Every Business Needs an Eeyore

December 6, 2019

Another country-wide business is closing stores. They blame the economy, but I think that there’s more to it than that. I think that many companies just never build market saturation into their business plans.

You start a business. It takes off. Then people get tired of waiting for the product, so they go elsewhere. If you don’t want to fail, you have two choices: Price the product high, and market it as an elite brand; or expand your operation. You may choose to open locations in different parts of the same city, or in other cities. Then you build more. And for a while, all is well.

Then the copycats come. Or the novelty of your brand wears off. Or you cut corners to save costs, quality suffers, and business slows. Or the economy tanks. Or you don’t pay enough to keep motivated employees who care about keeping the customers happy. Anything can happen. And you find yourself looking at fewer profits.

But how many companies build that reality into their business plans?

From what I’m seeing, not enough.

Major businesses have a handle on the basics: The minute a copycat competitor opens, they roll out a new product, or hype their superior customer service, or buy out the other guy and get his product. But for some reason, businesses are still taken by surprise when their market shares drop. Why?

Because enthusiasm overpowers reality when they’re making their expansion plans.

Once a product has proved that it can sell, the focus is all on expansion. But you have to be realistic: Nothing lasts forever. You need a cushion in your business plan, one that says, “At some point, a regional market will be saturated. We need an exit strategy, with funds available so that when that market isn’t producing, we can afford to move elsewhere.” Or, “This product will wear out its welcome. If we can’t find something else to keep customer interest, we’ll need to decrease production and fall back on exclusivity for a while, until interest returns.” Or, “We need to move the company in a completely different direction, and pursue a completely different type of product.” It’s a natural course of events, but one that MUST be accounted for in the budget.

You need an Eeyore in your company: Somebody who says, “Sure, it looks good now, but just wait…”. Somebody who can see the weak spots in your business strategy, and who can figure out how to adjust for them.

Don’t just look at how well you’re doing. Look around at the stores who only concentrated on expansion, and didn’t factor reality into the business plan, and remind yourself of how that worked out for them.

Don’t be a cockeyed optimist. Pay attention to Eeyore.