An explanation in general terms as to what Unfair Advantage is and what it is not why it is not Strategic Advantage or Critical Advantage or in fact Competitive Advantage why it is more powerful than all of these and why is costs so much less and makes so much more
Most business fail in the first five years so let’s take a look at the way this might happen before we look at ways to stop it
Okay so you think that you are really going to be the owner of a great business making lots of money and giving you the life you that you have always desired. If you work hard and keep going there is a chance, a small chance that this may happen but in the great scheme of things that is unlikely. Most businesses fail in the first five years in fact out of the 10 business that start up today in ten years there will only be one left. Now all ten starts out wanting to be still around and all ten invest the same amount of energy and money into their ventures with a view to meeting Aim 1. In the unlikely event that two survive it will not be through skill and knowledge but more like luck that keeps them there.
So let’s refocus our aims a bit closer to home so that is not taking the long view but something most people who usually don’t know what they want for lunch can cope with how about?
Year 2 survive the first year;
Now that seems likely as the usual cycle in that first year you survive on your redundancy payout and live a frugal life but you have not established yourself and will be missing out on business that should have been yours in normal circumstances, but these are not normal circumstances. Regardless of the fact that 51% of the business registered in companies house (and that is only the limited liability ones) are SME’s and the 90% of those turnover less than £50K per year; starting your own business is not a normal thing to do in the UK most individuals work for someone else and that matters. Now we will probably reach the end of the year and have to do a set of accounts which will mark a steady downhill slide into the Tax and red tape abyss which constrains and bleeds most small businesses to death.
So onto Year 3
Year 3, Survival;
We will be getting a bit of work in now but for the old wage earner it seems that running a business and paying professionals to get going and all you are left with is less than the minimum wage. Which if you think about it is only legal if you own the business. You look back at your acquaintances who think you are having the time of your life playing golf or playing with the kids whenever you want – a real life of ease. In reality you sweat yourself awake for long periods in the cold grey night worrying do I tell the partner that we are moving to a much much smaller place on the good side those big orders promised are just around the corner the redundancy money is but a small wisp in the bank account but you could borrow from the savings and holiday fund as long as you put it back when the order comes in. But like all things when it comes down to it the big order was more in hope than judgment and it went elsewhere to someone who has three years accounts which so obviously don’t. But one small mercy is that you have not earned enough to pay any tax and the accountant informs you that you should be able to carry over this year’s lose to next year when you will make a profit. Anyway you loaned the company your money and now you are the largest creditor so if it goes down it now takes you with it… Let’s aim for year four.
Year Four, don’t let the family find out!
This year it’s the kid’s college fund that takes a battering and low and behold they don’t really need a substandard degree. They can always do better if they take an apprenticeship or they could take out a Student Loan and eventually pay it off just before you retire if you can afford it. This is a delicate time if the partner finds out it could be curtains for your ambitions so best just keep at it and ignore the lack of business as it is starting to come in dribs and drabs but not enough to feed a hungry caterpillar. Kid’s money’s all gone so we’re focused onto Year 5
Year 5 business be damned
Okay you have promises from contacts orders are being processed and you will have the money by the end of the week phew but until then how will you live a quick glance into the wallet and we are into breaking the rules we have maxed out the overdraft which is guaranteed by the family home and now the drastic plastic is flexed. Spending only until the end of the month then it will be paid back. Then watching the local news you see the directors of your new client being escorted by the local constabulary into the back of a Black Maria they have been arrested for fraud!!
So sitting there with your head in your hands crying out that “It’s just not fair” and do you know what? It isn’t!
Where does this leave you now?
This is just a story but it explains why most small businesses fall over due to a mix of enthusiasm, optimism and delusion so by year five; the money has run out, the family has run out, and the orders haven’t come in. So what can you do to stop this happening to you?