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Old August 2, 2003, 08:19 PM
Michael S. Winicki
 
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Default BIG mistakes entrepreneurs make...

This is probably going to take a while!

Pehaps the best advice I've heard about growing a profitable business comes from Scott Bedbury who spent several years with both Nike and Starbucks as each company grew to unbelievable size. This is from his book "A Brand New World" ...

"Start with a great product or service that peple desire and that you can sell profitably. The best brands never start out with the intent of building a great brand. They focus on building a great-and profitable-product or service and an organization that can sustain it. Once that has been accomplished, you can slam your foot on the marketing accelerator and let the whole world know about it."

The key part of that (in my opinion) is "Start with a great product or service that people desire and that you can sell profitably".

The trouble is most failing/failed businesses violate this rule at every turn... Here is a real life example:

Over the past few months I've poked my head up on this board and asked for opinions concerning a line of naturally made body lotions, shampoos, conditioners and other personal care products made by a small company I do business with. Their products are good...very good. Product quality has never been an issue. Regardless of the time and attention they've spent creating their assortment of produts they've never made money. They'll get behind on their bills for a few months, get caught up and then get behind again. They'll take home a few dollars per week (sometimes)... for a wage that is typically less than the accepted minimum wage here in the U.S.

And they've been doing this for seven years. Seven long years they've been grinding out a minimal return on the sale of these products. They typically have less than 6 employees and most of those are family members--two sons, a daughter and
their mother.

The mother and daughter started the business. The daughter is the one that created most of the formulas for the products. Did I tell you they've been doing this for seven freakin years and they've made virtually no money despite the amount of time they've spent creating these products?

Last year I came across them. They were working out of a small industrial type building that had no airconditioning. Let me tell you this, body lotions and hot weather don't mix. They were throwing out as much product as they were making. I found them a better location.

One of their biggest mistakes is that they love line extensions. They love making more and different products. Instead of one type of shampoo they have 3 or 4. Instead of focusing on just liquid soap they started creating bar soap also. They added potpourri, they added tub teas, they added salves, they added body oils. They just kept on adding. They tried building their walk-in retail business but couldn't. Soon they decided the location was "bad".

They decided not too long ago to move to another location that would be more retail friendly. The trouble is this new location is in a mall, and their rent will increase by 2 1/2 times. AND their payroll will explode. Instead of going home at 5 at night they're going to have to be open until 9. They'll have to be open on Sundays too, which they've never done.

That's an extra 31 hours a week they're going to have cover.

Needless to say I think their days are numbered as an organization. They've never proven to me or to themselves that anyone actually wants their products. Or enough want them to be profitable.

Thank goodness if they go out of business I can still get my products made but it is still a bad situation and it goes back to the fact they've continually violated the rule brought forth by Scott Bedbury...

They've never found one product that they could sell profitably. Not one... they've always sold a little of this and a little of that but no one product has become that lead dog that would lead to growth. Maybe they haven't marketed well enough. That is a possibility. Or it could be that just having a "very good" product isn't good enough.

Seth Godin believes that... Here is quote from Seth out of his "Purple Cow" book:

"The Opposite of Remarkable is very good. Ideas that are remarkable are much more likely to spread than ideas that aren't. Yet so few brave people make remarkable stuff. Why? I think it's because they think that the opposite of "remarkable" is "bad" or "mediocre" or "poorly done". Thus, if they make something very good, they confuse it with being virus-worthy ("virus" in this case is what you want as a business owner. You want your product to spread like a "virus" to consumers throughout your target area--read Seth's book "Idea Virus". MSW). Yet this is not a discussion about quality at all. If you travel on an airplane and they get you there safely, you don't tell anyone. That's what supposed to happen. What makes it remarkable is if it's horrible beyond belief or if the service is so unexpected (they were an hour early! they comped my ticket because I was cute! they served flaming crepes suzette in first class!) that you need to share it. Factories set quality requirements and try to meet them. That's boring. Very good is an everyday occurrence and hardly worth mentioning. Are you making very good stuff? How fast can you stop?"

You see that's what scared me about this company's product line. They're all about top-quality. But so are most of their competitors. They do use mostly natural ingredients but I can go on the net and find dozens that claim the same thing. Their products are indeed very good. And because they are very good and not remarkable and they are due to failure expecially with the questionable management decisions they've made.

But I see the same thing everywhere. Everyone is trying to make/sell the "very good" and "very good" doesn't get it done anymore. From body lotions to business opportunities I see a lot of "very good" but little in the way of "remarkable".

The combination of a lack of a clear "lead dog" with the concentrated focus on creating "very good" products (rather than remarkable) probably has doomed this little company.

What they should have done is tried marketing a single remarkable product... if it doesn't fly try another and another but you can't waterdown your efforts over a multitude of weak products. They need to be great in a small area rather than very good over several categories.

Author Richard Koch said it best in his book "The 80/20 Principle"...

"Specialization is one of the great, universal laws of life. This is how life itself evolved, with each species seeking out new ecological niches and developing uniqe characteristics. A small buisness that does not specialize will die. An individual who does not specialize will be doomed to life as a wage slave."

Well, that's my view.

Take care,

Mike Winicki
 


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