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Do you want to start a business? How hard it could be, right? Unfortunately, there is no secret sauce. Telling you something else would be a lie. However, you can improve your chances if you do a couple of things before you take the leap and start. These things are not completely bulletproof and success is not guaranteed. However, you can avoid many pitfalls and mistakes and make the process of building a business easier. Without further ado, let’s take a look at how to improve your odds of success.
Last 3 things to do are in part 2.
Start a business and start with a plan
Making a decision to start a business only to close it a month later is not a sign of courage, but a stupidity. Entrepreneurship caught a lot of attention during the last few years. As a result, there are now many people who want to start a business. Whether it is because they think it is cool or because it will bring them a bit of fame doesn’t matter. What matters is that many people start business without doing any research. In other words, they have no idea if their business will be able to become a profitable venture.
Skipping the planning and planning to fail
And, it can get even worse. There is a significant number of people who pride themselves on the fact that they are not planning anything. They decide to start a business, any business, and just take the leap of faith. Who cares about viability of the idea, existing market or potential for creating new one? The same is true about researching potential customers. Who cares whether there are any customers who will actually be willing to buy the product or service? And, what about competition? Let’s not talk about that.
Therefore, it is no wonder that we often read statistics saying that the majority of new businesses fail in the first year. I think that the wording is wrong. It is not that the majority of businesses fail. The majority of business founders fail. There is a difference between a business that failed and business founder that failed. How it would be otherwise possible to have two, almost the same, businesses, one failing and the other succeeding? If the business itself is doomed, then situation such as this one should never happen.
Vague plan is better than no plan
We should stop applaud to people who start a business without any plan, validation or even idea. When someone decides to start a business for the sake of starting a business, we should take it as it as a cautionary tale. If more people start to think and do something to validate their ideas before they start a business, I believe, these numbers often mentioned statistics will soon start to decline. Start a business to solve a problem. Let me give you two interesting quotes on this subject we should keep in mind.
The first quote is: “If you fail to plan, you are planning to fail.” Unfortunately, I can’t tell you who is the real author of this quote. However, it is attributed to Benjamin Franklin. The second quote is: “A good plan violently executed now is better than a perfect plan executed next week.” This one is attributed to General George S. Patton. Both these quotes are important. The takeaway is following. First, have at least some plan, even a very vague. Second, use and follow that plan. Sure, you should change and adjust it as you go, but use it.
Remember, you don’t need to know the exact numbers and have them all in a nice spreadsheet. You also don’t need to know exactly how many people in a specific segment will buy your product or service. However, you should know what problem are you solving and how, who is your target customer, if that customer even exists and is willing to pay for your product, if you have a serious competition, how will you spread the word about your product. You should also have some idea about how much you need to become profitable.
These are only few things you can, and should, include in your plan. Again, you don’t need to know exact numbers. Know the destination, and have some idea how to get there. You will figure out the rest on the go. Just make sure that you are not going completely blind because that is a recipe for disaster.
Validate your idea
So, how can you validate your idea to make sure you will start a business that has at last some chance to survive? There are three good ways you can test your idea. First, you can research the market and look for potential customers. In other words, are there people willing to pay for what you offer? There must be at least some demand for the product or service you want to offer. People must be willing to pay for it. There is a difference between willingness to use something and to pay for it. Aim for the later.
Validating your idea and the problem with customers
Before we move on to the second way, there is one important thing you must know about. Let’s say that you approach a number of people and ask them if they would be willing to pay for your product or service. Chances are that some of them will be interested in making the purchase. This is often also the problem. There is a big difference between being interested in buying a product and actually buying it, customer taking his wallet from pocket and giving you his money, in cash or via credit card.
What this means for you? If you want to really validate your idea before you use it to start a business, start with presales. No, this is not a joke. You should start selling your product or service, and let people buy it ahead (or reserve), whether you already have it or not. This is the only way you can test if someone is interested in buying your product or if someone will buy your product. Keep in mind that the goal is not to get the full prize. And, it is also not about selling ether and cheat your customers.
When you find someone who is interested in buying your product or service, offer her an opportunity to make upfront payment. Ask for a small fee. In exchange, you will place her on the list of people who will get your product or service right when it hits the market. In other words, this small fee will give them the privilege of having your product or service before anyone else. Well, except the people on the list. Although, you could actually gamify it by asking for a higher fee to get a better position on the list.
Validate like a Kickstarter
If you think about it, this is how crowd-founding platforms such as Kickstarter work. There is a person who has an idea. It is not important if she wants to start a business or not. She may just wants to know if there is at least someone who would buy her product. She decides to create a campaign, or project, on Kickstarter, or some similar platform. Next, she sets a specific goal, or amount of money she wants to raise for her project. Finally, she outlines the fees, or pledges, people can pay to support her project.
If her project succeeds, and enough people pay enough money so the project reaches 100% of its goal, or more, she will get the money, minus platform fees. Next, she has to create her product and ship it to her customers. Otherwise, if her project doesn’t meet its goal, people will get their money back. Thanks to this simple system, our potential entrepreneur can really validate her product and see if there is any real demand for it. Otherwise, should would have to rely only on words of her potential customers.
