December 4, 2019
Over half of new businesses fail in their first five years of operations. Some experts say the number of business failures may even be closer to 90% in the first 5 years of operations.
I’ve built a couple of very successful businesses over the last 25 years. I’ve also had one dismissal failure. Why did I fail?
Because I didn’t follow the rules of how to build a successful business. The rules Billy Houston, the main character in my books follows – what I call Billy Houston’s 7 Rules of Business– all learned through trial and error and of course from failure.
SO WHAT ARE BILLY HOUSTON’S 7 RULES OF BUSINESS?
Rule 1: ALWAYS START WITH THE END GAME
Work out at the commencement of your business what your exit strategy will be. A bit like planning a holiday -what’s your end destination. For some businesses it may be an IPO on the stock exchange, it may be a trade sale, it may be handing the business over to the kids. But you’ve got to know your end game, otherwise, why are you starting the business if you don’t know where its ultimately going to go?
Rule 2: ALL SUCCESSFUL BUSINESSES ARE BUILT ON: PROCESSES, LEVERAGE, AND DISTRIBUTION
Processes – why have 10 people doing the same task 10 different ways? It’s completely inefficient and a waste of valuable business resources. You must document all the processes in your business that make any given system work most efficiently. The more systemised you are the more chance you have of building a successful and profitable business. The more process-driven your business is the easier to leverage it to greater growth and profits.
Leverage – you can leverage your skills, techniques, relationships to quickly accelerate the growth of your business. Consider a product 20 years ago. For many industries the bigger the yellow pages advertisement then hopefully the more phone calls received enquiring about the product or service. Today with the advent of Social Media ( Facebook, LinkedIn, Twitter, Instagram) and the effective use of the same by correctly targeting your desired customer the rate of growth of your business can be exponential. The more process-driven and systemised your business the easier it is to leverage your business growth.
Distribution – the easier and more cost-effective it is to distribute your product or service the greater potential for larger profits. For Billy Houston, and his Tax Refund Shops it was a franchise model using the already established footprint of one of America’s largest shopping malls. The established shopping malls were his distribution centre- already up and running for him to plant his Tax Refund Shops in. His next business, Future Wealth, which became one of America’s largest financial planning groups used the distribution footprint of over 1,000 accounting firms to sell his products. His fitness and yoga app, which became the largest in Asia was distributed on Apple and Android phones via the Apple and Google Play stores. He leveraged his marketing through the effective use of social media to drive people to the app stores to download his product. (That’s book two – available in 3 weeks)
Three businesses spread over twenty years, all operating in different industries and different worlds of technology but by working on effective distribution of his product Billy built multimillion-dollar businesses each time. Two of those businesses listed on the stock exchanges of Wall St and Hong Kong respectively for circa 500 million USD each.
Rule 3: ONLY DO BUSINESS IN AN INDUSTRY YOU UNDERSTAND
Me, what did I do? Well like Billy I got involved in an industry I knew nothing about. It was a dismissal failure and cost me and other investors a considerable sum of money. After some earlier business successes, I thought I was ‘bulletproof’ and everything I touched would turn to gold. I thought I could build Australia’s next big surf clothing label and the end game would be that one of the big clothing players would buy me out in 7 years. The problem was I knew next to nothing about the mechanics of the clothing world. After that failure, I vowed to never again get involved in an industry that I didn’t fully understand.
Rule 4: WHATEVER YOU BUDGET PREPARE TO DOUBLE IT.
We all tend to overestimate our revenue and underestimate our expenses when preparing budgets. A rule of thumb Billy worked on after years of experience of working with people who were hopeless at budgeting is always double what they tell you it’s going to cost. That way you never have any hidden surprises and are never undercapitalized.
Rule 5: YOU’VE GOT TO FAIL TO BE SUCCESSFUL
We always tend to learn from our business mistakes. Why? Because they cost us cold, hard cash. I’ve always worked on the principle that for every 10 business ideas only 6 will work out, 4 will fail. The secret is to know when to call it quits with those ideas that fail and move on to other ideas. None of us are perfect, none of us get it right all the time. Billy is incredibly successful because he never fears failure, he actually learns from his failures.
Rule 6: YOU’VE GOT TO KNOW YOUR NUMBERS INSIDE OUT
Breakeven point, average customer sale, gross profit margins, return on equity, debt ratios, financing costs, net profit margins, year to date profit, cash in bank. You’ve got to know all these numbers plus others particular to your business and industry. You’ve got to have these numbers updated daily, weekly, monthly. You’ve got to know the key drivers of your business and they should fit on the palm of your hand and be available live. Importantly your figures have to be accurate. Otherwise, its garbage in and garbage out and that’s a waste of time and effort. Billy always knows his numbers inside out.
Rule 7: ITS 5% STRATEGY AND 95% IMPLEMENTATION
I’ve met plenty of people in business who have great ideas but are never successful purely because they have no idea of how to implement their ideas. They are what I call Dreamers. The world of business is full of Dreamers.
I’ve met plenty of people in business who spend all their time working on strategy. On paper, they build the perfect business plan but they can’t implement it. I guess we’ve all seen the 300-page business plan – its most often unworkable. We often over-complicate business. For sure we need the right strategy, it’s important, but the secret to making the strategy work is to implement it. Points 1 to 6 above help in that process. Billy Houston is one of the best at the implementation of strategy.
If you want to follow the exploits of a man who lives by those 7 Rules of Business then you’ll love reading about Billy Houston.
I’m giving away a FREE digital copy of my brand-new financial thriller BILLY HOUSTON RAGS TO RICHES to the first 100 people to join my mailing list! Click here: http://eepurl.com/dCUTzv
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