"It takes 20 years to make an overnight success." - Eddie Cantor
Life moves fast. People appear less patient than they used to. Everyone is rushing around, chasing the next big idea, trying to make a deal that will make them money, fast.
This constant need for speed makes people want to make money quickly. They chase fads in order to make a quick sale, a quick profit and then move on to the next thing - hoping to get lucky again.
However, the most successful businesses are based on things that are going to be around for years.
Yes you can invest in the latest 'must have' children's toy and cash in at Christmas but that's a one time thing. You may get lucky but what do you do in January now that the seasonal business has gone? What do you do if you realise you have backed the wrong horse and now you have 1,000s of toys that nobody wants?
It's better to start a business which has longevity. You need to plan for stability rather than thinking about turning a quick profit. A business is a long term investment.
Jerry Murrell, the founder of Five Guys burger restaurants tells a story of how when they were starting up, they only picked the best ingredients for use in their restaurants. They would get the whole family round their house and blind test different mayonnaises, different gherkins and different bread buns. Whichever one tasted the best, that's the one that was used in their restaurants, regardless of cost. They focussed on providing the best burger they could, rather than skimping on ingredients and providing a lower quality burger even though it was costing them more in supplies. It meant that they were making less profit in the short term but as their reputation grew, so did their business.
Lee Rose of Voipfone, the telephone service that I use, was recently being questioned about why they do not offer a reseller service so that other people could sell their services. In theory, the idea makes perfect sense as Lee would immediately get lots of people selling his services for him and therefore increasing his profits.
His reply was excellent. He replied that he had considered offering a reseller service but there were a few issues which he couldn't resolve. Firstly, the likelihood is that yes, the number of customers and profit would increase but it could do so at such a rate that they would not be able to keep up with demand. They are not structured to grow that quickly. A sudden influx of demand would slow down their systems, possibly crashing them, and this would affect all of their customers.
Secondly, he replied that the company sees an annual growth of around 2-3% which is pretty impressive. It's perfect for him because it allows him to build the business gradually and build a product with a strong reputation. He is building a business that will last and not chasing a quick profit.
The benefits of growing slowly are numerous. In Voipfone's case, they are growing slowly which allows them to keep control. They do not require outside investment because there are no sudden spikes in demand requiring new equipment to be installed immediately, so they can retain full control of the company. The company grows at a rate which allows them to constantly improve their systems and staffing levels.
With slow growth, you are also building something with extra value. Unlike a 'flash in the pan' business where the sole aim is to buy something, sell it and turn a quick profit; the slow and steady method will give you something at the end of it. When you are ready, you have a business with a history and a reputation that has value - you can sell it. As well as providing income over the years, you will also be able to cash out for a large lump sum when you decide to sell up and move on to your next thing.
Before starting up, consider if there is a long term market for what you're offering customers. Can you see your business being around for the next 10, 20, 30 years? If not, perhaps you should consider setting up something different.