Characteristics of a Good Entrepreneur

Many of my posts stem from ideas or issues that arise in my life, this one is no different. Yesterday a series of events played out that made me want to discuss the characteristics of a good entrepreneur. To be frank these characteristics are also ones found in all productive people.

The event yesterday had to do with a promising individual that received some pushback for their efforts. As a result the individual was upset, and rightfully so, because they believed they were doing everything they should be doing only to have the door slammed in their face. Does this sound familiar? If it doesn’t right now some day it will.

As entrepreneurs, or in the work place there will come times when no matter what you do it will fill like you are fighting an uphill battle. You will need to have discursion here but there is a good chance you are indeed doing exactly what you need to be doing. Whether it be the market or other people that push back you are bound to get it even with the best ideas or with your best efforts. In my situation I was able consul the individual and remind them that their inherent value will prevail regardless of circumstance.

Luck, a Zero Sum Game.

In his recent book Great by Choice: Uncertainty, Chaos, and Luck–Why Some Thrive Despite Them All Jim Collins discusses the zero sum nature of luck. His team found that comparable organizations with differing performance were exposed to the same number of “good luck” circumstances as they were to “bad luck” circumstance. His assessment determined that circumstance played less of a role in how a company preformed than did the company’s response to the circumstance. Said another way it’s not what happens to you that matters but rather how you respond. In the case of the pre-mentioned individual I reminded them about this reality and pointed out that we always have a choice to dwell on misfortune or use it to fuel our next step.

Inherent Value Over Clever Play

This point is especially pertinent for those of you in a work environment. If you are currently working under an employer and are working your way through the ranks it would be prudent of you to understand your inherent value. What is it that you specifically bring to the table that others don’t? I am not talking about responsibilities mind you; I am talking about your specific characteristics. A good employee does what they are told at great employee leverages their strengths for the betterment of their organization.

In highly competitive environments leveraging your inherent value will server you better than trying to out maneuver your competition. If you allow yourself to get caught up in the games people play you will only be hurting yourself in the long run. People that play games in the workplace are a cancer and may see short term recognition but will never see long term success. We can’t fake who we are, our performance is a direct consequence of our character not the result of strategic plays. Here is a link for more tips on succeeding in the workplace.



That said, you need to know your direction. Where are you now and where are you headed? If you can answer this you are on the right track. You would be surprised at how many people don’t know where they are headed. Having a direction is the first characteristics of a good entrepreneur. You will never run into a successful business man or woman that isn’t thinking a few steps ahead. They can do this because they know where they want to be in 5,10, 20 years.
(Warning! Shameless plug coming…) In an effort to help entrepreneurs find their focus I created a process modeled after the Theory of Constraints thinking process in my eBook; “Zero Risk Startup”. (…Shameless plug over).

Truth be told finding ones direction is not the easiest thing to do. Even if you have an idea of where you are headed you probably don’t know the specifics of how you are going to get there. So, don’t be discouraged if this proves to be challenging, it should be. The mere fact that you are taking the time to put things in black and white will help you down the road.


I have heard it said that the single common thread among successful individuals is persistence. With enough persistence you can achieve anything. Edison and the light bulb, Gates with Microsoft, and the forefathers of our nation all pushed through tremendous challenges to achieve their goals. If you push hard enough long enough there is nothing that can stand in your way.

There is an analogy in the Theory of Constraints that talks about a crack in a brick wall. In addressing your challenge (the wall) your initial goal is not to knock it down or blow through it, you simply must make a crack. If you can make a crack you know it is only a matter of time before you will be through. Personally I have found this quite encouraging especially when I started building websites. It took a while before I made my first $1.00 online but once I did I knew I had found my crack and only time stood in my way.

Willingness to Work

Lastly I want to mention that nothing will come to you if you are not willing to work for it. There is no 100% passive means to succeed. The closest you will get to passive income or success will come in the form of a flywheel. After a fly wheel gets spinning it doesn’t take much to keep it going but more work is required to keep it from stopping. This means you probably won’t see a return for your efforts right away but know that with time fruit will come from your continued hard work.

