Dave Pollard on avoiding landmines:
In MBA school they now call this Risk Management. This article identifies ten of the major landmines for entrepreneurs, using some real-life examples:
- Copycat businesses: Thirty years ago I did some financial consulting for a small start-up cruise ship operation. They acquired and completely renovated a ship, which was lovely, got the licenses, hired the appropriate staff, set up the business systems, and then waited for the customers to roll in. After all, the competing operations on the same run were all fully booked. But this operation was an unknown quantity, and before they realized that just being similar to a successful and busy business wasn’t enough to succeed, they sailed off into the sunset, empty. Franchisees beware.
- Over-estimating the market: Consultants love to sell you spreadsheets that will ‘forecast’ your income and cash flow. An inventor friend of mine used one of these to persuade himself to produce and sell a new organic nutritional supplement he had developed. His research showed that the annual sales of this type of product North America-wide was $X billion. The spreadsheet encouraged him to plug this number in, along with his estimate of what share of this market he could capture over three years. Needless to say, he never sold anywhere close to this amount of product, because that’s not how you go about forecasting sales.
- Being too far ahead of or behind the market: A client of mine bought the North American rights to a new technology that would extrude a rugged, colour-fast plastic that could be used in decking, fencing, and other outdoor applications. He spent a fortune setting up the manufacturing plant. Problem is, he did this in the 1980s, when plastics were distrusted as ‘cheap’, wood was cheap, and creosote in pressure-treated lumber was not yet known to be a carcinogen. Being 10-15 years ahead of the market cost him his life savings.
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