Harsh Realities Of Business
Sexy Businesses Aren’t Actually That Sexy
Five years ago, a small social network called Facebook started to gain a lot of traction. Around the same time, MySpace was sold to News Corporation for nearly $600 million.
All of a sudden, lots of entrepreneurs and investors were pouring their time and money into social networking. After all, it was the next big thing, so how could anything go wrong.
The problem was that many of these people didn’t know anything about social networking, or even about the internet in general. They saw a success and wanted to copy it, but had no real vision about how to differentiate themselves.
The same thing happened with Groupon three years ago. The “daily deal” concept was easy to understand, but difficult to execute without a strong understanding of the local advertising market. However, lots of people saw an “opportunity” to get rich quick by starting their own daily deal sites.
Once again, most of them failed horribly, resulting in a huge waste of time and money.
Instead of jumping on the bandwagon, think about how you can solve a real problem that you actually understand. Even though this problem might not be “sexy,” it will definitely give you the best chance of success.
One good example of this is Cash For Gold, a business that buys gold jewelry for a serious discount and then sells the gold to other investors. The business made more than $100 million in revenue in 2010, with fairly gigantic profit margins.
Cash For Gold isn’t the “sexiest” business, and the company also engages in questionable business practices, but no one can argue with the fact that they are printing money.
Things Fall Apart:
Nothing is more painful than working for months on a partnership deal or prospective sale, only to see it fall apart at the very last minute.
I spent the early days of my career at a bank, pitching deals to rich clients. I can’t even count the number of hours I’ve spent writing documents and models that have gone nowhere.
The worst part is that sometimes there’s nothing you can do. It just wasn’t meant to be. But more often than not, you can at least increase the chance that the deal will go through.
First of all, be willing to compromise. Sometimes, tweaking the deal terms just a little bit can help alleviate a tense situation. Most of the time, making these small concessions is far better than losing the deal altogether.
It’s also important to show that you really want the business. Emphasize that you value the relationship and make sure to bring up the positives of moving forward. One of my good friends sealed a multi-million dollar affiliate contract simply by sending over a package of beef jerky.
Finally, be patient. Good things take time. Lasting relationships are not built overnight. Strong partnerships are the result of many hours of discussion, deliberation, and research. Don’t apply more pressure than you have to, or you risk things breaking down.
This last point is especially difficult for me, since I am a very impatient person, and it’s an area where I still need to show a lot of improvement. Any suggestions here are more than welcome.
You Can’t Do It All:
It’s important to know your limits. No matter how much you know or how talented you are, you simply can’t do it all yourself.
Tim Ferriss writes about this in depth in the Four Hour Workweek. After his first business, BrainQuicken, started to take off, Tim was working 15 hour days trying to ship orders, return calls, and build new partnerships. His dream of owning a profitable, growing business was quickly turning into a nightmare.
To his credit, Tim quickly identified the problem and came up with a solution. He realized that his strength was marketing and business development. Therefore, he hired people and set up automated systems to manage the back-end operations of his business.
The result? Increased profitability, improved inefficiency, and a whole lot less stress.
I owe a lot of my own business success to other people.