How To Fail in Business
A little under two years ago, I took over a small business in Port Harcourt, Nigeria. It is a beauty center with a salon, spa, gym and café attached to a hotel. I had been living in Nigeria for a year at the time, I always had an interest in hair and beauty, I had a steady if not demanding job, and I was very excited. I spent the next twenty months treating the business like my own pet project. No idea was too lofty, no plan was too ambitious. I thought I had it all figured out. Fast-forward two years and the best thing that has happened to my business is that the building was condemned and is being demolished.
What happened? What went so wrong? How did I go from proud entrepreneur to humbled business survivor, and why on earth am I very happy right now? The theme of my business story is “If I knew then what I know now.” Instead of giving you a bunch of business do’s and advice, I will share with you all the mistakes I made and how they affected my bottom line. Hopefully someone can take something away.
1 Don’t Plan, Just Make It Up As You Go Along
One would have to be living under a rock not to know the first step in any business is to draw up a business plan. So what was my excuse, being a highly educated and exposed young lady? Simple: I was cocky. See, I have been doing Business for as long as I can remember. From the time I was 12, I have been braiding hair, tutoring, babysitting and much more. It is how I made all my pocket money and I have to say it was highly lucrative. I used to charge $50 a day to babysit and sometimes the parents would go away for an entire weekend. When I was in university, I started a grocery delivery business for Nigerian students. I would take their order, drive the thirty minutes or so to the nearest African food store, buy it and deliver. In a week I could make $300 easily.
Now none of these businesses required much planning and I used them for one purpose: cash in my pocket. There was no development, no growth, little overhead and everything was at my discretion. So because I had been ‘successful’ I thought I had somehow discovered the hidden secret to business.
So I approached this business the way I did the others. I jumped in, had a lot of ideas, implemented them, and sat back for the money to roll in. It never occurred to me that
- I was, for the first time, an employer of labor so my decisions directly affected people’s lives
- The business did not run on my whims
- I could not simply shut down and walk away if things did not work out
The result was unnecessary expenditures, heavy losses, unhappy staff, schizophrenic growth plans, no clear vision, suffering quality and much more. Most of which would have been eliminated by a week of hard planning and strategizing, as well as a commitment to those plans.
2 Never Listen To Anyone, You Know Best
From the outside looking in, it is easy to point out everything that is wrong with businesses in Nigeria. Employers are greedy, workers are lazy, customer service is a joke and on and on. You may even think to yourself, ‘If I ever own a business, I will make sure to do XYZ.’ That is exactly how I was. And if someone were to advise me against a certain policy I would promptly ignore them. After all they were part of the problem and I was trying to do something new.
Even with my staff, I would impose new policies that I had seen somewhere ‘Abroad.’ They would gently try to warn me that ‘Madam, that one no go work for here.’ There were several such lessons I learned the hard way.
Despite the fact that I was coming with reforms and innovation, I never asked the question, ‘But why are things the way they are?’ If you start with the basic concept that People Are Not Stupid, or even if they are, No One Likes to Lose Money, then by definition, any policy that is in place must have a reason behind it. Perhaps the reason that shop sells products for more than twice what you would pay abroad is that the cost of logistics was very high, or their overhead demanded it, not simply that they are greedy.
I ignored all advice and threw out the common industry practices because I was so sure my way was best. By the time I learned I was wrong (and I was almost consistently wrong) I faced the difficulties of having to change policies mid-swing.
3 Let Your ‘Experts’ Lead the Way
Perhaps because of the way consultants are portrayed on TV, I thought the best approach is a hands-off one. For example, if you want an advertising program, you approach the Don Drapers of the world, give them a 5 minute brief, then come back in two weeks for the final product. Which you will love, of course. I took this approach with all my consultants: Marketing, Finance, Legal etc. I would tell them what I want, go away, and expect it to be done when I get back. It is laughable how foolish this sounds, even to me.
