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Resource Center > Article
Business Failure Direct Result of “Under-Education”
3 May 11 Posted by: Kathleen C Lanza
in Entrepreneur Exchange
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Douglas E. Nevill is the CEO of pajezy.com, inc., a website development and content management system created specifically for small-business owners and available only through pajezy.com authorized licensees.

An entrepreneur since 1977, Doug was sixteen years old when he began working as a freelance graphic artist and paid his way through college via various entrepreneurial pursuits.

In the first of what will be a two-part series for BusinessOpportunity.com’s Entrepreneur Exchange, Doug talks directly to budding and fellow entrepreneurs about such issues as the primary reason most businesses fail, the greatest challenges they face today and what they can’t afford to overlook at start-up…

How does someone know if they have what it takes to own their own business?  Tell us a bit about how you made the decision and why.

First, if you want to own your own business, you need to GET SMART.

Are you smart?  I’m not talking about formal education here, but more of that “uncommon sense” and real-life wisdom.  I’m not trying to insult you by asking this question, but the reason that I ask it is that I believe most small businesses that fail do so because of inadequate education.

It is vital that you know what you know and that you know what you don’t know.  You must determine which of those things that you don’t know are mission-critical to your business and get the UNKNOWN answered.

The standard and universally accepted answer to the question, “Why do most small businesses fail?” is under-capitalization.  I contend that this answer is an inaccurate interpretation of data and that it is false.

The real reason that most small businesses fail is UNDER-EDUCATION.

And how they fail!  Out of new start-ups, 71% will fail within ten years.  (This data comes from a special tabulation by the Bureau of the Census produced for the Office of Advocacy of the U.S. Small Business Administration, results from 1992 – 2002.)

Now, if we were to ask the operators of these failed businesses, “Why did your business fail?," most of them would no doubt reply “under-capitalization.”  Why then do I contend that the real culprit is under-education?

Let me explain.

If you were to ask these same persons this follow-up question:  “Did you THINK you would have enough money?,” they would no doubt answer “Yes.”  So, the real failure was a failure in THOUGHT.  They “thought” they would have enough money, but they thought WRONG.  Why?  Usually little or grossly inadequate RESEARCH is the culprit.  They did not KNOW how much money they would need.  The lack of CAPITAL is simply the coating on the underlying problem―a lack of practical business education.

Second, if you want to own your own business, you need to GET REAL.

The first reality that you need to be aware of is that business ownership is vastly different from being an employee.  So if you are thinking about business ownership, embrace this truth:  You may be proficient in your field or even expert, but that does not mean you will operate a profitable business.

Assuming this is true, you would be a valuable employee, and you may be convinced that you are worth far more than you are being paid.  You may be right.

On the other hand, you also might be making more than your employer already.  Oftentimes small business owners are paying more than they can really “afford to pay” to their employees.  I have known many that in reality make less than their employees, because they do not pay themselves a regular salary or wage.  They live on “cash flow” and only take from their businesses what they can after everyone else has been paid.

An aspiring business owner must know how to do basic math and apply mathematical business concepts.  You need to understand that cash flow does not equal profit.  There is a huge difference between punching a clock and getting a regular paycheck and assuming the risk of owning a business and being responsible to pay the employees (and the government and everyone else) in a timely fashion.

Ignorance, bad math and unrealistic optimism are the conspiring agents that kill most small businesses.

In order to be profitable, you need NUMBERS and they MUST be accurate.  You must KNOW how much it costs to operate the business, how much cash is coming in and how much is left over.  Then you must be able to intelligently FORECAST what your expenses and revenues will be in the future.  Calculate the costs and then decide if the cost of the business is worth your efforts to operate it.

Third, if you want to own your own business, you need to GET HELP.

You don’t know everything and you can’t do everything.  Knowing when to get help and how to get it is essential.

In any business, your most valuable ASSET is your staff.  If your business is going to require employees, you must be able to manage them well.

Staff need not necessarily be employees.  You can outsource many things and hire temporary consultants and other contracted staff.

Have your expectations and performance criteria written down and signed.  Be careful with hiring new help and be willing to fire non-performers.  If you have a great employee, reward them as handsomely as you can and keep them.

The way to wealth (which is WHY most of you are in business) is to leverage your income through the efforts of your staff.

Finally, if you want to own your own business, you need to GET TO WORK.