My Dad is a superb example of someone with a great work ethic. He could have retired years ago but chose not to because he feels (and I agree) that a man needs his work. When he could hire out a job he did it himself. When there is a job to be done he leans into it rather than shying away. Think of the successful entrepreneurs you know and ask yourself how hard do they work? I will guarantee they work hard.

As a side note I have seen in recent years a decline in younger generation’s willingness to work and a rise in their sense of entitlement. I don’t know why this is but finding good help is becoming a harder and harder task.

That’s All

I hope that helps shed some light on the fundamental truths the lie behind good entrepreneurs. There is no special sauce just good old fashion hard work, focus, and persistence. If you can obtain these qualities I can bet you will see great improvement regardless of your situation.

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Best Small Businesses to Start in 2012

A common question Shy Entrepreneurs ask is “What are the best small businesses to start?” While I could take the route others have and list the top 10 small businesses of 2012 I would rather go into the fundamental principles you should look out for in each options you read about. Here is a quick list of business types you are bound to see;

  • Janitorial
  • Athletic Trainer
  • Computer repair
  • Graphic design
  • Elderly Health Care

The list could go on but rather than throwing you fish why don’t I teach you to fish? There are commonalities that these and other business options share that make them good candidates. That said the best option for you will not be the best option for someone else. I get in to specifics in my eBook “The Zero Risk Startup” but here I would like to address criteria that make for good options.

Service Based

Small businesses by nature are often service based. There are many reasons for this but the biggest reason is providing a service can’t be boxed up and sold at major retailers. People have needs and a serviced based company that can meet those needs can have a good shot at success. This means there will also be a high degree of labor required for the business to operate. If you are the one providing the labor keep this in mind as you begin to scale up. All business is very much relational and serving is a great way to build relationships.

Services also don’t require much of an overhead. Take Janitorial services for example, after purchasing your cleaning equipment (much of which you probably already have) there are few other reoccurring costs. There will be expenses but it’s not like you are leasing a piece of machinery or office space while business is slow.

Low Sunk Cost

Starting a service based organization usually means you will have a lower financial barrier of entry. Sunk costs are the un-recoupable costs associated with your launch. A small business by definition does not have much money behind it so keeping the sunk costs low is vital. While not always the case a high financial barrier of entry could also imply high costs to continue on.

Conducting business will require some finances so you won’t be able to spend your complete budget right out of the gate. Only a portion of your startup capital can be used as you launch. As a side note be warned that a lower financial barrier of entry also means you will have a lot of turnover competition. Competitors will come and go as they try their hand in your niche. This competition will be people that want to get started but don’t know what they are doing. They will pull jobs out from under you by low balling the price but this practice will put them out of business as fast as they started up. What does this mean for you? It means you will have to deal with constraint haggling about lowering your price. Don’t worry its how business works but as long as you have a strong competitive advantage you will be fine.

High Degree of Customization

As a service based business there will also be a high degree of customization. This means no two jobs are going to be the same. A janitor for example may always be cleaning but what they clean will be different from client to client. A handyman for example may build a deck one day and fix a sink the next. This “customization” is what allows the market to exist. If the problems were always the same a single solution could be put together, boxed up, and sold through larger businesses.

You will be in the business of solving other people’s problems which means the specifics of your service will be in constant flux. That said it will also be assumed that you will provide your solution/service in a short amount of time. Larger organizations can offer custom solutions but they won’t be able to offer the solution as quickly as you can.


If it’s possible you will want to start a non-seasonal business. Having a non-seasonal business means your cash flow will be more consistent on an annual basis. As stated earlier small businesses fundamentally don’t have much money behind them so dealing with seasonal trends could be a tough reality to handle. A caveat to this could be offering different services in your off season. My brother in law runs a landscaping business and they keep moving through the winder by offering snow removal services.

Even non-seasonal niches will see a rise and fall in demand so be prepared to weather some downturns. Inconsistent need is often consistent with small business so adding seasonality on top of it can be a headache. If you like change a seasonal business may be perfect for you but from a business stand point additional flocculation is generally frowned upon.

