Starting A Business

For those seeking to start a business, address this paragraph before you address any other factor.  It comments on the fundamental reason new businesses fail.  They have too few customers.

“For all of our species’ history the problem with markets has been that it was costly for buyers and sellers to find each other. That’s why literal markets came to be in the first place: so people could meet and exchange goods and services they hauled in from the countryside. But now the Internet allows buyers and sellers to get together virtually, virtually no matter where they are. Information barriers that have existed since the beginning of time — great high walls of ignorance — have come tumbling down, all in the space of a single generation, even, with Uber and Airbnb, a single decade.”

William Watson, Financial Post, 13 August 2014

But beware.  The changed world the article comments upon is not as easy to implement as some think.  Social media and virtual markets are nice, but they are very crowded compared to old markets.  When you reduce the barriers to entry, more entrants appear.

For new people in business, it is wise to estimate that 30% or more (probably more) of your time will be consumed in finding new customers and another 30% will be spent on defensive activity like record keeping, hiring, supervising, government compliance, miscellaneous problems and finance.

That does not leave a lot of time for what you see to be your real business.  The thing you are good at, or the service people need.  You can overcome, but not if the customer shortage surprises you.

Everyone underestimates how hard it is to get new customers.  After a while, they underestimate how hard it is to keep them.

The “great high walls of ignorance” may have fallen, but they have been replaced with hundreds of small hurdles of ignorance which, collectively, may be a more formidable barrier to success.

Business is fun and good for you, but failure flows from surprises.  Do not let this one be your undoing.


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Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact:  

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