Everyone loves a new restaurant: the allure of a new menu, a fresh atmosphere, an exciting experience. Yet even when that restaurant is started by a local powerhouse who’s boasted major success in the past, a flourishing entrance and prosperous existence isn’t always guaranteed.
Such was the case with St. Philip Pizza, a highly-anticipated new restaurant opened in October of 2014 in Southwest Austin. Despite being opened and run by the owners of Uchi and Uchiko sushi restaurants — restaurants that have gained national recognition as well as a local cult-like status — the restaurant serves as a prime reminder that even powerful brands can fail.
Sure, St. Philip Pizza had a few things working against it: the food and beverage industry inherently comes with high failure rates (an average of 60% fail after the first year and 80% close doors within five years), a personal incident led to losing a key team player, and the brand itself was venturing into an entirely new arena from its normal endeavors.
But St. Philip’s demise isn’t, unfortunately, the exception, but is more often the rule when businesses — no matter how strong their brand — venture out into unknown territory.
Protecting yourself in new ventures as a small business owner
This is not to serve as a warning that small businesses should never try their hand at anything new. In fact, while consistency is key to sustainability, innovation and change is key to growth.
The lesson here comes in making sure you’re in a good place to venture out and try new things — and that you put certain safeguards in place so that experimentation in a new venture does not lead to an overall fold if the experiment doesn’t quite pan out.
After all, each new experiment or venture is essentially an investment — and that’s the name of the game here at WorthPointe. We want to help you safeguard your investments and your interests as a small business owner. Here are a few places the Uchi and Uchiko owners did well, as well as a few other ways you can protect yourself:
- Create multiple revenue streams. Ever hear the old adage “don’t put all your eggs in one basket?” Post that somewhere where your management team can see it each and every day. Even for small businesses operating in hyper-focused niches, it’s important that revenue comes in several different forms. A service-based business might release a few products, for example, or a product-based business might take on a role as an affiliate for partner programs. In creating multiple revenue streams, if the well dries up with one, others are there to back it up. Such is the case with a new venture — if other business operations are solid and varied, you’ve got a strong back up if a new opportunity doesn’t work out and the investment doesn’t come back in full.
Tip: Look at your business ventures much like an investment portfolio, where variation is key.
- Build up that rainy day fund. As an existing small business owner, you know that profit doesn’t show up in a day, and that “overnight successes” can take a decade to build. With that in mind, consider seeking out capital to help you start your new venture (crowdfunding is on the rise), or start setting aside money from other business revenue in advance to build up a “rainy day fund” that can help your new opportunity thrive even when it’s in the red.
- Invest in insurance. Beyond setting the business up properly — whether that be as an incorporation or LLC to protect your personal assets from business debts — it’s wise to invest in further insurance that can protect your new businesses depending on their nature. The Small Business Administration breaks down the types of business insurance available, but working one-on-one with your lawyer will help you determine what might be best before you approach a broker.
- Focus on your skills — or get fantastic at hiring. In the case of St. Philip’s, the restaurant group was venturing into unknown territory — pizza and other carbs adored by Italians everywhere, as opposed to the Japanese fare they were known for. While restaurant management skills might translate, others didn’t, meaning they had to bring on the right people to fill that gap. Hiring opens you up to greater risk, so be sure to set aside both the time and the money to do it well.
Tip: Keep in mind that seeking out top-tier skill is important, but attitude and passion can play a much larger role in retention.
- Get it in writing. Everything — and we mean everything — should be documented. From patents to non-disclosure agreements and vendor contracts to employment handbooks, having each detail documented in writing can safeguard you down the line from potential lawsuits and other costly endeavors.
- Know your exit plan before you ever start. Not to be a negative Nancy here, but let’s get real: when you know what the plan is if things were to go downhill, you’re better equipped to focus on keeping them afloat while you have the chance.
Don’t be afraid to put yourself out there
Now that we’ve properly instilled a bit of fear in small business owners everywhere, let’s pull back. Here’s the thing: the threats will always exist. It’s up to you, savvy small business owner, to put the safeguards in place to proactively avoid them. Part of that is having the right team on your side. Start with the team at WorthPointe. We’ll join you in every venture you take on, to make sure your wealth points in the right direction. We are here to help put you on a path to success. Give us a call today!
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