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It's very likely that you've already been impacted by news like this:
A frightening piece of information, generally associated with a lack of support for the entrepreneur or with the economic moment.
It derives from a strong association between tax registration and business.
In practice, many companies close their registrations without this implying that the deal has closed together.
As is the case of Transfer of commercial outlets, in which one company takes the place of another in a business that remains in operation.
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This bias that many companies close has to do with the source of the information.
Business closing studies based on the registration bases of Legal Entities, such as Central Business Register Or from Federal Revenue Service, are more practical, as they have well-organized official information.
Companies open over a period are counted and their life cycle is monitored, resulting in the time in which the companies in this group “resisted to bankruptcy”.
But they don't tell the full story and still give the impression that business mortality reaches an alarming level of 4 out of 5!
It's not like that, tax records serve other purposes and can be disconnected from a business that continues to do well.
Take a look at this recent case:
Makro sold some of its stores to Muffato.
Fiscally speaking, Makro may shut down the activities of some companies linked to it, which will be taken over by the Muffato companies.
The wholesale business in question is doing very well, including receiving new investments and renovations.
Even so, in this case in which the Makro companies close and no new company is opened by the Muffato, the closed companies enter the statistical databases as mortality.
Therefore, the company closure statistic is not entirely linked to business bankruptcy.
In the case above, it is quite the opposite, companies are closed to make way for other existing companies that will make investments in the business.
Cause of Death
But this is not always the case, companies go bankrupt and there are reasons that lead to this.
Sebrae conducted a sample survey of entrepreneurs who closed open companies between 2007 and 2011.
The job of tracking the owners of these companies involved visits to properties closed or occupied by others, conversations with neighbors, going to their homes, all for the purpose of interviewing those who closed a business.
There were 1,846 interviews, which result in a rich picture of factors, which tell the following story:
Entrepreneurship is a dream of freedom that entrepreneurs allow themselves to be carried away by, neglecting some essential aspects that will cost them dearly, if not everything.
At the end of a cycle, when they decide to close the business, the entrepreneurs consumed almost or all of their capital, their family suffered with the process, and they are still working as employees or freelancers.
Despite their frustrations, they do not give up on undertaking, keeping alive the dream of freedom.
There is a gap between dream and reality, and that is what we are going to talk about.
The desire to own a business is a weak foundation.
The market doesn't give a shit about your needs, it's you who has to stay connected to the needs of the market.
Successful companies are built on markets, preferably as solid as the proverbial rocks in Matthew's verse:
“The rain fell, the rivers overflowed, the winds blew and hit that house, and it didn't fall, because it had its foundations in the rock.”
The first step in undertaking is to find a market, a niche, or a business opportunity.
The main cause alleged by those who went bankrupt was “Lack of Planning”, which is the absence of validation of whether the market offers essential conditions.
The main problem faced by these companies is the “Lack of Customers”, another sign that there may not even be a market.
Without clients, without profit, there is no working capital to handle it, the business goes bankrupt.
Okay, and how do I find a rock-solid market?
Whoever asks that question will be well on their way to living their dream of freedom.
But first, let's talk about other reasons that bankrupt a business.
Low price is not a strategy for small and medium-sized businesses
Many people evaluate a market by the companies that operate in it, come to the conclusion that they may charge less and decide to enter.
Even Walmart, the world's largest supermarket chain, failed to sustain its policy of Low price every day.
You may even be able to balance yourself with a low price at the beginning, but any setback can take that advantage and you will have nothing left.
Evaluate a market by its ability to differentiate, where price may be a factor, but never the only one.
Family and business
Entrepreneurs use their own resources, which can be added to financing, with guaranteed assets.
Until the business takes off, it needs more resources, and the family is being robbed of their livelihoods.
In many cases, the family is at the center of operations.
Bullshit is fatal!
Business affects family, family affects business.
Many opportunities to transfer commercial outlets in good markets arise from family cracks.
Nobody is going to put this in the ad, people prefer the classic “move abroad”.
Size matters
Larger companies better withstand times of crisis, have more resources for network marketing, offer management support.
There is a great risk in going it alone. Those who are part of franchises, associations, and shopping networks are more likely to succeed.
The willingness to keep the entire result to yourself can consume your own result.
Ponto Comercial
The three most important things about retail are location, location, and location.
