Five keystone pillars of profit (Part I): Ageless formula for success

PART ONE: Success or failure and the American Way

First article in a series

By Jim Yount

It is a brave person who walks away from his job, lays aside immediate financial security, and starts his or her own business. Many will live daily from the proceeds produced while dreaming of a better future. In free-enterprise America, about the only thing required to open a business is ambition, a dream and a little money. We’ve all witnessed such events as the auto mechanic, trained by a dealership, resigns and opens his own auto service center, and the experienced waitress opening her own deli or café. The good news: We need no one’s permission to start a business. The bad news: Although these new business owners may provide excellent operational job task skills, their business failure rate is extremely high.

The first and most serious question to ask, “If these business owners possessed excellent operational job task skills, why are their failure rates high?” Regardless of how excellent they are at generating revenue, which is the first priority of business, the owner must remember the only way to keep score in business is to count the money. The administrative activity of counting and managing the money for positive flow is the business side of business management, and it’s of the highest priority. For without the knowledge and business side of business management skills, any business — regardless of size — can outspend its revenue/earnings. The answer to the question: Owning and managing a business for the purpose of earning a profit is a learned skill and cannot be inherited. Without business side of business management skills, failure is the destiny.

In my mid-20s, a friend and I started our first business. We were sure it would carry us to the promised land. We had loads of fun buying, flying, selling, and working on private aircraft. After three-and-a-half years, the business closed because we failed.

I have met folks suggesting, “We should not discuss negative issues such as failure. We want to think positive.” If we do not address the reasons for our failures, I am positive we will continue to fail.

Webster’s Dictionary defines “failure” as “to fail or failure; to be lacking or insufficient, falling short, inadequate, as being unsuccessful in obtaining a desired end.” In business, an example of a “desired end” would be earning an acceptable pretax net profit.

Fast forward to the year 2013. Are all failures irreparable? NO! My first business failed because I had not acquired the knowledge and developed the business side of business management skills. It became obvious that there is more to business success than hard work and long hours. I went to work on myself, seeking things required for achieving success.

In summary, my corporate mentors left me with two major bottom-line focal points:

1. The business/corporation existed for the purpose of producing an equitable profit/return based on total investment.

2. When things are not going as planned, it’s the owner’s responsibility to determine why and figure out what must be done to correct the deficiency leading to failure. Then, and only then, can you develop and execute a plan for recovering losses, increasing profits, and growing business.

Why did our first business fail? Even after paying the bills and having little money in the bank, we ignored our deficiency and began working on another job. We were sure we would eventually be earning more money than we were spending. It never happened.

This, our 31st year in business at Jim Yount Success Dynamics, confirms it is for the lack of sufficient profit, most businesses close. Of course, the recession is responsible for a growing percentage of closures. However, at the core of closure, the root source is to continue to ignore the business side of business management. Too many owners do not realize earning money begins in the office. Always remember: The only way to keep score in business is to count the money.

“Five keystone pillars of profit: Ageless formula for success” will show you how to keep score and count the money.

Revealing statistics

Statistics are a form of mathematical tabulations dealing with facts and data regarding quantities, for the purpose of measuring and identifying a ratio, or a frequency of success or failure. Statistics shine light on the truth.

U.S. Government statistics reported in year 2007 new business startups numbered slightly more than 2,000,000 and 49 percent of those new startups failed in the first year. Forty-nine percent of 2,000,000 is 980,000 failures. Most of these failures were caused by the following in no particular order:

Too few customers making purchases
Running out of money before achieving positive cash flow
Lack of business side of business management skills

First-year survivors totaled 1,020,000. After five years, only 20 percent, or 400,000, survived. Failures during these first five years totaled 1,600,000. Of the 400,000 survivors, 160,000 of the total 2,000,000 startups were active after 10 years. Please note: These statistics do not mean you have to fail. Start planning today to become the owner of a thriving business.

According to Money magazine, the International Franchise Association reports there are 746,800 franchise establishments in 300 categories, supporting 8.1 million jobs and producing sales of $769 billion.

Another journal reports franchise businesses have a great success record. These statistics tell the story. Franchise businesses have an 86-percent survival rate at the end of five years, while independent business owners’ survival rate is 19 percent. This means four out of five independent businesses failed, while only one of five franchise businesses failed. Would not most independent owners like to increase their earnings by 400-500 percent?

A SERIOUS business question: Why do franchisee owners outperform independent owners at a ratio of 5 to 1? Because the franchisor, such as McDonald’s, Sonic, Burger King, etc., has a vested interest in the franchisee and their success. Success begins for the business owner when they purchase a franchise from a franchisor.

A SERIOUS commitment: The franchisee has no choice except to participate in an on-going never-ending training program to, as much as possible, ensure long-term success.

The franchisor and franchisee are always concerned with the product, process, policy, people and profitability. They are also focused on the customer/consumer. For without consumption on a timely basis, and profit sufficient to sustain the future, there will be no re-orders. There will be NO SUCCESS.

Why are franchise businesses more successful and sustaining than the independent small businesses? The answer is built into the franchise agreement, and it is known as Education, Education, on-going never-ending Education.

That’s why for more than two decades, our primary focus has been on independent small business owners. Perhaps, it is for this cause we recognize the critical need for our “Five keystone pillars of profit: Ageless formula for success.” Is it not time to close the doors on failure?

In the second article in this series, we will introduce the first of the five keystone pillars of profit.

You must possess the right business knowledge, know what works, develop the correct business skills, and do what works if you expect to enjoy long-lasting and fulfilling success.

 Jim Yount is the founder and chief executive officer of Jim Yount Success Dynamics LLC. For more than 30 years, he has hired, trained, managed, sold, marketed, and motivated. Extensive real-world experience in retailing, distribution and working with manufacturers, both domestic and international, has earned Jim the reputation as a trustworthy and knowledgeable professional in his field. As a results-oriented speaker, he is dedicated to inspiring groups of 30 to 3,000 to develop their talents and realize their full potential. As a business consultant, teacher and coach, Jim is experienced at challenging leaders to explore their operational procedures and change unacceptable practices that are producing poor results. For more information, contact Jim at jimyount@hughes.net or (903) 796-3094 or visit his website at www.jimyountsuccessdynamics.com.