Organic Growth Scalability

When you start your business you will probably be the entirety of your organization which means you are your fist business. This is important to realize as you grow. I very much believe an organic growth strategy is required if you are to build your business into a long lasting company. If you are handed a business or see too much growth too quickly your likelihood of failure begins to rise. This is because variability is introduced with a steep growth curve. If on the other hand you take it one step at a time and learn all there is to learn you will build a foundation that will not easily be shaken.

Lastly don’t get caught up in fast money. You will need to be willing to put in the time and effort no matter what avenue you decide to take. Chasing the “easy money” businesses will only serve to keep you in the rat race. Understand that success will come with time. As long as you continue to pursue excellence you will no doubt find yourself running one of the best small businesses to run regardless of industry or niche.

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Case Study of a Successful Little Business

I recently had the privilege to review the 10 year performance of a successful little business and want to touch on some of the general business principles that allowed this success. Confidentiality prohibits me from including specific details but you probably don’t care about those anyway; you want to know what you can take away for yourself. The company operates as a small business and has the volume of a good size organization with annual revenues over 10 million.
What makes this case study interesting is that the subject company has seen roughly a 20% annual growth rate for the past 8 years. In case you didn’t realize it a 20% annual growth is HUGE and to do that for 8 consecutive years is even more amazing. Another twist to the story is that this company competes in an industry consisting of large conglomerates.

So, how did they do it? Well, the answer isn’t a short one; there are many factors that played into their initial and continued success. The best explanation I can find for this dynamic is the “Fly Wheel” effect found in Jim Collins book Good to Great: Why Some Companies Make the Leap… and Others Don’t. Basically there was no one single decisive point that shot the company into the world of success. Rather, it was a continued effort (pushes of the wheel) that collectively allowed the company to grow. Interestingly enough each “push” is in itself unique and wasn’t required until the “push” before it was in place. This means that one of the biggest challenges of growth is the dynamic nature of changing needs.

Dynamic Needs of Growth

As a business grows its needs change and efforts must be shifted to accommodate the new demands. This fundamental truth is in part the reason few people “Get rich quick.” Healthy sustainable growth happens at an organic rate and through iterative efforts. I believe this dynamic is also much of the reason small businesses have such a terrific failure rate.

The needs that exist when you start a business will not be the needs required to grow your business. Additionally the needs required to grow your business initially will not be the needs required to grow your business down the road. These needs will obviously be business and industry specific but what you need to understand is that your business is a changing entity that requires more than a single fixed solution to survive. Think of it like a plant that needs water to sprout, then apple juice for the next three weeks, then beer after that. If you simply continue to give it water it sprouts and flounders for a bit then dies. Wait, sprout and flounder for a bit before it dies? That sounds a lot like most small businesses. Hmmm.

Back to the Case Study

An added advantage to our case study that I don’t want to leave out is that its parent company has the finances to pay for changes that need to be made. This may not seem like much but it is a big deal when a company has to find the money to make the changes needed to grow. If you can’t already foot the bill for your planned growth it means you will need to assume additional risk beyond that inherent to the change you want to make. The lesion here is that good old saying “Cash is King!” As a small business you simply cannot afford to be cash poor if you want to grow. In some respects this is where the art of business comes in. Depending on your circumstance the question of how to manage your business successfully will change.
The subject company leveraged its parent companies willingness to foot the bill on many occasions. Resources were acquired and workers were put in place each time a legitimate need existed to do so.

Market Positioning

I mentioned earlier that the subject company was competing in an industry with many large players, how is this possible? It was made possible by sticking to a market position that played into the strengths of small business. As a smaller company it could provide a higher quality product and service to its customer base than its larger competitors. It could also offer these products and services in a fraction of time. The larger organizations have bigger pockets, a larger product scope, perhaps even greater human capital, but none of those matters when a customer needs a high quality solution with a fast turnaround. What would take the large company 2 months the subject company can do in 3 weeks. When problems arise the large organizations have layers of bureaucracy between the customer and the person with the solution while subject company has a non-automated phone system and customers are patched directly through to the parties they care to talk to.

