How to start a business?
For most of us, it starts with an idea.
The idea can either be to break free from the corporate world. Be our own boss. Stop feeling like a cog in a machine and actually make a difference.
Or it can be more specific. Build the first or the best widget in the world. Because I’ve used every other widget out there and they are all lacking in a specific way.
The idea is to start a small business. To build something brand new. Brick by brick.
I have worked with dozens and dozens of small businesses and startups over the years. I’ve seen the good, the bad, and the ugly. I’ve seen companies go public at valuations of more than $200M, and others crumble under the weight of their own mistakes.
So if you have an idea, the spark is there but then your heart skips a beat, and you think to yourself: How exactly do I start?
To avoid some of the missteps that others have made, to build a business that thrives; here’s how to start a small business that thrives from the ground up:
1. Know Your Why
Simon Sinek has one of the most popular Ted Talks of all time, and a best selling book as well, called Start With Why. In it, he talks about how important it is to know why you are motivated to do what you do; and that why shouldn’t include “to make a million dollars” or “make my mother proud.”
It is about understanding the way you want to make an impact on the world. And it’s different, and personal, to each person.
I have found that having a solid foundation on why you want to start a small business makes all the difference. When things get rough (and they will get rough), you can return to this fundamental understanding and as a reminder of why you want to keep moving forward. As Sinek says:
Working hard for something we don’t care about is called stress; working hard for something we love is called passion.
So ask yourself, how do I start a small business that aligns with my Why?
2. Build Your Business Around Your Lifestyle
“If you fail to plan, you are planning to fail!” – Benjamin Franklin
Don’t fantasize about starting a business so much that you forget why you’d wanted to start one. Sure, you want the freedom to choose which types of projects you’ll work on–but don’t create another job for yourself.
Take for example an entrepreneur who decides to start their own pie business. This person commits and quits her job to work on her business. After a few months, she’s earning a sustainable income. The only problem is that she’s no busier than ever.
She works 60 to 80 hours each week and doesn’t know how long she’ll be able to sustain her business. This is the case for many entrepreneurs who fail to plan. Before brainstorming business ideas, decide why you want to become an entrepreneur.
Do you want to spend more times with your family? Or travel the world? Whatever your reason, be clear on why you’re starting your business.
Once you know your reason, start building your business around your desired lifestyle, not the other way around.
3. Don’t Wait for All the Green Lights to Pick Your Business Idea
You’re clear on why you’re starting your business, now what?
Decide what type of business you want to create. Some examples include opening a restaurant or selling online products and services. Brainstorm a few business niches you’d like to explore (i.e. health, finance, and fashion.)
A few years ago, I was clueless about which business idea to choose. After stumbling upon blogging, I failed miserably along the way. My biggest mistake was spending months designing my blog.
The truth is building a blog is one of the most important things you can create for any business. It allows you to deepen the relationship with your customers by providing value. But it’s also time-consuming, making you prone to waste time as I did.
Instead, skip creating a blog and provide valuable content on an existing platform. This will help you determine if your business idea is something you’d like to pursue long-term while getting audience feedback. The best platform to do this is Medium for written content.
Jot down a few ideas and narrow your list down to 1 to 3, then focus on producing quality content. Once you’re confident about your idea, brainstorm how you’ll monetize it.
4. You Don’t Need Business Experience to Get Started
The best part about building a business is that the market doesn’t care about your experience.
If you can solve a problem, the market doesn’t care about a college degree or your business experience. Many entrepreneurs have built successful businesses without the help of their degree.
For example, Richard Branson quit school at age 16. Today he’s the founder of the Virgin group and worth billions. Bill Gates received his degree from Harvard 30+ after dropping out.
I share these examples to show that a college degree doesn’t make or break a successful business.
Instead, start a business on a niche that interests you the most. Chances are that you’ll have some knowledge in this area. Eventually, you’ll become an expert on the topic you choose.
5. Be a Consumate Learner
The most successful Founders and CEO that I’ve met are constantly asking questions. They are confident in what they know but are aware that they can always learn more. This can come up in a few key ways:
Before you even start your business, research your market.
Then research some more. Never think that you already know everything about people who buy widgets or all the other widgets on the market.
Ask questions. Then ask some more. Find people smarter than you or have way more experience, and listen to what they tell you.
Acknowledge that you don’t know everything. This is another critical piece to running a successful business.
I have seen it so many times. A Founder asks to “pick the brain” of someone else who has gone before. They hire a brilliant person to be part of the team — an expert in marketing or finance, and then disregard what they say or tell them what to do instead of asking them the best way to do it.
