There are two ways to launch a new business and one is better than the other in most cases. No, I don’t mean the right way or the wrong way.
The first, and most common way, is to make a plan, get started, obtain financing, finish putting things together and then open the perfectly planned business. Of course, 4 out of 5 businesses fail within 5 five years so this method isn’t a sure road to success.
The second, and far less common method, is to make a plan, do whatever it takes to start doing some token amount of business, tune the plan as you learn and scale up as you discover what works best.
The San Francisco Bay Area offers great examples of both of these models.
The Bay Area is known for food. There are restaurants everywhere. They are as diverse as the people of the Bay Area. And, these restaurants take two different paths to opening.
There is the common method. Save up your money. Add a big loan. Find the space. Make a huge investment. Open the restaurant and hope for success. This works sometimes. I have, however, seen very successful businesses collapse after about four years. Why? They cannot generate the revenue necessary to keep the place looking like new.
When a business launches on a huge budget, it is very difficult to maintain that “we are the best and greatest” look. It’s expensive. It can be done for a while, but a the revenue levels off, things begin to deteriorate. Bathrooms get a little dirty. Carpet gets grimy. Quality is cut. Things just don’t feel new.
When your customers get that “it’s not the same as it was” feeling, the business is in serious trouble.
The other model I’ve seen in the Bay Area is very clever. I’ve seen this done mostly by Mexican-Americans. They’ll start with a pretty basic, used, food truck. They find a vacant lot somewhere that no one cares about and park there every day at noon. They sell the best tacos and burritos you’ll ever have at amazing prices. Soon they’ll own a new truck. Soon after that, they’ll have a few trucks at different locations (vacant lots!). They build a brand. You soon recognize the name. Within a few short years, about the time the other business, that started with big money is going out of business, our taco vendor is pouring the foundation for his restaurant on the very “abandoned” lot where he parked his first truck.
When the restaurant opens, they have built a very loyal following. He owns the lot.
If you are starting a business, keep this little lesson in mind.
I want you to succeed..
Chris Reich, CEO TeachU
FW: 135 (Must resume that project later!)