Business is full of concealed truth. Legerdemain. Your own eyes are not to be trusted.
Consider the e-commerce company Overstock.com. It appears to be successful. It is huge. Its sales numbers are in the hundreds of millions. But it has NEVER made a nickel. In profit terms, it is a horribly unsuccessful enterprise. A failure of epic proportions; and a very dangerous illusion, as others without access to unlimited capital infusions may be tempted to copycat its methods. Overstock is a glowing example of something not being at all what it appears to be.
In my industry; in info-marketing, where I’ve plied my trade for 40+ years, the internet is an endless field of facades. More often than not, the profit is nil or nominal, there’s no stability, there’s no real business at all. Anyone who thinks this sort of chicanery and confusion is unique to internet desperados is sadly mistaken. Wall Street and Silicon Valley are rife with this fakery. The overwhelming majority of these fantastical enterprises start, consume venture capital, and disappear ignominiously.
One of the things I fight to do – here, in all my writing, speaking, coaching and consulting – is to keep people grounded in reality and engaged in accurate and complete thinking. Year after year after year of multi-million dollar losses is a stubborn fact, and facts ought not be ignored.
What IS A Business (Worth Having)?
Let’s review the basics of a successful, valuable business. A key factor is the affordable acquisition and assembly of a sufficient number of customers (clients, patients, members, etc.) who can be retained and who will engage in on-going or repetitive transactions at price points producing net profitability. There are businesses that defy some part of that definition. But there are no real businesses that conduct the entire business at a sizeable loss.
Another key factor is equity, not just income, not just profits. Equity is in assets that disgorge profits. If an entity has no such assets, it has no equity, and thus has no real value. Sorry, but to me, a company doing $100-million in sales with 0-dollars’ profit is no more valuable than a little kids’ lemonade stand. Both are pretend, play businesses, not real businesses.
An additional key factor is sustainability. Can it withstand stormy weather? Is there some sort of perpetual-motion to it? One thing that is real about the dot.com’ers is that these companies’ creators view their businesses as something to take money out of, not put money into. They’re very big on having OPM – Other Peoples’ Money – in these things, and getting their money out, if any of it ever went in at all. That’s wise for every entrepreneur and business owner. But most of these business’ advertising, marketing, sales, price and operations strategies must be extremely suspect – because they FAIL to produce profit.
There is a tendency to believe because something or someone is Big, Visible and Applauded, they are also smart and should be emulated. Such an idea cannot be trusted. It is best to follow those who prove a true and clear understanding of net not just gross, of profit v. loss, of equity not just income, of facts not hype, of history not just the moment. You can’t out-perform your understanding.
Anyway, my message of the month is: beware the sexiest Sirens. Beware the very visible, very prominent business media darlings of business and commerce. The “genius” on this month’s cover of Forbes or Fortune or Success can next be – and has been – Inmate #60742 or Bankruptcy Case #X-0136. It is up to you to decide on your definition of a business worth having. Take a little time. Write it down. Iron out its wrinkles. Clarify any ambiguity. Then choose the models you emulate and the advisors you heed based on their congruency with your definition – and be wary of all others.
Hear author, consultant, and renowned copywriter Dan Kennedy in person at GKIC’s next big event, SuperConference in Orlando, April 6-8. (gkic.com/sc) Dan Kennedy will make you laugh, think, strategize, and rule over your business and life like a king.
Using his real-world experience, Dan founded GKIC to help entrepreneurs and small-business owners put an end to wasting their time and money on marketing strategies that don’t work. GKIC has continued his legacy “Renegade” approach of integrating classic lead generation advertising with proven multi-step, multi-media follow-up…producing leads, customers, and profits.