Jim Blasingame

Business futurist, award-winning author, speaker and columnist

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Revealed: Two more of the Five Financial Mysteries

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This is the second of three articles on how to prevent your firm from becoming part of the increasing mortality statistics of U.S. small businesses. That’s right. The SBA reports that 50% of small businesses fail in the first four years, instead of five years, as they reported 20 years ago.
 
In this series, I’m revealing what I call the Five Financial Mysteries. Actually, they shouldn’t be mysteries at all – they’ve been around for generations. But with this much Main Street carnage – a 20% increase in startup failures – it’s obvious to me that a lot of people haven’t learned what you must be able to do to sustain your business: fundamental financial management.

If you think you’re an excellent financial manager, then you won’t find any mysteries here. But if you think you could use a little help with your financial management, then this series could be just what you need. Don’t worry, we won’t get too mathy.

In the previous column, the First Financial Mystery was revealed: Cash and accounting are not the same things. Today you’ll discover the Second and Third Financial Mysteries.

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Revealed: The First of Five Financial Mysteries

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This is the first article in a three-part series on how to prevent your operation from joining those who are driving the increasing mortality of U.S. small businesses.

One of the pillars of the American Dream is the ability of any citizen to start a business from scratch, build it, own it and pass it along to their heirs. Research indicates that there are more than 25 million of these dreams-come-true in the U.S. Approximately eight million that have employees, the balance is independent contractors, professionals, etc., and together they create half of the U.S. economy. All of that is the good news.

The bad news is that the rate of small business mortality – when the dream turns into a nightmare – which was once 50% in five years, has now increased by 20% in the past 20 years (U.S. Small Business Administration). The reason for this unfortunate trend is associated with Blasingame’s 1st Law of Small Business: It’s easy to start a small business, but it’s not easy to grow one successfully.

The smoking gun that kills most small businesses is the Founder’s ignorance of or disregard for the financial fundamentals of business. And most of this business carnage could be avoided if every Founder understood what I call the Five Financial Mysteries. In this installment, I’ll reveal the first Mystery with the others to follow soon.

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The Golden Triplets of small business success

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For most of the 20th century, Americans enjoyed what I call The Golden Age of Customer Service. Sadly, based on recent research, it appears we’re in the Plastic Age.

In a national customer satisfaction index, the average customer rating was less than 60%. Going six for 10 is pretty good – if you’re playing baseball. But any small business with that batting average is headed for the shower.

So how has such a level of unservice become a 21st-century norm? Because customers have become sensitized to what I call the Plastic Triplets: High volume/low price, impersonal e-business, and almost as impersonal face-to-face service.

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The problems and perils of perfection

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There are a million – maybe a billion – scenarios for how someone becomes the Founder of a business. But regardless of variability, there is one part of every venture that, almost by definition, will not vary: In the beginning, and often for some time afterward, the Founder will be the first to do all the jobs.

If you’re one of those Founders, you were the first receptionist, the first salesperson, the first accountant, and the first janitor. But you didn’t become a business owner to answer the phone, pay the bills or sweep the floor. You did those jobs because, at that moment, you were the smallest of business entities. An entrepreneurial quark. A team of one.

You have every right to look back on those days with great pride. Starting a business from scratch and growing it into a success story is a modern-day Herculean feat, accomplished against all odds. But there is one perilous byproduct of the Founder being the first to do all the jobs – they were all done perfectly.

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Mastering the sales discipline to shut up

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Contrary to what you’ve heard, selling is the oldest profession, because “In the beginning” the serpent sold the apple to Eve. You might say she bought wholesale and then sold the apple retail to Adam. And as we now know, that was one expensive transaction.

A key characteristic that clearly separates humans from the other animals identified in Genesis is ego. And while ego can be a beneficial motivator in selling professionally, in order to do that successfully, we must do something that’s in direct conflict with our ego – we have to let someone else talk more than us.

So, when you’re on a sales call – face-to-face with a prospect – what do you do? Do you unload the dump truck of stuff about products, pricing, etc. that your company installed in your head? If that’s your answer, your professional selling career is doomed.

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Three words terrorism hates: Let’s do business.

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Since World War II, human behavior has manifested in a classic example of a human paradox. One side of this puzzle is that we possess the intellectual and technical ability to create nuclear weapons capable of global human annihilation. The other side is that, after four generations of nuclear-armed nations aiming those weapons at each other, the value of life ultimately proved more compelling than the potential for political or strategic conquest. What became known as MAD – Mutually Assured Destruction – prevailed. So far.

But eighteen years ago this week, the belief that preservation of life as the highest human value would deter unprovoked, murderous attacks on thousands of innocent people turned into an illusion. On September 11, 2001, civilization was blindsided by an ironic form of barbarism. Without respect for any international convention or moral standard, 19 evil humans took the lives of almost 3,000 innocents and declared war on the rest of us.

This barbarism was ironic because these followers of a radical form of Islam employed to their murderous advantage one of the icons of the very society they claimed to hate – technology. Indeed, the same humans who would take 21st-century civilization back to the Stone Age, adopted some of our most advanced innovations to coordinate and conduct their evil deeds. And then the rest of their coward co-conspirators claimed those crimes with more modern technology as they communicated their demented, Dark Ages worldview.

But just as technology became the ironic lever of those who place no value on innocent life, it’s still a powerful lever for those who do. When tolerant, civilized humans use technologies like the Internet and associated applications, they do three very important things: communicate, conduct business and share values.

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