Ten Tips for a Strong and Smooth Start
It is a great time to start your own business, largely thanks to the recovery of the economy and the large number of supports available to start-ups. While starting a business for the first time can be very exciting, it nevertheless involves risk. To overcome the possibility of failure and to give you best chance of success, the following top business tips have been compiled from RIKON’s business strategists over hundreds of engagements with start-ups.
Do the Research. Test Your Business Assumptions
When starting your business, you are making certain assumptions about your product/service idea – e.g. that people want it, that there is customer out there willing to pay for it, our price will be the differentiator etc. Going to market without testing or challenging these assumptions is very dangerous. If your business assumptions are not challenged or tested in the marketplace, then they are really only a best guess at best. Why would you do this considering that money, time and energy you are going to put into your new venture. Take a few months to watch the market place, are there big competitors out there? and what makes your company different? Do your research and ask those tough questions of customers – will they pay for the product or do they even want the product. Sometimes the answer to these questions won’t be what you want to hear. But you the insight you have gained and then you pivot and hone your idea.
Apply a Lean Start-up Mentality to your Business
The biggest risk for first-time entrepreneurs is that they’ll create a product that absolutely no one wants to buy. The Lean Start-up approach is based upon the notion that when you launch a new business or product you should (i) Build a minimum viable product to test a set of hypotheses. (ii) Measure data against that set of hypotheses (iii) Learn whether the hypotheses have been validated or not and (iv) Decide whether the product is onto something with those hypotheses, or if a new set of hypotheses should be considered
Know Thy Customer
When faced with the question – who is your customer? A very common answer from start-ups is ‘everyone’, ‘the world’, ‘all men’, ‘all woman’ etc. Why is this a problem? Because you are engaging in what is referred to as a Mass Market approach where you are targeting everyone and you see no distinction between market segments. It also means by not narrowing your marketplace, you have increased the breath of your competitors. You must be specific. You must be able to describe your customer in extensive detail? High level descriptions are note good enough. The narrower you can pinpoint your target market, the more focused your marketing will be and the more relevant your product will be to the customer.
Focus. Focus. Focus. Know Thy Opportunity
Getting that first sale or customer is often the most difficult. Money and resources begin to tighten and many first-time entrepreneurs feel the need or the urgency to jump at every “opportunity” they come across. One of the most important things in business to figure out is what you do and what you don’t do. When you’re a start-up and money and resources are tight, it is very tempting to jump at every “opportunity” they come across. Don’t. If you are jumping from one opportunity to the next, you are not focused and perhaps you are avoiding the real issue – that there is a problem with your start-up concept.
Write a Business Model
Every company should write a business plan. It is your company’s strategy and future financial performance. Moreover, for a start-up it will become invaluable when seeking funding later. However, in the start-up phase, it is probably more important to focus on your business model which is the mechanism through which your business generates profits. By developing a business model, the start-up will quickly see how they are positioned within the industry and the logic of how their business operates, or intends to operate. In a nutshell, business modelling will enable the first-time entrepreneur to see the implicit thinking behind the business operation/venture and allows them to identify economic value creation opportunities. The goal is to enable the start-up to take full advantage of the strategic partners, resources, channels and activities at its disposal and to align to customer’s needs with their offering
Network, Network, Network
Often first-time entrepreneurs feel that they must know everything. You don’t. No one does! There is so much to learn about running a business and it is imperative that you go to as many networking events as possible. At these events, you will meet experienced business people and you can tap in to this wealth of knowledge. On the whole, people are very generous with their time and sharing their knowledge and some may as a business mentor to you. Even if you don’t get a business mentor at first, it is important that you have an outsider, another set of eyes, who is objectively giving you advice and challenges your decisions, plans etc.
Focus on Sales & Marketing Manically
All that matters in business is having customers. You do not have a business without them. Most first-time entrepreneurs feel that they need to have their product, brand, website etc. perfect before they launch to the market and so they spend a lot of their time and resources on just that. This is exactly the wrong way to go. Most of your time in the early days must be focused on marketing and sales. You must be manic about it. Your marketing plan identifies your target audience, who they are, attracting them and converting those leads to actual sales. Don’t get overwhelmed about diving in – just do it. Start making calls to the potential customers you have identified and follow up with your marketing brochures etc. Will there be some rejections? Yes. But that is fine, there will also be some interested parties.
Perfect your Pricing Model
Pricing is probably the most neglected aspect amongst start-ups and yet it can be as important to the success of your business as the product itself. If you set the price too low, you may not be able to cover costs and set it too high and it might be unattractive to customers. Setting the right price takes a bit of homework, but it is worth it. The Price is how you make money and generate profit for your business. Your pricing strategy should not only cover your costs, it should also facilitate the generation of profit. Although this may sound obvious, have a look at your competitor’s prices and do a comparison. If you are planning on having different pricing options, do not make them so confusing that no one will be able to follow them. Keep them simple. Finally, you need to understand how many products you must sell or how many customers you need to convert to actual sales and how does that break down weekly, monthly etc. You do not need accounting skills or fancy spreadsheets to do this. Constantly update your numbers so that you can see where you are at.
How to Find Start-up Funding
There are many different funding options open to people when starting your business from funding it yourself to loans from your family and friends to bank loans to crowdfunding websites to investors to government support structures. Regardless of the funding option, they all require work and commitment and there is no magic funding bullet or no free money for that matter. Every funding decision should be carefully thought through in terms of its cost and payback and the ownership and control of your business.
Know when to call it a day.
It’s ok if your business idea fails. You do not have to go down with the ship. That is bad business. A true entrepreneur will reflect on where the mistakes were made, how they should have been handled, and how the same mistakes will not be made in future ventures. People often go to extreme measure to try and rescue a business, but It is better to fail quickly and often than to continue a business that has no viability.