The CEO is missing a critical opportunity by not leveraging the team members/ expertise and not acknowledging that this team member has a lot to teach the CEO. It’s disempowering to the team member too.
6. Roll up Your Sleeves
You might have the fancy title – CEO, Founder or Head Honcho, but when you start a small business, you are also the receptionist and in charge of data entry.
At the beginning, you need to be willing to do all the nitty gritty work that goes into your business. You can’t be too good to do anything. The tasks might not be in your zone of genius. And sooner or later, you will be able to hire and/or delegate a lot of the smaller stuff.
But if you don’t understand all the little pieces that go into making your business great, you won’t understand how to scale your business and grow when the time is right.
7. Get in the Weeds
I have worked with many, many CEO’s, Founders, and Entrepreneurs, and most of them have one thing in common:
They are Big Picture Thinkers.
They are the ones with the dreams and the big ideas. Execution? Not so much.
So, if you are going to start a small business that thrives, you need to get in the weeds. Take a look at the details:
Why would blue be the best color for your widget? Who will take the orders that come in from outside the US? How, exactly, will you ship your products to the people that buy them?
Don’t avoid the details of your business because the big picture ideas are more fun.
Dreams and big ideas are critical when you start a business. But if you don’t have a handle on any of the details, you won’t be able to make those dreams a reality. And eventually, your business will crumble like a house of cards.
8. Build a Plan That Includes Budget, Expenses, and Profit
When you’re in those weeds, you must put together some numbers — real, researched, well-informed numbers.
Don’t assume you’ll take 50% of the current market because your idea is great. You need to create a plan that outlines every single expense that you’ll expect in the next 6 months to a year. You need to create a realistic timeline to product launch and create estimates for how much revenue you will get from your product, and when.
Without a plan that includes numbers, you will spend most of your time reacting to what happens around you instead of moving forward with intention.
Dave Ramsey is one of the big gurus of small business and personal finance. In his best selling book, EntreLeaders, he keeps it simple. He says:
Business is not really that hard. You are, however, required to do the basics or you will not win. Budget and do the accounting, stay out of debt, don’t buy what is not needed what is not needed to make a profit, save cash, and always be generous.
And you need to have a good answer to the most important question of all – when will you make a profit?
Evaluate Your Business Idea
Again, being able to honestly evaluate your own business idea is key. However, this step is generally not as hard as the self-evaluation because the criteria used in the evaluation process is more objective than subjective.
Identify your target market – Who are the people that will be buying your product or service? For this step, it’s important to alter your mindset. Instead of thinking like a seller, start thinking like a customer.
Can you articulate answers to the following questions?
- What is the problem addressed by your product or service?
- How does your product or service solve that problem?
- Why is your solution better than the competitions’?
- Are people willing to spend money on a solution to the problem?
You will also want to gather as much information about the people in your target market as possible. At the bare minimum, you will want to know the following about your potential clientele:
- Marital Status
- Number of Children
All of this information will help tweak your product or service to better suit their needs. It is also helpful in developing a marketing strategy.
Evaluate the Competition
Generally, you can divide your competitors into three categories:
- Direct competition – These are companies that offer the same products or services to the same target market as your business. You can think of Burger King and McDonald’s as direct competitors.
- Indirect competition – These businesses will offer products and services that are similar to the ones you provide without being the same. Another type of indirect competitor can be one that markets the same product or service, just to a different clientele or market segment. Subway and McDonald’s would be indirect competitors.
- Substitute competition – These are businesses that offer different products or services to the same clientele in the same market segment as you. An example of substitute competition for McDonald’s would be the local mom and pop diner.
Once you have identified exactly who your competitors are, you will want to gather the following information:
- What is the range of products and services they offer?
- Are they expanding or scaling down their business?
- How long have they been in business?
- What do customers see as their positive/negative attributes?
- Can you identify any competitive advantage they have?
- What is their pricing strategy?
- What is their advertising/marketing strategy?
The purpose of the analysis is to identify your competition’s strengths and weaknesses to better compete.
For example, if your competitors sell largely to companies with more than 100 employees. You may decide to target smaller companies with less than 100 employees. This means that your pricing and marketing strategies will need to be more in line with what the smaller companies expect and can afford.
Evaluate the Financial Feasibility of the Business
In developing a financial feasibility analysis, you need to have answers to the following questions:
- What will it cost to get your business off the ground and become profitable?
- What initial expenses will you have?
- What ongoing expenses will you have?
- What is the source of your start-up capital?
- What is the earning potential of the business, and how long will it take to achieve?
- How will you keep the business open and pay your bills until it becomes profitable?
