My very first business venture, besides selling lemonade, was selling worms with my brothers and it was disastrous.
At the age of 13, our family lived on a small acreage outside of the city limits. My brothers Rob and Paul were close in age and always looking for new, exciting things.
This particular summer we needed money to go to the county fair. It just so happened that we came across an ad in the Buy and Sell titled Worms Wanted. The ad read, "We buy worms, $15.00 per thousand."
In 1976, $15 was a lot of money! It didn't take us long to respond to the ad.
We knew where the worms were, and they were in our yard. In fact we made the call and went right out to our barnyard and dug up worms. Five thousand worms to be exact.
We sweated in the sun and counted every one of those worms dropping them each into a bucket with a lid so they wouldn't escape.
Seeing as it was quite hot that day we thought that the worms would like some water to drink. Big mistake...
The next day the nice man drove out from town and handed us $75 dollars - pure profit for those 5,000 worms (if, like most business people, we didn't count our time).
We had barely had the time to show our father our money at dinnertime that night when the phone rang. Apparently worms with water and heat die rather quickly.
The worm buyer was understandably angry. But he didn't want the money back, he wanted worms.
Doing what was right, the next day we went digging for another 5,000 worms.
This time it was much harder; all the places we had harvested the worms the day before were pretty much empty. We had to resort to digging around in our mother's garden, knowing very well that we were risking our lives doing that.
We found another 5,000 worms but it took a long time and we wrapped up the worm business shortly after we walked back into the house. We learned the hard lesson that your product has to be good each and every time you sell it.
We also realized that the worm business was one that we didn't really want to be in and shut our doors.
Every business has times in its life cycle where it isn't profitable. The fact is that 50 per cent of businesses are never profitable and end up shutting their doors within three years of starting. For some businesses, this period of unprofitability is just a short time during start-up; for others this might happen during an expansion, downturn in the economy, or after there has been a technological shift (VCR to DVD, for example).
Even low overhead businesses, such as a sole proprietorship selling a simple product or service, have a period where they have expenses without generating revenue.
There are many reasons why businesses aren't profitable which we will get into later. I myself, like many entrepreneurs, have owned a couple businesses that weren't really profitable for periods of their existence.
Dave Fuller, MBA, is certified professional business coach who works with successful business owners who are going through rough patches and can be reached at [email protected] or 250-617-7467
