How to Minimise Your Financial Risk!
She Lost £60,000. He Built a £1.8B Business. Here’s the Difference
It’s a simple fact: if you gave £10,000–£100,000 to someone on the street with no business experience, and told them to start a business, the odds are that within 18 months they’d have blown the lot.
The way you approach starting a business makes all the difference.
Here are two very different real-life stories. The first shows how inexperience and a “standard” approach increased financial risk. The second shows how experience and smarter choices minimised risk and maximised success
Business 1- Wedding Dress Outlet
A family friend, who had never run a business, had always dreamed of owning a wedding-dress shop. When her mother kindly lent her £60,000, it felt like her chance to finally make that dream come true.
She quickly found what she thought were suitable premises and signed a long-term lease because the rent looked cheaper that way. She then headed to exhibitions to buy dresses for stock.
At her very first exhibition, she was impressed—if not slightly intimidated—by sales reps from high-end designers. They told her she would need to commit to a minimum spend to represent their brands. Convinced by the “great discounts” on offer, she spent thousands on dresses, pleased with herself for now having the makings of what she thought would be a great shop.
But reality soon set in.
Twelve months later, despite months of hard work and pouring in more cash, the shop was losing money. By 18 months, overheads, advertising costs, and wages for a part-time employee forced her back to her previous job while the shop sank deeper into loss.
The “discounted” dresses couldn’t even be sold for what she had paid. New fashions arrived each season, forcing her to slash prices further. Panic set in, and the £60,000 investment from her mother was disappearing fast.
Her plan had really been this: open a retail outlet, fill it with stock, and wait for customers to come.
With more business acumen, she could have asked:
Was there a real need to buy so much stock upfront, especially from suppliers who had competitors she could have negotiated with?
Did she really need to invest in premises, or could she have run a mobile or online version of the business, delivering dresses directly to customers’ homes?
Could she have tested demand first with a smaller investment?
The answers may never be certain, but considering these questions beforehand would have reduced her risk and helped determine true demand.
Business 2- Software Solutions
In complete contrast, take a read of the following story of RightNow Technologies—a company started by Greg Gianforte. On their office wall was a sign with the quote:
“Nothing happens until somebody sells something. In other words, sales is where your business begins. You don’t have a business until you start selling.”
In 1997, RightNow began as just an idea for a product. And the only thing that could make that idea real was a sale. That year, the internet was just beginning to boom. However, many companies had no effective way of responding to customer inquiries through their websites.
Most of their software solutions were homegrown and often ineffective. So Greg tried to imagine what kind of software could automatically respond to customer inquiries. One by one, he made a list of features he thought would be central to the product. Then he picked up the phone.
Greg called hundreds of companies and asked to speak to the customer-support manager. He described the software and emailed over a one-page specification—nothing more. Then he asked whether they would be willing to buy such a product for their company’s website if it were available.
A small minority said yes, they would, in principle, like to buy it. Most companies, of course, said “no thanks.” But far from being discouraged, Greg saw in this response a real business opportunity. When a potential customer declined, Greg shifted into fifth gear and listened even more carefully.
He would ask: “Why not, may I ask?” and follow up with questions such as: “What features do you really need? What additional features would convince you to buy this software?” The managers would then explain, and Greg added their requested features to his specification list—putting the customer’s name next to it.
Reactions to this “pre-sell the product” strategy yielded some surprising lessons. Features that Greg had assumed would be popular often generated nothing but indifference.
These were dropped from the specifications—saving many hours of unnecessary and wasted development. The beauty of the process was that it produced invaluable feedback. The favoured features went into the product; the unpopular ones were discarded.
And the result? RightNow Technologies grew rapidly and, in 2011, was acquired by Oracle Corporation in a $1.8 billion deal.
Learning Points
The main two learning points from these different approaches to business are excatly the same methods we use with our own business clients when working on Business Viability Scoring & Marketing Strategy
1) Identify who your customers are with laser focus and completely satisfy their needs- once you do this you can more easily minimise your advertising spend and get far more bang for your buck!
2) Minimise your risk- dont start investing huge sums into equipment, offices etc. until you have definite orders.
If you’d like to avoid the painful mistakes that so many start-ups and established businesses make, I invite you to book a FREE business review with us.
Whether you’re developing a brand-new idea or looking to refine and grow an existing business, we’ll review your plans, identify where the risks are, and show you how to move forward with confidence.
Don’t gamble with your hard-earned money. With the right plan, you can build—or rebuild—a business that truly works.