Jim Muehlhausen

Entrepreneurs are the best people in the world. They are ever-hopeful and optimistic. They believe there is a solution to every problem; and they are usually right. However, this same optimism tends to lead entrepreneurs to believe that all business problems can be solved with more sales. Many times, this is simply not the case.

Let's examine some typical scenarios that entrepreneurs believe require more sales.

Scenario #1: Perpetually underfunded

In this scenario business is usually good and the company is typically growing. However, the company is always broke. The business owner or entrepreneur is constantly scouring for additional financing sources. In many instances the...

It seems that many entrepreneurs have crawled into their caves to wait out the recession.  For many of them, the battle cries have become:

• If in doubt, don’t spend
• Just ride it out
• Change is dangerous, one small mistake might break the camel’s back

This general attitude of intense risk aversion leads to abysmal business model innovation.  Many businesses only innovate when they are on death’s door- when there is no other option but to innovate.  For many small businesses, this innovation comes too late.

It takes years for powerful innovations to take hold and fundamentally change a business.  Take the success of the...

You may have noticed Ally Bank, Discover, Chase, and others promising a computer-free, and, in some cases, foreigner-free customer service experience.  Discover card is moving customer service to Utah.  Chase promises that you will get a person not a machine on the phone.

Let’s call this an attempt by the financial services industry to win customers with an improved customer service experience.  These changes dramatically increase the cost structure of the banks- human attendants vs. free machines and higher-paid U.S. workers vs. Indian or Pilipino.

Clearly, the logic behind these changes is that customers are fed up with machines and bad customer service and that fixing it will yield additional customers.  Will this happen? Let’s explore the potential options:

Earlier this year, Sears Holdings announced it will shutter three percent of its stores, or 120 stores.  Sears also reported same store sales decrease of 5.2%- 4.4 percent at Kmart stores and 6 percent at Sears.  According to the company:

"Kmart's quarter-to-date comparable store sales decline reflects decreases in the consumer electronics and apparel categories and lower layaway sales. Sears Domestic's quarter-to-date sales decline was primarily driven by the consumer electronics and home appliance categories, with more than half of the decline in Sears Domestic occurring in consumer electronics. Sears’s apparel sales were flat and Lands' End in Sears’s stores was up mid-single digits."

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