Making a Business More Resilient

[bunchbikes]

These are taken from one of my favorite books, The Millionaire Fastlane:

The Five Commandments of Fast-Lane Businesses:

Need - Does the business solve a problem, need, pain, or inconvenience in the marketplace?
Entry - Is there a barrier that prevents others from copying your business and/or competing with you?  Large upfront costs/techincal skills/propreitary technology/ etc.
Control - Do you have complete control over you business?  Would one google algorithim ruin everything?  Are you dependent on one big client, or one big sales channel, or one big product?
Scale - Can it be used/consumed by a large number of people?  If not, is it a very high priced product or service? To make millions, you must impact millions.
Time - Does the business continue to generate income independently of the time that you put into it?



What are some other ways that we can make businesses that are more resilient?  Ones that increase the chance of upside, while reducing the risk of failure?

[swick]

Have a firm understanding of who your customer is and how you can serve them better than your competition.

Don't be too dependent on one person or process, cross-train. Make sure you have systems in place for your most vital operations. Make sure no one is indispensable (especially yourself!)

[Syonyk]

What are some other ways that we can make businesses that are more resilient?  Ones that increase the chance of upside, while reducing the risk of failure?

Those assume you're creating a business to be a blowup success.

It's entirely possible (and quite useful) to create businesses that are small, provide for you and your family, don't scale infinitely, but generate a good steady income or side income for a good chunk of your life.

And you can often run multiple of those at once.  A friend of a friend called them, "Nickel generators."  None of his activities, alone, sustain him, but he's got his fingers in a lot of pies, has a lot of small income streams, and he's not too dependent on any of them at any one point in time.

What is valuable, at least in my experience, is going deeper than anyone else does in a particular area, and making yourself easy to find.  My side gig which is generating a couple hundred a month pretty regularly is battery pack rebuilds for a common brand of electric bike kit, from a company that has awful post-sales support if you're out of warranty.  I spend $0 on advertising (actually, my advertising makes me beer money), because it's in the form of a deeply technical blog.  I haven't had to spend anything on SEO because I'm the top hit for quite a few queries now. :)

I'd also argue that customer service is key.  So many companies are impossible to reach now if you have a problem.  Stand out by actually listening to your customers.

[bunchbikes]

Those assume you're creating a business to be a blowup success.

You can meet all 5 of those criteria in the op without being a large business.  It's up to you how far you want to take Scale.  If you have the option to reach millions, but choose to only reach a few thousand instead, that's your perogative.

Seems like a better choice, then opting for a business that can only reach a couple thousand, and than deciding later that you want to grow it, only to hit a ceiling.

And you can often run multiple of those at once.  A friend of a friend called them, "Nickel generators."  None of his activities, alone, sustain him, but he's got his fingers in a lot of pies, has a lot of small income streams, and he's not too dependent on any of them at any one point in time.

This might work for some, like your friend.  For me, I find that the more plates I'm spinning, the more mediocre I spin them all.  I've done much better with a singular focus.  It is nice to have those things in your pocket as a fall back, however.

What is valuable, at least in my experience, is going deeper than anyone else does in a particular area, and making yourself easy to find.  My side gig which is generating a couple hundred a month pretty regularly is battery pack rebuilds for a common brand of electric bike kit, from a company that has awful post-sales support if you're out of warranty.  I spend $0 on advertising (actually, my advertising makes me beer money), because it's in the form of a deeply technical blog.  I haven't had to spend anything on SEO because I'm the top hit for quite a few queries now. :)

Great customer service in a poor customer service market is definitely a great way to get ahead.

Have you ever thought about launching your own line of batteries?  Seems like this would be the real money maker, especially because you can already provide the support needed.

[maizefolk]

Those assume you're creating a business to be a blowup success.

You can meet all 5 of those criteria in the op without being a large business.  It's up to you how far you want to take Scale.  If you have the option to reach millions, but choose to only reach a few thousand instead, that's your perogative.

Seems like a better choice, then opting for a business that can only reach a couple thousand, and than deciding later that you want to grow it, only to hit a ceiling.

Well this assumes that you have a couple of business opportunities that are equal in all ways except for their ability to scale. In my experience whenever you prioritize one thing, it means sacrificing others. For example there might be two potential avenues open to a person, one of which, if successful, is able to scale and produce profit independently of the number of hours put into the business, and the other of which doesn't scale in the same way, but provides a much higher income per hour of work prior to hitting hockey-stick level growth rates.

[bunchbikes]

For example there might be two potential avenues open to a person, one of which, if successful, is able to scale and produce profit independently of the number of hours put into the business, and the other of which doesn't scale in the same way, but provides a much higher income per hour of work prior to hitting hockey-stick level growth rates.

