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The Biggest Risk
By Michael Taylor
My favorite travel guide in high school and college was Lets Go: Mexico for my frequent trips South of the Border. I recall two pieces of travel advice from the guidebook:
1. Lay out the clothes and money you think you need for the trip. Now pack half the clothes and twice the money.
2. Never pack more than you can carry at a dead run for a mile.
This continues to be sage advice for traveling where the Federales are not always your friend, and where it can take a long time to get out of town when the buses don’t run until mañana.
The risk of travel in Mexico was that, if things didn’t go well, it could be a long time before anybody realizes. Friends and family back in the US really had no way of knowing where you were.
In the small-business context, I think the analogous advice for this risk is “Try to get by on half the expected costs, and realize that you’ll need twice the revenue you originally planned.”
And the basic reason for this advice is that, like a gringo stuck South of the Border, many of your customers don’t know you exist. Whether you’ve got a great product or not, it could be a long time before anybody realizes.
This is biggest risk Cedarcrest has faced. Specifically, if my company offers a really good and important service, but nobody knows it exists, do I have a business?
The answer is no.
I imagine every small business runs this risk. You may provide a great service or product, but if not enough people know about it to buy it, well then you’re stuck.
My regular entrepreneur-insomnia-hour of 1AM to 2AM (if you don’t know what I’m talking about you’ve probably never been a small business owner) more often than not is filled with variations on this theme. The mind spins: “How do I get the word out to customers, to get enough scale, to get enough transactions, to get a little bigger, to get to the next level, to…” well, you get the idea. Good times at 1:45am!
In my case the solution to this risk came from another South of the Border concept: Outsourcing.
After two years I found a marketing company willing to provide services for Cedarcrest on a contingency basis. The marketing company’s payments are directly tied to my growth in customers. If I operate at a small scale then my payments to them remain minimal. But as they get the word out about Cedarcrest and my revenues grow, they earn more money.
That marketing company’s solution is not universally applicable to other small-businesses. But I do believe in paying outside experts to help you get scale.
I expect to pay my marketers extraordinarily well over time, since they now share my biggest risk. And when I get there, the cervezas and margaritas will be on me.
Comments (0)April 24, 2007 5:18 PM