Even if a store closes due to family quarrels or lack of resources, it will still have value if it is at a good point.
And we're not talking about the ownership of the property the store is in, but about your rental agreement.
When we talk about the owner of the point, the sale of the point, we are talking about the occupancy rights.
So if a property is leased to someone, the right of occupancy belongs to the tenant.
This right is protected by law, provided that certain contractual conditions are met.
So if something is yours, you can sell it.
Hence the term “gloves”, which means to charge to pass on the point to the other party.
More formally, this would be the operation to transfer the commercial fund.
Be careful when buying a trading fund, it brings the good and bad parts of the previous company.
Finally, a poorly chosen point will hinder your development and your business, and if everything goes wrong, it will be worthless.
You will close and the landlord will put up a rental sign.
Now that you know the risk factors well, let's move on to the success factors.
Companies go through cycles, the first of which is maturation.
When a new business hits the market, it takes a long time for people to get used to it.
Counting the surrounding population and believing that everyone will buy in the first month is crazy, not least because the needs of this market are already being met in some other way.
It is a phase of consumer experimentation, and if it works out, a transition begins.
This transition follows a pattern described by Geoffrey A. Moore in the book Crossing the Abyss.
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There is a small proportion of customers who like news, they are those people who are always experimenting and arrive saying:
“Did you see that? Have you ever been there? Did you hear about it?”
This group shouldn't generate a lot of regular customers, because they're always experimenting with things out there.
They are few but important because if they like you they will attract a second group, the experimenters.
Those do have the profile of recurring purchases, what we call clientele.
But there's a big problem there!
This group does not attract others and so on, there is an abyss between them.
The first group likes news, the second likes the news that the first group approves.
When we see a business exploding, a pure trend, everyone talking about it, we are seeing those first two audiences in action.
But if the business doesn't attract other audiences, doesn't cross the chasm, it will be at risk.
These initial audiences like news and will soon be looking for the next one.
You should use them to attract others and not worry too much if the fashion people are dissatisfied with you in the process.
The other groups are pragmatic, those who see no reason to change what is working in their lives.
They will wait to see if you are working out and that time is exactly the maturation phase.
This pragmatism translates into loyalty, which is why reaching those audiences is so important.
When you reach them, your business will be established.
That could take years!
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🥷 We have a secret for you who have read this article so far
Many businesses go bankrupt exactly at this stage of maturation, hence the statistic that so many close within 5 years.
What they are saying is that many businesses do not pass the maturation phase, they are on the left side of the abyss.
The secret here is to buy deals that are being transferred well at the end of this cycle, you will have to pay an amount per point, such gloves, which are usually much less than the cost of going through the maturation period.
Almost everyone considers the payment of gloves to be a kind of bonus, something that should be avoided.
If you think so too, that's fine, even Credit Suisse analysts considered the amount paid in gloves by Carrefour to Makro high.
In this case, they observed that Carrefour was spending twice the total cost of opening a store, something in the region of 30 million reais worth of gloves per store!
In general, people think that it's not worth paying so much for something they can create, but that's where the illusion lies.
Creating a point is expensive and has the risk of going wrong, buying a good point costs less than trying to create one and there is no risk.
In addition, cities practically do not produce new commercial regions, and the well-located commercial point is a scarce resource, hence the extra value to be present where it matters.
That's how The president of Carrefour explained millions paid in gloves:
“More important is the location of the stores”
🚀 Bonus secret
The deal being transferred may be a little worn out by the incomplete maturation process or unsuccessful. When re-opening you can do much more than put on the track “Under New Direction”, you can re-attract the new crowd while captivating the pragmatists.
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And how do I validate all of this?
I have two ways to introduce you:
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In this way, you will hire some of our independent experts to carry out these evaluations.
It's great if you plan to open a new business every 5 years or so.
It's just not worth learning everything, and I tell you, it's not easy, if you're going to use that knowledge a few times.
Consultants sell expertise and you can count on them.
Longo
You loved this text and want to do studies of this type several times a year.
So your path is the professional one, where you are able to work within companies that are expanding or as an external consultant.
Get ready because it won't be easy, which is why it's so advantageous for those who arrive on the other side.
Only 1 in 5 interested parties makes it to the end of Mapfry Geomarketing certification program.
References
The Real Failure Rate of Restaurants, 1991
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