In my line of work, as well as seeing established companies, I also see a lot of start-ups and it’s always pretty clear to me which ones did the right thing getting into business and which should have done a bit more homework… In my opinion, there are always things you can work on to make your business more successful, but if the right boxes aren’t ticked from the start, it will be much, much harder to get ahead. Here’s what I suggest you consider before you launch that business idea you’ve always had:
1. First, do your research. Is there truly a need for what you want to do? A high proportion of new businesses fail every year because there’s not a huge need for what they offer or an adequate point of difference from their competitors. Ask yourself: why would customers truly want to buy from you instead of an incumbent? And if your idea is a truly new offering – unique to anything else out there – your research needs to include more than friends and family… Those closest to you are often enthusiastic to your ideas because they like you and they want you to succeed. Instead, include a cross-section of people who you’d consider your target market and a ‘doubting Thomas’ or three – you want a wide range views from your potential future customers to let you know if you really are on the right track.
2. If possible, do the research and real in-market testing before you leave your job. Many successful startups saw the founder work two jobs ie. 9–5 in their normal job then their startup (or side hustle) every other waking hour… I think having a regular flow of income coming in in those early days is a good idea, especially because new businesses aren’t usually an overnight success and it could take a while before you earn a living wage.
3. Be prepared to work very hard for very little money. Make sure you have a bit of a runway to get you through, say, 9-12 months (or more) of earning not much, if anything. If it’s impossible for you to have this kind of security blanket, you might consider making some sacrifices – reducing your personal living costs, moving in with your parents for a year, living on a budget supermarket weekly allowance or selling non-essential assets to help build your bank balance. The life of a business owner ultimately can be incredible and rewarding but nobody has it made on day one. Be prepared to make big sacrifices. As well as working on your business, make sure you keep working on your mental health as you are likely to have some ups and downs as you grow your business and the better your head space, the easier it will be to ride them out.
4. Create a painkiller product or service rather than a vitamin. Solve a real issue people have, rather than a developing nice to have, and you’ll have a much higher chance of success. The likes of AirBnB and Uber are obvious examples here. How can you become a true essential in your customers’ life?
5. If you are able to, create an offering that gives you repeating sales rather than a one-off sale. Repeat customers are more profitable, reducing the amount of effort and money you need to put into always looking for new customers. Ideally, get them on a subscription model, to reduce admin for both parties. The more your customers buy from you, the more likely you are to have success with your business.
6. Truly consider your business model. That is: how are you going to make your money? Have you built enough margin into your offering? Can you make your price a bit higher? It is easier to go down in price rather than go up.
7. You’ll need a cashflow forecast. How long will the money you have available to put into your business last? Are you putting it into the right things? I get really upset when I come across a startup that has spent 80% of their initial cash on things that I consider nice-to-haves rather than must-haves – this stunts them from having a successful launch as they can’t put money into the most essential things… Be very careful what you put each dollar into as once you spend it you can’t get it back. If you are making a product, be very careful on how many units you make as if you make too many of a product that is a poor seller, that is a lot of cash tied up in the wrong thing. Do your market research to know what product to make the most of. Do pre-orders if possible, if you have a strong database pre launch. Ultimately business go out of business because they run out of money. You have to be very careful what you spend your money on and which experts you engage.
8. It won’t be a case of “Build it and they will come”. Sorry, but you can’t just open and expect to get customers flocking to you. Just because you have a website doesn’t mean you have a business! In those early days, no one will know about you so it’s essential that you have a well-thought-out sales and marketing plan. Yes, it’s likely that plan will be on a tight budget but there’s still things you can do to get in the face of your potential customers. You’ll need to get creative and think laterally; you might need a hand from an expert in sales and marketing to help you with strategy here.
9. Have the right people around you. What skills do you personally have and what are you missing? Which shareholders or part-time contractors can help you fill those gaps? Success will always be much slower if your business doesn’t have all the skills required. Are you a gun at marketing? Do you know what numbers matter on your P&L? Is your website a good representation of your brand? You’ll find success much faster if you have people on board who have complementary skills to yours and who have been there before and know which hurdles to avoid – they’ll have the blueprint and help you avoid all the costly mistakes many start-ups make. Make sure you are getting the best you are able – your chosen experts should have true runs on the board, be a good personality match and have a passion for what you are trying to achieve. Be careful about who you have in your circle.
10. It’s true that looks don’t matter – but in business they do… Because of limited budget, many startups skimp on design – they have a poor website and their brand looks average at best. You’ll notice that everyone – from electricians to wholesalers – have worked on improving their logos and brand, because it really does matter. Don’t blow all your budget on design but definitely be considered about how your product/service looks before you launch. Good design makes you look professional and in the early days, it could be the difference between a customer deciding to trust you and give you a go – or not.
11. Make sure you look great online. Beyond creating a fantastic product that meets the needs of your potential customers, I suggest you put a decent budget into looking good online because it’s often the first impression customers get of your brand. A cheap website also makes your product or service look cheap. So many of your eventual sales will start from people Googling your keywords so make sure you are well set up on day one for being found on Google. You’ll likely need experts to help you here.
12. Will doing it alone be worth it for you? It’s common for me to meet one-(wo)man-bands who want to go into business and work for themselves. That’s completely cool but unless you start to build a business, you end up buying yourself a job with more stress than just having a job – and sometimes for the same kind of money. Yes, you might have more flexibility and be your own boss but the power of having your own business is to actually build a real business that allows you to step more and more away from the day-to-day work required to earn money. It also means you have something to sell when you’re ready, which is near-impossible if your business is just you. This will be a gradual thing but it’s a great reward if you are able to make it come to life and is hopefully one of the reasons you want to go into business in the first place.
13. Don’t go into business thinking you will find it easy to raise money. Because of all the media around these unicorn companies that get massive paydays, more and more people go into business with big ideas of being able to raise capital. The last statistic I read was that in NZ, only 2% of people who want to raise capital are able to raise capital. Spoiler: raising capital as a startup is a very hard thing. In my opinion, you’re better to bootstrap so you always spend within your means and learn the value of investing in the right things. I’ve seen plenty of companies who had funding fold, simply because they’ve been able to spend willy-nilly and before long their well runs dry. Having funding constraints brings creativity, which I think is invaluable for new businesses.
14. “By failing to prepare, you are preparing to fail,” said Benjamin Franklin. He’s right – you need a plan. Preferably before you launch, and then a year after that, and then a year after that. Having a good business plan reminds you of who your core customers are, what you need to focus on for better success, how you’re different to others on the market and what you need to do to accentuate that, and what your opportunities are. A good plan reminds you of what you need to work on to take your business to the next level, without being distracted by the day-to-day of your business. A good number of attendees at our Business Changing Planning & Strategy workshops are startups and I love seeing that because it means they’re giving themselves a smart blueprint to have the best chance of success. You can find out next available workshop HERE
15. Truly have a passion for what you want to do in business. To take you to where you want to go, you need a lot of passion as business comes with its ups and downs and if you are doing it without 100% passion, it’s a much tougher road. I’d be holding off until you find the thing you are totally passionate about.
I hope these considerations help you with your decision to go into business! If you get it right, owning your own business can give you the life you have dreamed of, in whichever way you measure success. Good luck!