Starting up a business is not easy and once you have taken the plunge there is a tremendous pressure and need for it to succeed. You’ve convinced yourself that the idea is great enough to take this risk, and if only you could get some more exposure you know that people would buy it. The results are so low because you just don’t have that extra cash to push it as far as you can. This business idea is great and it will make it!

The truth is that if your business isn’t succeeding then your problems are far more internal than a simple need for more money or for a feature on Oprah. Your business plan itself needs re-evaulating and tweaking so that you hit the right formula and it becomes viable. Ignoring this fact is a sure recipe for failure and how I learned this lesson in the first place.

Based on this I’ve come up with a rule of thumb for evaluating the difference between a business that needs more time to become profitable and one that is dead in the water. It’s very simple:

A business that has the potential to succeed with time is working hard to make the improvements and changes required for market success. A dead business continues to operate on the same weakly performing ideas and methods.

As long as money doesn’t run out first the above should guarantee the success of any business, although in extreme cases the successful venture would have no resemblence to the original. It’s a very intuitive rule that operates on the idea that if you can measure results and continue to improve them then at some point you will reach your goal. You don’t need a whole lot to be able to do this except a measurable way of defining positive growth and enough of an open mind to be willing to accept that your original ideas are not the key to owning your own Trump Tower.

This blog is an example of a venture that is not earning a lot of money, but it’s doing extremely well due to the rapid growth rate of the earnings it’s generating. The growth has so been quick that in just several months it has gone from earning pennies a day to averaging $1-2. It’s hardly impressive cash, but try calculating the percentage on that. To accomplish this I have worked on many aspects of this site, from the topics and style of what I write about, to the layout and features I present, to the way I position my ads. I know I need to generate high amounts of traffic and be able to realize revenue from this free content model in order to make it work, so I actively put effort into these things and measure my results.

A position like this one is where many good and highly profitable businesses go bad. The excited entprereneur has poured a lot of time and effort into building the business, but the results are just so low. How can anyone justify operating something that is earning $2 a day? Logically you must look at a realistic growth forecast and be able to determine if contined improvements can generate enough changes to steadily bring abouta profitable business. Or perhaps there is an amazing market you need to break into or a big corporate customer that you need to acquire, after which the serious money will start coming in. If you have a realistic plan to make it happen and are showing real progress on achieving it, then don’t quit because the initial earnings aren’t impressive!

On the other hand if your earnings are $2 a day in your venture and you have no plan for improvement then don’t expect to earn more than that. Big or small, something has to change. In cases like this blog its a matter of incremental small improvements. In other case its something more drastic, like a coffee shop that needs a better location or a way to service more customers in its current size. Maybe the change is so drastic it means closing down the business and starting over with a different product or business model.

It can be extremely difficult to make these larger changes as it can be seen as admitting failure or that the fantastic idea just wasnt that great. That’s really a flawed and damaging perspective to take on though. To me it’s changing course until you find the right path for achieving the results you desire. Even deciding to exit entrepreneurship entirely is not a failure, if you have genuinely found that it’s not the right path for you. The only way to really go wrong in an unsucessful situation is continuing to do the same thing that you are now, hoping that your results will somehow change.

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This entry was posted on Friday, July 14th, 2006 at 8:08 am and is filed under Business, Entrepreneurship, Achievement, Startups, Business Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.