Ok, I get where you're coming from.  Depends on where you are at in your financial journey and what your ultimate goals are.

[Syonyk]

You can meet all 5 of those criteria in the op without being a large business.  It's up to you how far you want to take Scale.  If you have the option to reach millions, but choose to only reach a few thousand instead, that's your perogative.

That depends.  If there's too much demand and you can't handle it, you end up looking like a failed Kickstarter that wanted to sell 100 gizmos and suddenly has to make 100,000.  They rarely succeed.

Seems like a better choice, then opting for a business that can only reach a couple thousand, and than deciding later that you want to grow it, only to hit a ceiling.

I mean, if you can come up with something huge, sure.  Have fun.  But it's a lot easier to find a few small niches to play in than to disrupt some industry or other.  And, honestly, I wouldn't want to be CEO of a multi-billion dollar company.  I value my time with my family too much.

This might work for some, like your friend.  For me, I find that the more plates I'm spinning, the more mediocre I spin them all.  I've done much better with a singular focus.  It is nice to have those things in your pocket as a fall back, however.

I suppose to flesh that out a bit more, it's passive-ish sources of income after you generate them.  He sells plans and books for various things he's worked on, and I think does some consulting, but a lot of it is the random plans he sells (consisting of putting something in an envelope and shipping it).

Have you ever thought about launching your own line of batteries?  Seems like this would be the real money maker, especially because you can already provide the support needed.

Nope.  I can't compete with China on bulk battery assembly.  What I can do is custom build stuff to match abandoned hardware.

Someone from China can sell a pack for less than what I pay for cells.  I have no interest in working for that hourly rate.

[SwordGuy]

One way I've found to cut business expenses is to find another business to cover your recurring expenses.

In the real estate investment world, one way to "live free" is to buy a duplex and rent out the other unit for enough to cover the PITI on the property.

When running a business, look for opportunities to do the same.   One savvy business man I worked with years ago ran a construction business.  He needed an office for his business.  So he built one that included professional office space he could rent out to cover his own costs. 

Your business is a lot more resilient if you can find a way to cut the recurring operating costs.

[maizefolk]

One way I've found to cut business expenses is to find another business to cover your recurring expenses.

In the real estate investment world, one way to "live free" is to buy a duplex and rent out the other unit for enough to cover the PITI on the property.

When running a business, look for opportunities to do the same.   One savvy business man I worked with years ago ran a construction business.  He needed an office for his business.  So he built one that included professional office space he could rent out to cover his own costs. 

Your business is a lot more resilient if you can find a way to cut the recurring operating costs.

I really like this idea!

[bunchbikes]

One savvy business man I worked with years ago ran a construction business.  He needed an office for his business.  So he built one that included professional office space he could rent out to cover his own costs. 

Cool post. I'm going to think of ways I could maybe do this in my business.

I recently had a friend who needed warehouse space to receive, pack, and ship products.  He bought a 4 unit commercial space, and the rent from the other spaces are paying for his warehouse.  Same idea.

There are times I've paid employees to do tasks that I then replaced 90% with software solutions. I look at everything I do on a daily basis. If I can, I automate it. If I can't automate it, I outsource it.

[ketchup]

One savvy business man I worked with years ago ran a construction business.  He needed an office for his business.  So he built one that included professional office space he could rent out to cover his own costs. 

Cool post. I'm going to think of ways I could maybe do this in my business.

I recently had a friend who needed warehouse space to receive, pack, and ship products.  He bought a 4 unit commercial space, and the rent from the other spaces are paying for his warehouse.  Same idea.

There are times I've paid employees to do tasks that I then replaced 90% with software solutions. I look at everything I do on a daily basis. If I can, I automate it. If I can't automate it, I outsource it.

That's similar to the tactic done by the owner of the company I work for.  They needed laboratory space, so they bought this weird wacky old warehouse building (was a pencil factory in the 1930s).  ~25% now is lab space (with space to expand if they have to, which they've done a few times already), and the rest is a storage/moving company (also run by the owner) with a few small rented office spaces too.

[maizefolk]

Do you know if the owners bought the warehouse through the company? Or independently and are renting it to themselves? (One way to get money out of things like c-corps).

[ketchup]

Do you know if the owners bought the warehouse through the company? Or independently and are renting it to themselves? (One way to get money out of things like c-corps).

I'm pretty sure it's separate, and renting to "themselves".  I'm pretty sure it's Person A, Person B, and Person C (and formerly Person D) owning the laboratory business (that owns the building) and paying rent to the warehouse business owned by Person A and Person D.  I know the warehouse business isn't terribly profitable on its own.