to generate in revenue, then monitor it carefully taking action to keep the plan on track as you progress and never, never allow one single month to go by without the Variance Analysis!