Once you have this information in hand, you will need to build in an extra “cushion” for all of the extra “surprise” expenses that pop up. Additionally, most people are overly optimistic when it comes to estimating the profitability of the business and the time frame needed to achieve it.
How much of a cushion do you need? No one can say for sure. Some people will tell you to double or even triple your estimates. At a bare minimum, you should add 50% to the estimates you made.
It can be disheartening to learn that your business idea really is not financially feasible, but it’s much better to make that discovery now rather than after the money is spent.
9. Avoid Shiny Object Syndrome
You’ve put your plan together. You’ve researched your market. You know that you want to create 2 inch widgets in a gorgeous shade of blue. You will sell them for $1/widget. Bob the designer is signed up to build them. You’ll launch in June!
My neighbor Betsy told me she’d love a widget in green. Should we change the color to green? And Johnny’s teacher mentioned that she could use a widget that is 3 inches. Let’s change the size of the widget!
It’s so common. We have an idea but what if there is a better idea?
Do your research. Make informed decisions. And then stay the course. You can always pivot later.
But if you keep turning your head toward every shiny object, you won’t reach the goal right in front of you. You’ll never launch that product by June.
10. Trust Your Team
A small business might have one founder, but people rarely start a small business all alone. There is often a consultant, a partner, a sounding board. And then, consultants, accountants, and marketing experts.
No one’s “zone of genius” covers every area. So one of the best ideas on how to start a small business is to find a great team to help get your idea off the ground. Spend critical time on the front end vetting and hiring great people. And then let them do their job.
In my years on Wall Street, I saw first-hand the impact on a business when the Founder didn’t trust their team. I had hundreds of small private companies pitch their businesses to me, with the hope that my investment bank would take their company public.
The companies that gave me the most pause, the ones that rarely succeeded were the ones where the CEO did all the talking, or when he or she cut off his team members when they tried to answer questions.
Because in my mind, if that happened, it meant one of these two things: 1) the CEO is not listening to all the other smart people in the room; or 2) the CEO does not trust his team.
Both options were a recipe for failure.
11. Surround Yourself With All Types of People
“You are the average of the five people you spend the most time with.”
If you’re an entrepreneur, you should only be around other entrepreneurs, right?
Entrepreneurship is a long and lonely journey. The truth is you’ll benefit being around other entrepreneurs and learning from others.
For example, your friends and family can potentially be your customers. Use this knowledge to test your product or create new features. Be willing to learn from everyone but also be careful with who you spend most of your time with.
Take my case, for example, when I was in high school, I began hanging around the wrong crowd. Being a good student, I didn’t imagine this would have any effect on me. Eventually, my grades dropped and I began caring less about school.
As an entrepreneur, similar instances can happen to you. Surround yourself with supportive people who’ll help you in your lowest points. Spend less time with those who don’t believe in your goals.
12. Learn More About Other Things Besides Business
It’s not uncommon for entrepreneurs to read.
Bill Gates claims to read 50 books per year, and Warren Buffet recommends reading 500 pages per day. So you should only read business books, right? Yes and no.
Business books will teach you more about running a business effectively but these shouldn’t be the only types of books you read. You’ll limit your growth in other important areas for your business.
For example, human psychology is important to better understand how your customers think. Reading fiction can spark creativity for you to innovate in your business. The truth is expanding the type of books you read will only benefit you.
Mix it up by creating a reading list in a variety of categories. Also, join book clubs to become inspired to read different types of books with others.
13. Focus on Value Instead of Money
“Serve a million people—and serve them incredibly well—and the money will follow.” – Dharmesh Shah
Focusing only on making money can be toxic.
Many people have ended their life after losing their entire wealth. This doesn’t mean that wanting to build large wealth is bad; but putting money on a pedestal is. Instead, focus on a higher purpose.
When you focus on giving more, you’re more likely to build more wealth.
Gary Vaynerchuk shared a story of a time when he delivered a low-end wine to one of his customers during a snowstorm. He didn’t expect anything, but this customer’s wealthy son later placed a large order with Gary.
This doesn’t mean that you should give for the sake of receiving something. Give out of the intent to help others and experience the positive benefits. Studies have shown that people who give money away experience happier moods.
Focus on increasing profits for your business but remember to have a higher purpose.
Believe In Yourself And Just Do It!
Trying to start a business can be incredibly difficult. We dream of the possibilities but get overwhelmed by the realities.
Know your why and believe in your abilities. Don’t try to be the best in the world or execute flawlessly. Learn and grow and keep trying.
If you do all the above things, you will be a success in whatever way you choose to define that word.
Featured photo credit: Vitaly Nikolenko via unsplash.com
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