The subject company has also decided not to compete on cost. Meaning, they will pass on jobs if they don’t feel they are appropriately compensated. This is hard for most small businesses because business is not always coming in at a constant rate. Consequently the subject company receives more money for the time and resources it puts into its work. This is justifiable because of the quality and speed with which the customer is served.

K.I.S.S and Get ‘er Done

As an engineer I must admit that I have had trouble with these principles but have learned to greatly appreciate them. At the small business level the K.I.S.S (Keep It Simple Stupid) and Get ‘er done attitudes can go a long way with the customer base. Over complicating a solution or following a bloated process can actually get in the way of solving the customers true problem. Remember, the customer doesn’t want your product or service, they want what your product or service will do for them. In other words if you can address their problem not the means to the end you could be offering more value to the customer. The subject company recognized this and removed all layers that didn’t speak to the customer’s core problem. Upper management is kept thin with no middle managers, everyone wears many hats, and open communication is maintained among the staff. The human capital element is highly leveraged making each employee more of a craftsman if you will rather than a number.

Do You See a Bright Future?

After witnessing all of these realities in such a successful little business I am certain they have a bright future ahead of them. My hope with this assessment is that you will find ways to apply these principles and consequently see similar success. If you are having luck let us know, and if you have questions feel free to leave a comment.

For more information on starting and running a successful small business using the skills, talent, and finances you already have check out; Zero Risk Startup

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Entrepreneurs, Take Advantage of the Business Cycle Phases

I recently met with my financial advisor and our discussion sparked an idea for this post. I am going to discuss the business cycle and how as entrepreneurs we can better position ourselves to take advantage of the phase changes.

The Business Cycle

As you know there is an ebb and flow to our economy with times of prosperity and times of poverty. If you are not aware of this you need to open your eyes. The big thing to note however is that the cycle is just that, a cycle. No time of prosperity or poverty ever lasts forever. What does this mean for you and I? It means there are continual opportunities to position yourself and your business to make a profit. This is the strategy my advisor and I are following with my portfolio. The cycle can be thought of as the following a Sine wave;

This isn’t entirely true of course but it does illustrate the general rise and fall. The common approach is to break the cycle into four parts: Recovery, Prosperity, Recession, and Depression but, for the sake of this article I have broken the cycle into 6 parts. The image below breaks the cycle into 6 parts each found between inflection points. The idea here is that the inflection point denotes the beginning of a change. “A” represents the recovery phase, “B” is growth, “C” indicates maturity, “D” can be considered to be a correction, “E” is decline, and “F” the beginning of the next recovery. This cycle as I said is not perfect but has roughly a 2-3 period.

Why should you care? Just as an investor will change his portfolio for the coming economic land scape you can position yourself accordingly. For example companies that do well in recovery are generally smaller firms that assist in efficiencies. Doing more with less is the name of the game in recovery. IT businesses can find themselves in this group as IT products often allow for higher internal efficiencies.

In the maturity phase (C) the companies that do well are the larger institutions that are less effected by the market landscape. These companies are often so big and so diversified that they never see large spikes in any regard. The law of averages keeps them on a steady path. For the entrepreneur this could mean moving away from the “want” areas of your industry and into the “need” areas. What is it that your customers absolutely cannot live without? How can you offer solutions that don’t focus on options but feed into the core need of a person or business.

The time to position yourself or your company for each change is in the preceding phase. This will often be in the growth (B) and decline (E) periods. Some of you run businesses that can be easily tailored to these changes while others of you do not. Service based organizations can alter their packages to offer a better angle on the market whereas product oriented businesses may need to diversify their product line. Again, your specific industry and circumstance will need to be taken into consideration.

