Behind the Gavel: Bank on sound planning versus pop-culture clichés

I’m fascinated by how movie lines occasionally become twisted as they are absorbed into the public consciousness. We mis-quote them so often that we are sometimes baffled when the lines aren’t actually found in the relevant movies.

For example, in the Humphrey Bogart movie “Casablanca”, Rick (Bogart) never says “Play it again, Sam.” He says simply, “Play it, Sam.”

Check it out….

Captain Kirk never said “Beam me up, Scotty”; the actual command was “Kirk to Enterprise: Beam us up, Scotty.”

In the “Field of Dreams,” Kevin Costner’s character Ray Kinsella never heard the words “If you build it they will come.” The words whispered to Ray were “If you build it he will come.

Minor points, certainly, and nothing to make a big deal about. But, when these mis-quotes get stuck in the public consciousness, they can take a toll on those who accept the mis-quotes as truth and use them to guide their actions. For new entrepreneurs, pop-culture advice is often the worst kind of advice.

Take the “Field of Dreams” quote, for example. New entrepreneurs sometimes buy into the idea that “if you build it they will come.” Stores have been opened, websites built and products created with the expectation that consumers would beat a path to the entrepreneur’s door. So many have accepted this (incorrect) saying as truth that in 2013, Entrepreneur Magazine featured an article titled “Why the Motto ‘If You Build It, They Will Come’ is BS.”

I subscribe to a long list of antiques and collectibles forums, and about half of those are populated by dealers. Hardly a week goes by without a user posting a topic such as “I’m considering dropping my eBay account and selling only from my own website. What do you (meaning the forum participants) think of this idea?” Or, “I’ve been selling in a mall BusinessofAntiques-160x600booth for some time now and I want to open a brick-and mortar storefront. What advice can you give me?” Or, “I want to quit my day job and work my business full time. Should I make the leap?”

The most popular responses to these inquiries were some version of “Go with your gut feeling” or “Just do it!” Or “Follow your dream!” These particular responses are as misleading as “if you build it they will come.” Yes, it’s important for entrepreneurs to have ambition and enthusiasm. It’s also helpful if one’s friends and associates are supportive. But starting a business is a commitment of one’s time and money, and it’s foolish to make any change without carefully considering every aspect of the change. Friends who give advice are well-meaning but it’s not their time or money that’s at risk. Let’s reconsider the above questions without the pop-culture platitudes.

All new entrepreneurs should ignore the advice “go with your gut feeling.” Only experienced entrepreneurs can enjoy the luxury of “going with their gut.” Why? New entrepreneurs lack the experience and context to have good instincts. “Going with their gut” is often a mistake. In the early stages of an entrepreneurial career, nothing can replace good planning tools (like a spreadsheet and an accountant).

Should the forum member drop their eBay account and sell only from their own website? (eBay was their only selling channel.) Forum members chimed in about how eBay fees were out-of-control and made eBay out to be the Saddam Hussein of online selling. The user consensus was that the entrepreneur should drop eBay and sell from their own website (yet few of the respondents had actually done that themselves).

Dropping eBay to sell exclusively from one’s own e-commerce website is a bad, bad idea. The trick is to get enough traffic to the site to make sufficient sales. Getting traffic is expensive and time-consuming. Here’s my guarantee: if you build it (a website) they will NOT come (at least not in sufficient numbers). eBay has traffic. So does Etsy and other well-established sites. And, those of us who have operated brick-and-mortar stores laugh at the idea that eBay fees are high. They are cheap compared to the expense of running a brick-and-mortar store, and I’m glad to pay them. The entrepreneur should keep her eBay account.

As to the matter of moving to a brick-and-mortar storefront from a mall booth, it’s important to weigh the desired outcome against the risks and expenses. Mall booths are often expensive per square foot of space, but generally that space comes with built-in traffic, insurance, utilities and an electronic payment system. Mall-provided employees and a month-to-month lease are also a bonus. Free-standing retail stores are risky these days: a lease is a major financial commitment and a new store needs a lot of inventory plus point-of-sale and tracking systems, employees, insurance, utility deposits and a really big initial advertising budget. A brick-and-mortar store can be a great idea and be very profitable, but the decision must be driven by financial considerations, not emotional considerations.

Quitting one’s day job to be a full-time dealer should be an easy decision for most people. If one has sufficient means to cover business and household expenses then it’s OK to make the jump. The “mis-advice” given on a forum was that one could either work a full-time day job, or run an antiques business, but they couldn’t do both. That’s nonsense. People often do both, but the ones who do are smart about it. They sell online and do shows until they can generate enough money to support themselves and their business – then they quit their day job.

While working one’s regular job, calculate backward from a target monthly income goal and design your business to support that figure. I discourage people from quitting their day job to focus on a business (unless they are buying an established business with good cash flow and profitability). One doesn’t have to make that leap. Rather than thinking in terms of employee or entrepreneur, realize that there’s a broad spectrum of outcomes available and one can find a balance between the two extremes.

Small business forums are replete with bad advice offered in the form of pop-culture platitudes; I can’t begin to scratch the surface in the space I have here. Others that come up frequently are “just be yourself” “stay positive” and “focus on making sales and all will be good,” all of which may be proper advice under some circumstances but not enough to cause a new entrepreneur to jump off a cliff into a financial nightmare. Nothing beats good financial planning. If a business plan doesn’t work on paper, it sure isn’t going to work in reality.

CATEGORIES
Columns
RELATED POSTS
Wayne Jordan

About Wayne Jordan

Wayne Jordan is a Virginia licensed auctioneer, certified personal property appraiser, and accredited business broker. He specializes in the valuation and liquidation of estate and business assets. His column Behind the Gavel appears regularly in Antique Trader. Learn more at www.resaleretailing.com, or email auctioneer.wayne@yahoo.com.

COMMENT