And if you only want to work 40 hours per week, business ownership is probably not for you.

How did you become a business owner?

Though I would not have thought myself to be a business owner, I actually started my first business when I was sixteen years old.  I am a naturally gifted artist, and I started designing logos for businesses and creating business cards, stationery and brochures.  I worked at a fast food restaurant, too, making minimum wage of about $2.35/hour if my memory is correct.  My father was a general contractor.  I worked for him as well.  I never really was very good at anything other than painting.  In 1978, I started doing some painting on my own and really started making great money (for a kid, at least).

Although I have had several full-time, hourly jobs over the years, I ALWAYS had a “second” source of income.  I guess it is in my blood.

The catalyst that moved me away from working for other people and toward launching an entrepreneurial endeavor was dissatisfaction with my wages.  Like so many others, I believed I was worth a lot more than what my employers were paying me, and I proved to myself that I was right.

A specific incident that I can remember is suggesting a change to my employer that resulted in him saving tens of thousands of dollars annually and getting nothing more than a “good job” in return.  He was only paying me $12 an hour.

I knew my industry well, as well as anyone alive, and I knew how to do math and make logical, realistic projections.

Plus, I actually LIKE working.  Long hours for years did not discourage me.  I thrive on working.  It is MORE than the money.  It is experiencing life and accomplishing things.

What did you do before you decided to become your own boss, and how have those skills helped you in your current business?

I never slept late.  I wasn’t allowed to.  I started mowing yards for cash when I was a third grader.  I started pumping gas at a local filling station when I was in the sixth grade.

I knew how to work and learned to enjoy it.  I was, however, afraid to talk to strangers and though I was a stellar student and even enjoyed school, I would pretend to be ill to avoid having to give an oral report before my class.

When I was in the 9th grade, I got a job that forced me to work with lots and lots of people.  I took it knowing it would be hard for me and I was genuinely afraid, but I also KNEW that I needed it.  My dad was paying me a man’s wages (the same he paid grown men).  But when I told him I was going to take the job and why, he supported my decision.

Becoming comfortable with people and speaking to groups has been a vital element of my success, and I believe God led me in the process.

My relationship with God has been the most important thing in my life since I became a follower of Jesus in the summer of 1976.  I don’t use my Christian experience or conviction as a promotional tool in my business, but I gratefully admit that “skill” of seeking God and His will and glory is both the force and foundation of my life and business.

What was the biggest challenge you faced in your first six months in business?  How did you meet that challenge?

The biggest challenge I faced in my first six months of business was simply getting those first clients.

The way I met the challenge was simple:  I went out and got them by offering them a great deal (some free service) with the promise of a glowing referral in return if I was able to exceed their expectations.  I did that with five clients and have since that date earned many thousands of dollars from those clients.  I still have four of them ten years later.

What do you think is the greatest challenge facing business owners today and why? Any suggestions for how to address those challenges?

The greatest challenge facing business owners today is the emotional state of the population.  Many people are still FEARFUL to spend money, and they have every reason to be afraid.  This fear has a direct impact upon small business owners.

In oversimplified terms, I believe that if the American citizenry would simply believe that things are going to be okay and start spending money, it would kick-start our economy again.

The challenge is that you need to make “BELIEVERS” out of your target audience.  It all boils down to marketing.  You MUST make your target FEEL a need for what you sell and convince them of the VALUE of your product or service.

Put yourself in their shoes and evaluate how you would respond to your marketing messages if you were them.  What would it take for you to respond?  The same thing will work for them.

It's all a work in progress.  You may need to REDEFINE YOUR TARGET.  Figure out who will buy what you’re selling and then choose vehicles and craft messages that will convince them to do so.

More about Doug and pajezy:

Doug began development on pajezy in 2003, and beta testing of version 1 began in 2004.  In 2009, Doug began implementing a complex and powerful private-label licensing program for pajezy and started advertising the completed private-label solution in January of this year.   A web-based software application, pajezy enables private-label, authorized licensees to develop and maintain professional websites for their own small-business clients.

Click here on pajezy.com for more information on this outstanding licensee opportunity!  Secure your community today…the number of licenses is limited.

Please join us again this time next week for Part 2 of Doug’s interview with Entrepreneur Exchange where he’ll talk about everything from start-up/planning and marketing/sales to overcoming obstacles and the resources his company can’t live without.

Live On Your Own Terms
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