When Your Business Disappears, What Are You Left With?
High profit business models that attract entrepreneurs lose their attractiveness over time.
If it makes a lot of money, and if other people can do it, red ocean competition is coming. Margins and profits drop for everyone, and only the players who grew into mammoths can continue. (some business models stop working for everyone!)
An Indian well-drilling company in Lusaka, Zambia, told me the often-repeated story:
“We arrived in Africa, and nobody even knew that you could drill a well for your house. We charged $3,500 or more for each borehole and we grew the company. Then more companies flooded in and we can only charge $700 today.”
Their office was dismal, at best.
Perhaps you feel that your business is ‘safe’. At best, it is safer, but there is always the chance that it will fall apart. Or worse, it may become so terribly break-even and risky that running it feels like a dead-end job.
If your business does collapse, or if the opportunity moves on, what will you have left? The reason to ask is to make sure that you do have something left over.
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Network and Contacts – Do you have friends and partners who will trust you as you begin a new venture?
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Hard-Won Experience – If you start a similar business in greener fields (perhaps you’ve already seen where to move) you’ll know much more than most competitors. At least, you could become a highly-paid consultant.
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Financial Knowledge – Can you analyze a cash flow statement? Do you know how to position yourself for taxes? Can you spot a fraudulent miscalculation? Do you know how to manage debt or talk to investors?
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Management Skills – Can you deal with stressful employees? Have you hired and do you know how to fire fairly? Are you comfortable delegating and training?
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Business Processes – Have you written business processes that work in any type of business? Can you recycle the hard-won lessons?
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Leftover Profits – Did you save a safety fund or an investment pool for your next company? Did you invest into stocks that pay dividends?
If you plan it that way, being in business gives you more than just the financial profits. You can build equity outside of your business that you take with you even if it fails.
You will be out of this business eventually. With rare exceptions, you will either sell it or it will collapse.
So, make a “Post-Business Plan” today, while you still have cash flow, high margins, and lots of take-home profits.