You can listen to this podcast (instead of reading it) in the tool below, and you can subscribe in iTunes here.
I started my business in 1991 with $15,000 that I had saved over the course of three summers running an in-ground irrigation company in Montreal. I borrowed $15,000 from the Royal Bank, so my total startup costs were $30,000.
Let’s ignore the fact that I was down to my last $500 by the spring of 1992 and very close to closing the doors. I barely made it through the first year in business and was close to becoming one of the 95% of business casualties that don’t make it past the first few years in business, so in many respects, some of the feedback I provide in this post is from experience on what I did wrong.
On the other hand…
I of course now have the experience of hindsight. I’ll share some of my start-up mistakes with you, so you don’t have to make the same ones yourself.
And now, I receive no fewer than 5, some days 10 emails a day from budding entrepreneurs from all over the world who are asking me for help with how to start a business.
I find myself in a similar email conversation with each one, so the purpose behind this post is to help those budding entrepreneurs who are wondering where to begin, and who I can now point to this post.
Before you embark on your new journey, it’s important to remember that 90% of new startups fail.
90% is a very ominous figure.
I’m not trying to scare you, but the reality is that building a successful business takes a lot of work. Not just working hard, but working smart.
And most are probably doomed from the start, not because of lack of hard work, but rather smart work.
And the first step to working smart is to have a business plan. Operating without a business plan is like traveling to a destination without a map. You wouldn’t do that, would you?
So that’s your very first step.
2. Create a Detailed Business Plan
Having a plan isn’t about predicting the future, but rather, it’s about having the discipline to think through all the necessary steps required between your first day in business and your next few years.
I know you have a great idea, but will people buy what you’re selling?
Let me ask another way.
How do you know people will buy what you’re selling?
And how many widgets do you need to sell to break even?
Preparing a business plan isn’t just about producing a document that you’ll need to give to a lender. It’s about thinking through your idea and setting goals.
Your business plan should, at a minimum, consist of the following elements:
- Executive summary
- business description
- market research
- description of services or products
- management structure
- marketing and sales strategy
- financials
You might think you have a great idea, but putting it in writing will force you to think through all of the above.
Important: don’t let Excel be the reason your business fails. Read more about why I believe that Excel can kill your business in this post.
You can plug anything into Excel and make an otherwise crappy business plan look amazing. If you need an extra 2,000 widgets to reach profitability, then stick that into Excel. Bingo. Your business now looks better. If you need 4,000, go for it. Stick 6,000 into Excel, and you’re a millionaire.
Excel can make a crappy business look outstanding, so you need to be realistic with your numbers. And in order to be realistic with your numbers, you need to have a detailed marketing plan. Here’s a snippet of what I wrote in the following blog post:
Why do so many entrepreneurs believe they should open their business first, then figure out how to sell and market their product, well after the business is open?
If you’re trying to figure out how marketing and sales work well after you’ve opened your business, it’s no wonder that your business is struggling, your sales are stagnant, your business isn’t profitable, and you’re having a problem keeping the lights on.
Your business plan must include a detailed section on market research.
Here’s an interesting chart that I found that details why companies fail.
Did you notice the number one reason?
“Business model not viable”
Yes, I know your idea is the next Google. I also know that the world will knock down walls to buy what you’re offering.
But really? Will they?
How do you know what you’re offering will sell?
You need to do market research.
Your market research should include some detail about the total scope of the market available for your product or service. You should include the competitive analysis and projected margin.
2. Find Funding for Your Startup
No money, no business.
Well, that’s not entirely true. It is possible to start a business on a shoestring budget, but that’s probably not the best idea. The ideal scenario is that your business is properly funded and that your first two years of startup projections are realistic.
Now, take your two-year projections, and stress test them.
What happens if you’re only able to achieve 60% of your projected first two-year revenues? Can your business survive?
Keep in mind, 82% of business failures are due to poor cash flow management
Knowing this, it’s critical that you’re realistic with not only your projections but funding requirements, and now that you have your business plan in hand and know how much cash you’re going to need for the next couple of years, you can now determine how you’re going to raise your funds.
Some options include:
- Friends
- Family
- Angel investors
- Venture capital (VC)
- Small business loan from the bank
- Self-funding
If you are going to seek external funding, especially from an angel, VC, or the bank, it’s especially important that your business plan is complete and thorough.
Once you have your funding in place, you’re now ready for Step 3.
3. Establish your Team
Who is going to help you go to market?
It’s unlikely you’ll be able to do everything yourself. You’re going to need someone to help with the marketing, branding, website, content creation, accounting, legal issues, real estate, insurance, assistants, and whatever other staffing requirements your business might need.
I use the website Upwork.com to source talented individuals from all over the world. I did that when I was running my larger company and continue to do that today. Here’s a sample of a job that I posted a couple of weeks ago when I was looking for someone to do video editing for one of my videos. Notice that I received 26 proposals?
As of now, I outsource work from the following people in the following countries:
- Video editing (Venezuela)
- Copy editing (USA)
- Graphic design (Bangladesh)
- Book layout (USA)
- Facebook advertising consultant (UK)
- Trademark (USA)
- Social media marketing (Bangladesh)
I have assembled an amazing team and have sourced people from all over the world, some at labor rates well below what I would otherwise pay in Canada.
4. Marketing, Branding, and Web Design
If you don’t know how you’re going to market your business, don’t open your business.
If you don’t understand the nuances of marketing, in particular, the following, then don’t open your business, yet. If you are not certain you have enough skill to create your website, asking for some help from the best web design companies in Los Angeles is a step in the right direction.
Figure this out first:
- Landing pages (squeeze pages)
- Facebook advertising
- Google PPC
- Search engine optimization (SEO)
- Content marketing, blogging
- A/B testing
- Mobile advertising
- Email marketing
5.Never Forget Who Your Boss Is
Yes, I know you’re the President, but you still have a boss.
Any guesses about who your boss is?
Bueller? Bueller? (From the movie Ferris Bueller’s Day Off. If you haven’t seen it, you gotta. It’s a classic.)
Your boss is your customer.
Customer Service is Key
There’s an expression. If you don’t take care of your customer, someone else will. Especially since, and this is an estimate, over 40% of your business will come from repeat customers.
In fact, 89% of companies see customer experience as a key factor in driving customer loyalty.
It certainly makes it a lot more difficult to build a business if:
- You have to constantly chase new customers.
- Your business doesn’t have an element of recurring revenue.
So treat your customers like gold, and build your business so that as much of your revenue as possible is recurring.
There you go. You now have the 5 steps you need to take to get your new business idea from paper to launch and to infinity and beyond. Now, before you go, I publish 2 blog posts a week on entrepreneurship and growing a business. Do you want more inspiration and articles like this? You can subscribe to my blog post here, and, you can download my number 1 business and non-fiction book, free, here.
______________________________________
Want to know more about me and read some of the other interesting small business growth, profit and wealth stories I’ve written.
Here’s one of the first articles I wrote: My Journey Post Business Sale as I Sail Into a New Harbour.
Are you a younger entrepreneur? Here’s another interesting article I wrote:
My Response to an 18-Year-Old Who Wants to Become a Millionaire by the Time He’s 30.