Other Cycles

Cycles are everywhere and if you are aware of them you can often profit greatly. Annual cycles that affect many industries are often tied to the weather. Construction for example often slows in the winter because of the snow fall in cooler climates. The warmth of summer is also a catalyst for the soft serve beverage establishments. In fact, because I live in a 4 season area I decided against opening a self-serve yogurt shop in 2008. I watched a few similar establishments go under because they couldn’t carry an overhead through the winter months. If I were to have moved forward I would have had to offer more than frozen yogurt and I didn’t want to go down that path.

It would also be advisable to change your buying habits such that you purchase items in their off season. I haven’t tried the following but I have often wondered how much money one could make if they simply purchased lawnmowers in the winter from Craig’s list and sold them in the summer. The same could be done for snow blowers, picking them up in the summer and liquidating them in the winter. Doing this would exploit the cyclical nature of the demand that follows the weather. Of course this would require you to hold the items for half a year or so but I think it could pay off.

Out of Phase

As Warren puts it; “you should be fearful when others are greedy and be greedy when others are fearful.” This phrase speaks to the idea of setting yourself apart from the rest and positioning yourself for the effects of group think. You want to stay out of phase with what the majority of people are doing. Staying ahead of the curve often means not adopting what everyone else has adopted. Find a unique angle and go with it, don’t model your approach after the market you will be lost in the masses. To read up a bit more on how to set yourself apart check out The Competitive Advantage Spectrum.

The dynamics we are talking about also hold true on the business to business level. Companies that sell out to other companies often do so because they plaid into the masses. By playing into what everyone wants you will water your business down until you find yourself in a financial crisis and in need of someone to bail you out. Pricing wars can quickly lead to this. If a competitor is selling a product for less than what you can make it for you are either in the wrong industry or your competitor won’t be in business long. Dropping your price to meet theirs will only lead them to do the same and ultimately lower the expectation in the customer’s mind of the price for your product or service. This is one of the reasons why I tell all small business owners never to compete on price.


Play your own game. Take the cycles of your industry into account but don’t allow them to shape your business. Just because your customers want to pay less doesn’t mean you need to lower your price. There are many creative ways to meet the coming changes but you will need to step outside of what everyone is telling you and find a unique position that has not yet been exploited.

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Key Small Business Success Factors

Many factors play a role in the success or failure of a small business, but how can these factors be accessed across business types and how do we identify which ones are key?In previous articles we have addressed how businesses can compete relative to one another but here we will dig into the key factors that permit startup and long-term success.

Through the 80s, as the study of entrepreneurs and small businesses became more prevalent, it was recognized that a formal structure to describe venture creation would be helpful. William B. Gartner in his 1985 work ‘A Conceptual Framework for Describing the Phenomenon of New Venture Creation’ set out to establish such a structure.

The goal is to identify the specific variables that describe how each new venture was created, in order that meaningful contrasts and comparisons among new ventures can be made.” (Gartner 1985, 701)

As Gartner puts it

The framework integrates four major perspectives in entrepreneurship: characteristics of the individual(s) who start the venture, the organization which they create, the environment surrounding the new venture, and the process by which the new venture is started.” (Gartner 1985, 696)

Gartner’s first category the “individual” includes characteristics such as the need for achievement, locus or control, risk taking propensity, work experience, age, and education.

The “organization” is the entity that is created and consists of the product or service, the customer contracts, licensing, focus, and resource usage.

The “environment” is the external conditions outside the ventures scope of influence. Environmental factors include the available capital, skilled labor force, market accessibility, living conditions, and availability of supplies.

Lastly the “process” is the behavior and activities of the individual. Examples of process would be finding a business opportunity, gathering resources, making the product, or marketing.

This framework provides a common ground to compare the primary factors at a venture’s creation to the factors that play a role in the overall success. You will be suprised to find they are quite different.

Key Startup Success Factors

The application of Gartner’s framework upon business startup was conducted by Marco Van Gelderen when he used the framework to assess the relative importance of factors in successfully getting a venture started. (Van Gelderen 2006). The empirical study followed 512 entrepreneurs over the course of three years and determined that there were three primary contributing variables in the startup phase.

