How Not To Start A Business

Regular readers know that I'm a fan of small business and would probably enjoy traveling back in time and having a cocktail with George F. Babbitt at a plush hotel bar in downtown Zenith whilst discussing Boosterism. As someone who has owned and successfully operated a few small businesses, I always want new ones to succeed. I'm a fan. Sometimes though, you can't save them from themselves.

Recently, I read an article about a new business in my area - a model train hobby shop, no less - which is less than five miles from my house. It has been open for three months. I drive past its location almost every day yet I had no idea it even existed. I'm a model train enthusiast and try to keep current on the hobby. But I had heard nary a peep about this new store.

the view through the windshield

While I wish this new establishment the best of luck, I fear that it won't make it. This firm suffers from six major problems:

sherlock business blogPoorly Defined Mission: The store offers "items that will appeal to more than just train enthusiasts," including porcelain dolls as well as "wind chimes, candle holders, barbecue items, backpacks, beach towels and supplies for gift wrapping and packaging." More additions are on their way, including "jewelry, picture frames, mirrors and plant hangers."

Were he still alive, Mr. Rogers might ask, "Can you say 'unfocused'?"

Every business needs a business plan. The plan starts by defining What Business We're In. "A little bit of everything" is not acceptable.

No Marketing Plan: This new business has done no advertising or promotion, has no distinctive signage, has zero web presence and has failed to introduce itself to the local populace or the hobby community. How do they expect to reach prospective customers?

For example, Whistle Stop Trains, a Portland competitor, regularly offers how-to workshops and other special events to build a base of loyal customers. Including me.

I would also add that HO is the most popular scale of model trains, followed by O-gauge. This establishment has eschewed O-gauge railroading in favor of the much less popular N and Z sizes. This further indicates a lack of basic market knowledge.

Bad Location: The store is tucked a tiny, almost invisible corner of a country store building. The signage is very small and not illuminated. In the article, one of the four owners (husband, wife and two friends) exclaimed, "What better place to have a train store than right next to the railroad tracks?!"

Ummmmm ... how about a place with some visibility and foot traffic as opposed to being next to a little-used, rail freight spur?

automobile blogUnfavorable Market Demographics: My back-of-the-envelope calculation indictates that it takes a population of over 400,000 to support a train store. Clark County has a population of 420,000 or so and already has one train-centric hobby shop. It doesn't need this second one and probably can't support it.

At least three independent hobby shops in Clark County have failed in the last 20 years. A major reason for such failures is increased competition from large chains and internet retailers. To make matters worse, this store is in a semi-rural location at the county's north end - far away from the area's population centers.

There are similar negative demographics for the gift and sundries segment of the business - lots of chain store and internet competition as well as a local landscape littered with the bones of failed gift shops.

No Credible Feedback: One of the owners said, "We've had a lot of people who have come in and looked around and said we have some nice things." So what? Most people tend to be polite but, as a business consultant, I'd want to know if any of these browsers actually purchased anything. If not, why not?

You can't fix problems until you first learn what they are. You can't address customer needs until you find out more about your customers and prospects.

Availability: The store hours are Fridays and Saturdays from 10-6 and Sundays from noon-6. This is a narrow window, even for a hobby shop. Most hobby establishments are open 4-5 days per week - minimum. The majority of gift retailers - think Hallmark stores - are open seven days per week.

The news story concluded with another owner quote, "We're tiny as far as floor space goes but we have big ideas and a big heart." Yes ... and the road to perdition is paved with good intentions.

I'm afraid this will end badly but hope it doesn't. (posted 10/26/09)

PS: If you want to learn the right way to start a business, go here.

Update: In mid-February 2010, the establishment in question put a very small ad in the local weekly newspaper.

car blog

Difficult to spot and hard to read, it measured just under 0.75 inches in height and just over 5.75 inches in width. It was surrounded by larger, more-readable ads and I suspect most newspaper readers missed it. I did the first time around; I found it only after my wife pointed it out to me. (posted 2/24/10, permalink)

Update II: On June 10th, I found the space vacant with a 'For Rent' sign on the front door. (posted 6/10/10, permalink)

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copyright 2009-18 - Joseph M. Sherlock - All applicable rights reserved


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If I have slandered any people or corporations, either expressly or inadvertently, they should buy me strong drinks (and an expensive meal) and try to prove to me that they're not the jerks I've portrayed them to be. If you're buying, I'm willing to listen.

Don't be shy - try a bribe. It might help.