I'm going to tell you a true story about failure. It's not a complicated story and I know the facts well, so I shouldn't have much trouble with it. You may not hear a lot about failure, especially from the mouth (or keyboard) of the "failer", so pay attention and learn a little something.
First, a little background. I moved to Georgia from California in 2004. My sons were 9 and 12 years old. One of the first things I did was get them involved in the local sports program. They played baseball and a little later on we signed up for basketball. I was guilted into coaching my youngest son's basketball team (one of the best things I have ever done) and through that experience I got involved the following year as a board member and for four years I was one of the central figures in the basketball organization, finally serving a year as director in 2008-2009. The organization had four programs; basketball, baseball, football and cheerleading. I was only directly involved with basketball, but of course I heard the chatter from all of them.
One of the most discussed issues at executive board meetings was the handling of concession sales at the park where the football, baseball and cheerleading programs were conducted. There were lots of complaints about the food quality, hours of operation, attitude of the staff and most of all, the distribution of profits. The profits were divided amongst the three programs, but no one seemed to have a good handle on what the numbers were. They had turned operations over to an outside individual years ago and just accepted whatever money was turned over to them.
If you have an entreprenurial spirit, you see opportunities all around you. You see or hear about a problem, envision a solution, and spend some time rolling it over in your head. You can't do everything, but occasionally an opportunity looks so "juicy" that you just can't help yourself, and a business plan begins to form in your head. That's exactly what happened to me here. I thought about that concession stand operation a lot. I sat down and began to plan how I could help the organization solve this problem and turn a tidy profit.
A year later I made a presentation to the board of directors and after some negotiating we came to an agreement. I would operate the concession facilities as an independent contractor. I would pay the organization a fixed amount for the opportunity. I would hire my own employees, purchase my own goods, pay my own insurance and tax obligations and keep the leftover income as profit. Everyone was happy. Baseball season was a month away and I went to work.
Now you are up to speed on how I got into the concession business. I am not going to bore you with day to day operations, and I think you know from the title that it did not end well, so no need to go into a lot of detail. What I will do instead is try to break down some specifc things that I could have done differently to make this venture a success, or more probably to keep myself from jumping into a bad situation.
Every business is different, yet every business is the same. From a customer's point of view, a hot dog stand and an amusement park are completely different animals. From an employee's point of view, a bank is not at all similar to a pet store. In a lot of ways, however, all four are about the same from an owner's perspective. The owner puts systems and people in place to serve his customer. He markets the business to get the customers to patronize it. He invests his resources so that the customers needs are met. If the systems are efficient; the employees honest, talented and dedicated and the marketing effective; more revenue comes in than he invested and a profit is realized. Some businesses produce more profit than others. Some produce no profit at all. The size and scope may vary, but the basics are the same.
Knowing that all businesses are the same, I assumed I could very easily operate a concession business. How hard could it be?
Mistake number one: "All businesses are the same from the owner's perspective" only applies to the owner's perspective. I also planned to manage the business. Heck, I didn't just plan to manage it, I managed it! From the manager's perspective, this business was different than any business I had ever run. It wasn't rocket science, but there was a definite learning curve. What I should have done as the owner was to hire a competent manager. Instead I hired myself, and I wasn't ready to be great at the job. As an entrepreneur, we often wear many hats. It's very important to realize that some hats don't fit. If you can't do the job well, you need to find someone who can.
Before you purchase or start any business, you need to do a lot of planning. You need to be pretty sure of what your costs and revenues will be. If costs exceed revenues, guess what! Find another opportunity. If you plan to work in the business, decide what your time is worth and make sure that part of the cost calculation includes paying yourself. If you are buying a business, you need to spend a lot of time rooting around in the current owner's accounting records to determine these numbers. In this case, the current operator did not have or would not share the records, so I had to estimate them.
Let's go back to the part where I said "this business was different than any business I had ever run." Knowing that, do you think I was qualified to accurately estimate all of my revenues and expenses? In retrospect, looking back at it, I would have to say "not so much." So there's mistake number two: I tried to develop a business plan without reliable data. The data I used was somewhat accurate. I didn't just make it up - I spent a lot of time trying to calculate it. Some of my assumptions were just wrong. If I had known more about the business I was getting into, I would have made better guesses. If I had had access to the previous operator's data, I would not have needed to guess. Either way, my plan would have been more accurate.
Once I began to operate, I quickly replaced myself as the manager. I hired someone to take over that function. That was a relief because it turned out that I not only wasn't particularly good at managing a food service operation, I loathed it. The margins were very thin, however, and I could not afford to pay the manager to do things like shop for supplies, so I had to keep doing some of those things myself. That meant I was paying myself minimum wage to do laborious tasks. Mistake number three: I tried to start a business that I would have to be involved in but did not want to be involved in. I started a little Chris Compton prison!
Imagine yourself in my situation. You have a business that you have contracted to operate and guaranteed a good deal of money to an organization you have close ties with. You are not good at it, are not making money and are miserable. That was the product of my poor planning. Luckily for me, the organization realized that the situation was no good for me or them and asked me to terminate the contract. I lost about $10,000, plus several hundred hours of my time.
So my original question was.... Is failure a good thing? I'm looking forward to hearing your thoughts!