The first factor he found to be associated with startup success was the perceived risk of the market. In other words Individuals may or may not start a business given their perception of the risk associate with the venture. Van Gelderen points out that the actual risk may not be the same as the perceived risk but argues that a lower perceived risk will result in an earlier start to a venture. Risk or perceived risk of the market would be considered by Gartner to be an environmental condition.

The second factor associated with success at startup was found to be starting full time verses starting part time. Van Gelderen noted that starting part time is less risky but is also a sign of lower commitment. Starting full time assumes more risk but is also a sign of greater commitment. Individuals who started full time with a greater commitment are more likely to get their venture off the ground. Within the scope of Gartner’s frame work this would fall under the banner of an organizational factor.

The last factor Van Gelderen cites is the early capital requirements. Van Gelderen noted that those who lower their capital requirements increase their chances of getting started while those who intend to use more startup capital have a lower probability of getting their business running. Capital requirements would be considered by Gartner to be an environmental factor.

To summarize Van Gelderen’s findings in terms of Gartner’s framework, the primary success factors associated with getting a business started are (1) the perceived risk of the market, an environmental factor (2)starting full time verses starting part time, an organizational factor (3) the initial capital requirements, an environmental factor.

Key Long-term Success Factors

Once a venture has started the dynamics change and the factors that played a role at startup are no longer the primary concern. The study entitled ‘Why do Most Firms Die Young?’ by Robert Cressy develops a model to address the factors that contribute to success and failure in the first few years of operation and illustrates the exposure to risk through the life of a business. (Cressy 2006,111)

Cressy defined the primary variables associated with life time failure probability to be managerial capital(Human Capital), financial capital, entrepreneurial risk aversion, and the decision on market positioning. Using these factors Cressy created a theoretical model to illustrate the risk distribution over the lifetime of a venture. His resulting distribution indicated that the peak of risk exposure exists within the first 18-24 months and then tapers off through the remaining life of the venture. The study also suggested that the appropriate initial startup capital, both financial and managerial, will delay and minimize the overall exposure a venture will face. Cressy’s distribution is illustrated in figure 5.

Cressy, R., 2006, ‘Why do Most Firms Die Young?’
Small Business Economics 26, 103-116.
Figure 5

Applying Gartner’s framework to Cressy’s findings the primary factors can be categorized as follows (1) managerial capital, an individual factor (2) financial capital, and environmental factor(3) risk aversion, an individual factor (4) market positioning, a process factor.

Startup Vs. Long-term Success Factors

Comparing the results of Cressy’s study to the results of Van Gelderen’s shows the difference between the key factors in startup and long-term success. Table 1 illustrates the comparison.

Gartner’s Framework

Pre Startup Success

Long-term Success













Table 1. Success factors and Gartner’s Framework


From the studies we can make the following observations.

  • Long-term success is a function of four primary factors whereas startup success is a function of three.
  • The environment is the only factor that is considered in both startup and long-term success.
  • The specific environmental condition that existed in both cases was financial capital requirements.
  • The environment is the single biggest contributing factor associated with starting a venture.
  • The individual is the single biggest contributing factor associated with long-term success.

This paints quite a picture, not only do the factors change from the startup to the long-term but long-term success is dependent on one more factor than startup. Additionally the individual is considered to be a large part of what makes a venture succeed but is not a primary factor at startup. This discontinuity between primary startup factors and long-term factors along with the high failure rate together imply that it may be easier to get a business started than it is to make a business successful.

Could such a high small business mortality rate be due to the ease of getting a business started vs. the ease of making a business successful? What we do know is that the largest factor involved in long-term success is not required at startup and that the individual and financial capital requirements will always be a concern.

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The Competitive Advantage Spectrum

In a previous article entitles “Factors of a Competitive Advantage” I covered the three main areas a company can compete without an existing relationship. The three areas again are Cost, Quality, and Lead Time. Each of these factors is present in the market place and is taken into account whenever someone is making a buying decision. In other words the reason people make a purchase decision between two products is because one of them is cheaper, of better quality, or is readily available. Understanding this dynamic can help you better serve your target market and allow you and your business to provide the greatest value possible.

