Why Do Solo Businesses Succeed?
Why is it that some solo businesses succeed and others fail? I’m going to answer this question based on my own experience working with thousands of solo and micro businesses in the state of Oregon.
After 18 years, I have observed six requirements for a good foundation to a solo business. when one or more of these requirements were not met, the business either stayed in survival mode or failed.
Note that these six requirements are also essential in reviewing business plans. When I review a plan for a solo business, I’m looking for evidence to support that these requirements are being met.
Requirement #1: A solopreneur must have a high degree of self-knowledge and be adaptable to new circumstances.
How would I know if someone meets these criteria? Through a short conversation, I can learn a lot about a person’s mindset and how they might perform in the business.
Here are a few areas I will explore when talking with a new solopreneur:
- How motivated are they?
- Are they willing to step out of their comfort zone?
- Can they adapt to changing conditions?
- Are they self-aware and do they have a good ability to self-manage?
- Do they have a good sense of their strengths and weaknesses?
- Are they willing to learn about what it takes to succeed in business?
A few minutes exploring these areas and I have a pretty good sense of a person’s mindset. The key here is to be adaptable in the face of new circumstances. Think about it in your own case. Are you the kind of person who can adapt to change?
Requirement #2: A solopreneur must the ability to produce a product or service at a sufficient degree of quality for market acceptance.
If you have been working in a bakery for 20 years, there is little doubt that you have learned a lot about how it’s done. If you’re wanting to start a new business with a new skill set? That doesn’t work. The business is a lousy place for on-the-job learning.
In this case, it’s best to get the training you need to produce something at a good level of quality before going through the steps to start a business.
Requirement #3: A solopreneur must acquire skills in production, marketing, accounting/bookkeeping and other skills needed to operate the business.
This is the requirement that usually sneaks up on people. Starting a business is not doing the job. It involves business related tasks.
For example, every business has bookkeeping. Many solopreneurs would rather hand this out to a bookkeeper and only deal with it at tax time. The problem with this approach is that the solopreneur has no idea how the business is performing. Further, they won’t see trouble until it’s right on top of them whereas the keen eye on the books would give clues.
Requirement #4: A solopreneur must offer a product or service that creates value for a customer.
Value can be In several forms such as functional, experiential, self-expression, or cost-based value. These satisfy customers by meeting or exceeding their expectations and something that they were trying to do.
For example, someone who is making necklaces might focus on a customer who wears necklaces as part of their self-expression.
Requirement #5: The customer is willing and able to pay the price for your product or service.
A sale of your product or service will only occur if you have a customer who is willing and able to pay the price for it. The reason that the requirement is worded this way is that you may have customers that want to buy your product or service, but don’t have the money. This happens a lot with products and services that are associated with discretionary income.
Product Price and Volume
Requirement #6: The product price and the product volume is sufficient to cover all costs of the business including a reasonable owner’s salary and business profit.
Yep, this is where the math comes in. You have to sell enough of your product or service to cover all the costs of your business. We look at what’s called the “breakeven point”. Breakeven is where revenues equal expenses. I’ve added two more elements to this requirement which are a reasonable owner salary and profit. More on that later.
So there you have it. That’s what 18 years has shown me as the critical requirements for successful solo business. In my experience, the vast majority of solo businesses do not meet all these requirements, even if they were in business for many years.
If some of that didn’t make sense to you, don’t worry. That is what I’ll be covering in the next few blog posts.
Originally published at Soloprenur.