When my accountant presented me with an income statement, I was confused and asked him if he could prepare the books in a way that was easier to understand. ‘No, Madam,’ he assured me, ‘this is the way it is done.’ I figured he was the expert after all so I let it go. I never thought to insist that the services my consultants provided should be tailored to me. It was like I started a business and everyone insisted on speaking French, because that is how it was. Ridiculous! It is my business; we will speak English!
With creative activities I found myself wholly unsatisfied with the final deliverables. It was not until much time and many tears later (theirs, never mine), that I realized I had to be involved from the beginning and guide the entire process until I got what I had in mind. I do not know if this is unique to the Nigerian business scene or it is world-wide, but I now see consultants as merely dedicated labor that still have to be managed closely.
4 Ignore the Numbers, Those Are For the Accountant
Despite several accounting modules, including one Accounting for Engineers in my master’s program, I was at the time financially illiterate, and blissfully so. All I cared about each week were daily sales and daily expenditures. A day in which we made more than we spent was a good day in my book. Oh, the ignorance
I never stopped to think of the cost of sales. For example, if a wash and blow dry costs N100 in my salon, I counted that as N100 before expenses. But if the shampoo used for the service costs N65, then by virtue only 35% stays behind when the client leaves. This is called the Gross Profit Ratio and it is only one of half a dozen terms I knew nothing about, others being Current Ratio, Profit Worth, Cash Flow Analysis etc. Have you never heard of these terms? Well you are on the path to ending up where I did!
All these fancy accounting terms help you get a clear view of your business from different perspectives. I, of course, had an extremely myopic view of my venture. The worst part at the end was not seeing how much money had been lost but being surprised because I had no idea beforehand.
Oh, and you know that phrase that every business loses money in the first two years? I used that as a get-out-of-jail-free card because clearly it was not my fault. What I did not realize is that statement often refers to the fact that the break-even point (when you make back the money that was invested) is usually past the two year mark. Even if a business actively loses money in the beginning, it is because it is investing in future profits. In actuality, the first two years of a business should be the leanest, with no unnecessary expenses.
5 Let Your Business Run Itself
Although I was told repeatedly that you cannot run a business “on the side,” I felt I could be the exception to that rule. In the beginning everything was going well. I put in 8-hour days at work then 3-hour days in the evening at my business, including full days on the weekends. This went on for the entire first year. That was the time that things were smooth, employees were happy, and clients greeted me with smiles.
But by the second year, I was tired. I scaled back to once a week, left my manager in charge and focused on other things. I figured if my business was like a baby, I had weaned it and it was ready for a nanny now. But one does not let a nanny raise their children. No matter how well-meaning or skilled the custodian is, they are not you, and cannot enter your mind to reproduce your objectives. There is bound to be conflict and I experienced my fair share.
I thought the perfect idea of a company is one where I did nothing but sign approvals and checks and received income. If anyone else has that notion, do not, I repeat, DO NOT start your own business. You will end up resenting your business and it will never be satisfied with the time you give it. You are better off investing in stock or becoming a loan shark.
A business is a very long term commitment; you must be dedicated to it until it matures. Issues such as theft, client relations, policy evaluation etc. can only be addressed with devoted attention. This is a lesson that I learned only after it was too late.
So, if I failed so spectacularly in business, why am I happy? Well, I am being given an opportunity that most businesses do not get. The building my business was in has been condemned and this, at least, is no fault of mine. The owner has graciously offered me a different, smaller space under the same terms of tenancy. It means I get to start over and do it better this time. I am finally learning to seek help because what I do not know about business is only eclipsed by what I have not even realized I do not know. The online resource www.smetoolkit.org has been invaluable. I strongly suggest that anyone thinking of starting a business of any scale or venture take some time to work through this website.
My mistakes were egregious, but I am able to talk about them without shame. The best thing I have gotten out of all of this is letting go of my ego. As one of my favorite professors once said: good judgment comes from good experience; good experience comes from bad judgment. Puzzle that one out until it makes sense.
The author owns and runs Ibioju – The Good Body Center: Salon, Spa and Gym located at Rachael Hotel, #3 Harbour Road, Old Town, Port Harcourt, Rivers State, Nigeria. Feel free to visit anytime.