The Competitive Advantage Spectrum

When thinking about how you can compete in your market it may be helpful to think in terms of the following spectrum.

Shy Entrepreneur Competitive Advantage Competitive Advantage

Cost, Quality, and Lead all exist as areas in which you can compete but unless you are the only player in an emerging market (Company “D”) you will not have an advantage in all three areas. Most companies start off having an advantage in one area and work to compete in two. If you are just starting your business think long and hard about this because your pursuit to compete on too many factors could lead to your ultimate demise. It is better to excel in one area than it is to compete moderately in two. Many small businesses don’t understand this and try to be all things to all people.

Relative Positioning

While it is true that any business in any industry can position itself wherever it pleases on the competitive advantage spectrum, industries themselves often demand relative positioning. Web based companies often have real time products that are available at the click of the mouse. This means lead time is of little concern throughout the market segment and businesses will compete on Cost and Quality. An example of this could be Microsoft Operating systems and Macintosh Operating Systems. Both are readily available so competing on lead time is not of concern. Both Microsoft and Macintosh positioned themselves to offer solutions to different target markets. In terms of the spectrum Microsoft offers a better quality solution for the price for business oriented customers. Macintosh on the other hand offers a better quality solution for the price for graphic processing and artistic consumers.
Much of the retail industry has also found its corner on the spectrum. If you think of Wal-Mart, where would they be positioned? They would be somewhere close to Company “C”. They seek to have a large inventory of low cost products available to the general consumer. This in turn means they inherently have the supper high quality merchandise that may be found in a boutique store specializing in a focused product group.
What about Company “A”? One business type that would be in this neck of the woods would be customer furniture companies. Competing on cost and quality they often provide a long lead time. An order could be placed and it may take a few months for the product to be delivered. The products will be of higher quality than what you could pick up today but you will have to wait for them to be put together.

Small Business Vs. Large Business

Understanding how small and large business relate to the spectrum and how they compete can further equip you for success. Large businesses often cater to the general needs of many whereas a small business is positioned to provide specific needs to few. So, where does this put them in the spectrum? A small business should almost always be positioned in the neighborhood of Company “B”. They should never be positioned to compete on Cost, small businesses need to be as far away from that position as possible. As a small business there is inherently little money behind the organization so competing on cost can be futile. A small business should provide the highest quality solution in the shortest amount of time as possible and charge a premium.
Large businesses on the other hand are geared to provide boxed solutions at as competitive of a price as possible. Large businesses often must compete on price because they are taking part in very mature markets. As stated earlier Wall-Mart leverages the economy of scale to bring a lot of inventory in that is of little cost but often doesn’t have the greatest quality (Company “C”). It is hard for a larger organization to compete against custom solutions so often times they don’t. Larger establishments want to partake in a market segment that has a high volume of similar needs.

Emerging Market

An example of an emerging market would be Microsoft in the early years as they pioneered consumer oriented operating systems. Apple was right behind them but for a time the Microsoft OS was the only thing people were using on PCs. Finding a new market with no competition is quite difficult and is often found on accident. Many Startup companies operate on this premise of discovery working to find or create a new market in which they are the first competitor. If this works out the monetary reward can be huge but as you may have guessed the failure rate is much higher than the success rate.

Even if you are fortunate enough to be the first competitor in a market it would behoove you to determine how you will maintain your advantage in the future. The triple advantage will be lost the second another competitor shows up on the scene. Chances are they will enter your newly formed market asking where they can provide value where your company falls short.

  Why You Care About Competitive Positioning

If you have not started your business yet consider yourself lucky, now you can do so knowing the best way to position your company on the competitive advantage spectrum. Use this spectrum when assessing your competition; it may give insight on where they can be out performed. This will also help you to not give away your competitive advantage. In the Theory of Constraints the Viable Vision is often achieved by providing quality products quickly at a premium. This means you are getting much more out of your efforts than you would be trying to compete on every factor. I have seen this work fits hand and it is amazing. The value in providing a part or service quickly can easily outweigh the value inherent to the part itself. So, take some time today and figure out where you are located on the spectrum, then figure out where your competitors are positioned.

