Turning to Plan B
You've got a great idea. You've researched the market and perfected the products and services. So why aren't the customers buying?
The SBA reports that more than 50 percent of small businesses fail within their first five years. This failure rate is attributed to many things, including poor marketing, poor management and poor planning. But what if it's simpler than that? What if--now brace yourself--it comes down to one simple reason: Your idea sucks.
Admitting that you made a mistake is a difficult thing for many entrepreneurs to do, especially after they've put their heart and soul--not to mention their savings account--into an idea they truly believed would work.
"It's always difficult when you have an idea that doesn't work the way you wanted it to; there's disappointment in not being successful," says Merrily Orsini, managing director of Corecubed.
Orsini, 60, is no stranger to turning to Plan B. Her first startup in 1981 began as a concierge service for working executives, but business was sporadic. She struggled through two years of fluctuating revenue before deciding to change her business model. Orsini, who has a master's degree in social work, started receiving requests from older people who were homebound. As word-of-mouth about her concierge services for seniors spread, more and more home-bound elders began requesting her help. She grew her elder-care concierge service into a thriving business with more than 250 employees before selling it in 1996.
Orsini now owns her second major startup, Corecubed, a marketing and communications firm that started as a virtual corporation. The idea was for business owners with more than one business in different locations to hire virtual expertise as needed.
At the time, Orsini says, people were uncomfortable with the idea of outsourcing projects to people without a storefront. So she analyzed where she was making the most money and what services she enjoyed providing the most, and switched from a virtual corporation that offered a variety of business services to an integrated marketing communication firm that focused solely on design, marketing and public relations. She changed the name to Corecubed in 2003 and got rid of all of her original clients to focus on the new business model.
"We knew about six months into it that we made the right decision," she says. "Many times a business has a brilliant idea, but the consumer is just not ready."
That's what business owners Cecily Hoffius and Judy Bellos hope is the case with their new startup, Benito's Gelato, a St. Louis-based chain of gelato stores they opened in August 2006. "What our challenge has been is that a lot of people in St. Louis don't know what gelato is," says Hoffius, 60.
Two years ago, Bellos, 63, began researching gelato as an up-and-coming product. Hoffius and Bellos had been making ice cream for eight years through their catering company, Ces & Judy's, which started as a restaurant 26 years ago. The small restaurant had a huge outdoor cafe that was very successful but didn't carry them through the winter months, so they switched to catering their second year in business.
"I have to laugh at the comment that you need to be willing to change and go to Plan B, because we've always had to adapt as we've gone along," says Hoffius. Now, a year into Benito's Gelato, they've decided to try cupcakes to bring more people in. "We already sell coffee and some baked goods in addition to gelato, so we thought the cupcakes would be a natural addition to our sweet line."
Benito's Gelato introduced a new line of cupcakes last week on a local TV program Show Me St. Louis, and already the response has been positive. "It's just one more thing we can offer people--one more thing that attracts people into the stores," says Hoffius, who is holding out hope that their original gelato plan will succeed.
Giving up on your original business idea is a difficult pill for many business owners to swallow, but often it's better to take the pill sooner, rather than later. Paul Lemberg learned that the hard way when he started Axcelus in 2003. Axcelus began as a franchise program for people interested in business coaching. Lemberg soon discovered that while the franchisees he served were great at delivering professional services, they weren't great at developing their own business.
He still wasn't convinced that his original franchise model wouldn't work, so he switched to Plan B: Axcelus would take some of the burden off the franchisees by handling a portion of the sales and marketing for them. "We cycled through that for another year--again, not very successfully," he says.
After investigating other professional services franchises, Lemberg realized that the only real way his business would succeed was if he abandoned the franchise model altogether. "One of the core concepts I teach as a business advisor is the idea of 'sunk costs'--the idea that once you invest the money, it's invested already and it either works or it doesn't. If it doesn't work, try to figure the problem out, and if it still doesn't work move on to the next thing because the money's gone."
Lemberg says that despite spending tens of thousands of dollars on program development and franchise registration, he finally decided to move to Plan C, which required rebranding his company and shifting his business model from a franchise to a corporate-owned company. The consultants who work for him now solely focus on providing services, while his company provides them the sales and marketing they need to obtain clients. "At the end of the day, even though Plan B got scrapped, Plan C is looking pretty good," he says.
No matter what type business you have, it's clear that you have to be flexible. If your original plan isn't working, investigate the reasons behind it and be willing to accept that it may be time to move to Plan B, even if it means losing your current customers and the money you've invested up to that point.
"You could have the very best idea in the world, but if your customers aren't willing to pay you what you need to be paid in order to make it profitable, then you have to really pay attention to what it is that your customers want that you can deliver at a price they'll pay," says Orsini. "It's a pretty basic business 101 statement, but it's very difficult for entrepreneurs to admit that they've made a mistake or they need to tweak their business models. But the successful ones do."