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5 Steps to Start a Small Business


With everyone talking about the economy I decided it would be a good idea to discuss an approach to small business that if followed would minimize the number of failures. These 5 steps to start a small business provide a solid foundation to any venture and should not be ignored. It is in the success of small business that the economy finds its strength so, take notes.

1. Take a Look in the Mirror

When thinking about starting a small business the first thing one should examine is their personal financial situation. You are your first business and the way you manage your personal finances is a reflection of how you will manage the finances of your business. If your personal finances are in order and you make more than you spend, you are probably ready to begin thinking about other business ventures. If on the other hand your situation is the other way around and you spend more than you make, I would suggest that you get your situation turned around before venturing into the world of small business.

The management principles that lead to financial success on the personal level are the same principles in the business world. If you are employed you are providing a service to your employer and in exchange they are compensating you with a salary or an hourly wage. Think about this for a bit, you are already playing the small business game. Where are your week spots? Are there spending issues? Why are you looking to start yet another business? Examining your current situation with this perspective will give you an idea of what to expect if you were to get another business off the ground.

2. Understand the Small Business Marketplace

Before getting started make sure you understand Small Business Volatility. The most notable characteristic of the small business marketplace is its resistance to success.  The fact is the majority of small business startups will close their doors after two years of operation. If you don’t take note of this reality you are positioning yourself for failure. One of the biggest contributors to this reality is the fact that small businesses generally don’t have much money behind them and businesses fail because they don’t make enough money to cover their expenses.  In other words the small business marketplace is a marketplace averse to error. One must know where each penny is going and how each penny will help the bottom line.

That said, there are advantages to small business. Being small means you are flexible and fast. You won’t have the layers of bureaucracy to slow you down when you need to make a decision or change something up. Leveraging this reality can afford you opportunities that your larger counterparts cannot act upon.  Commonalities exist among the small business and large business paradigms but keep in mind a small business approach will not work in a large business environment, and a large business approach will not work in a small business environment. Most consumer based organizations that we are accustom to follow the large business paradigm so keep yourself in check because a Wal-Mart approach to a custom boutique is a recipe for failure.

3. Begin with Service

Outside of yourself your first small business should be service oriented. There is a smaller financial barrier of entry for service based businesses than there is for product based models. This means you will reach a break even faster than you would if you decided to go with a product based model. Think about a janitorial agency. The startup costs would be rather small, especially if you had supplies you could use around the house.

Additionally many service based business are better suited to handle fluctuations in demand. Market fluctuation can be killer for smaller organization. A service based model can have its expenses tied closely to the actual delivery of the service. This means unless you are providing the service, you are not incurring costs. There will be some overhead but not as much as there would be in a product oriented environment.

4. Be Willing to Change Direction

I have heard it said that companies change their focus an average of 5 times before they find success. As you begin to fulfill a need your intuition on that need will grow, as it does allow it to direct your company. Microsoft for example began in traffic analysis hardware, not software. There is freedom to try multiple directions (one at a time) to figure out how your company can best add value. Eric Ries in his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses calls this “the pivot”.

5. Dig In and Get to Work

These precautions will safe guard you tremendously as you pursue each business venture but they are worthless if you don’t act. In order to make you business work you will have to work… a lot. A common trait I have witnessed among successful business men is their drive to get things done. They don’t sit around and wait for this or that, they figure out what needs to be taken care of and take care of it. The journey doesn’t have an end, being a business owner is a continuous effort to perpetuate your organization. If you don’t eat and breathe your business chances are you will play second fiddle to someone who’s passion is the business you claim to love.

I hope you find this helpful. I know may people want to know How To Make Easy Money Fast, which can be done, but not continually and not with a small business. Business is hard work that will take time to produce fruits but trust me when I say diligent effort invested into a focused business will pay off handsomely in the time. Remember, the small business is the heart of our economy and anything that can be done for the sake of small business is a cause worth pursuing.

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