If you have an idea you could use to start a business I suggest you follow similar process. Set up a goal for yourself, how much money is the minimum you want to reach. Then, decide on how much will people have to pay if they want to reserve your product. Also, make sure to set a deadline. There has to be a clear timeframe within which you will do your best to reach your goal. Otherwise, you will stop, return the money you received so far and try a different idea to validate. Remember, always have a clear deadline.
Research existing solutions
The second way to validate your idea before you start a business is by looking at similar products or services people are already paying for. If people are paying for similar products or services, it is a clear sign of a demand. In that case, you can win those customers by offering something much better than your competition. This is usually not the preferred way of building a business in the world of startups, by adding yet another product on the shelf that is already full of other products. However, it can work.
That being said, if you decide to go this road, and start a business by offering a different solution that will compete with other already established products, keep in mind one thing. Your solution should be at least 10x better. It has to be really good. You have to give your customers a clear and solid reason to switch to your product. Your customers have to love it and talk about it. A positive word of mouth is what you want .Otherwise, it will be much harder for you to start a business and transform it into profitable venture.
Create a cushion
Ask people on things to do before you start a business. One of the things they often mention is creating some kind of a cushion or safety net. Put simply, making some amount money and putting them aside before you start a business. The purpose of this money is not to pay for a nice office, new computer for work or package of ads on social media. These money are supposed to help you cover your living expenses for a period of time. Usually until your new business will become profitable enough so you can pay yourself.
Having a cushion to cover your living expenses, such as paying the rent, buying some food and so on is definitely helpful, without a doubt. However, there is another benefit, related to this, that cushion or safety net can give you. Safety net will help you reduce the amount stress you will experience. Safety net will also help you lower the burden you will have to carry. When you decide to start a business, these things will come and make the whole process of starting a business from scratch much harder.
This make a big difference especially if you want to start a business in an area where creativity is a necessity. When you are stressed out from the morning until the evening it is hard just to keep your sanity, not mention to be creative. True, there are tips on how to increase creativity. If you search long enough, I am sure you will find an article saying that stress can enhance creative thinking. And, this might be true. However, there is a difference between being stressed deliberately and forcibly, and chronically.
Anyone working in a creative field will tell you that chronic stress never leads to good results. This may be one reason why many creative people like to take a short break from work, or to take a sabbatical. When you decide to throw the dice and start a business, taking a break or sabbatical is not an option. At this stage, you need to put all your energy into building your business. You can’t think about taking a break and going on vacation. Creating a cushion, or safety net, can help you reduce the stress.
The other side of the coin
That said, some people prefer doing the opposite. For some people, taking the leap and starting of without any cushion or safe net works better. There is at least one reason why idea like this might work. Having your back against the wall force you to do whatever it takes to survive and succeed. When you have no other options, and your whole life depends on what you can do with what you have, everything often gets much more simple. Almost all excuses disappear and your mind becomes crystal clear.
Just think about it. Imagine following scenario. It is the middle of the month. You have just enough money to buy some food. And, to make things worse, you have to find out a way to make money to pay your rent. In a situation such as this one, would you even think about coming up with excuses about why you can’t make the money, and pay the rent? Think about it, just for a minute. Would you try to complain about bad weather, economy, misfortune or about being tired? These excuses would not even cross your mind.
You would instead use any resource available and took any opportunity (legal) to ensure you will have a place to sleep at the end of the month. And, of course, a food to survive and later thrive. As I mentioned, this “back against the wall” strategy can help some people. It can help them set clear priorities, goals and plans. Then, it can help them take the leap, make the first step, and get into action. Laser-like focus on action, not words. So, for some people, it might be better to start a business without any cushion or safety net.
Two important questions
So, should you create some cushion or safety net before you start a business? There are two questions you should answer. First, how do you deal with stress and stressful situations? Second, is there anyone else who depends on you? There are people who handle stress very well, they are even motivated and energized by it. For these people, stress is something that helps them perform on a higher level, not something that is overwhelming. If you are one of those, then it might be better to start a business without any cushion.
However, even if this is true, there is still the second question, which is even more important. Is there anyone else who depends on you? If not, and you handle stress very well, go ahead and start a business without a cushion. Otherwise, I suggest creating some cushion, if not for yourself create it for the other person. It is one thing to be responsible for your own life. It is something different to be also responsible for else’s life. You may handle stress and build a profitable business. And, you should have a firm believe in both.
However, your personal beliefs should not put someone else’s life and living in danger. So, go ahead and start a business without a cushion for yourself. Just make sure you can take care of expenses of people working with you on your dream. Otherwise, take these people on board when your business becomes profitable enough that you can pay them wages. Until then, do as much as you can either by yourself or look for part-time employees or freelancers. Trust me, you can learn and do much more than you would think.
The final question
It is up to you to decide whether you create a cushion before you start a business. In case you decide to do it, there is one last, and important, question. How big should your cushion, or safety net, be? In other words, how much money should you put aside? My answer will surely please you. It depends on how much do you, or the person that depends on you, need to cover your living expenses. The higher your expenses the more you will need to put aside. And, you should put aside enough to cover six to 12 months, plus or minus.
Closing thoughts on things to think about before you start a Business
The decision to start a business is one of those that can change your life. This change can be either positive or negative. Many businesses started and survived the first months, before they got a traction, thanks to certain amount of luck and also good timing. These, and others, are factors you can’t fully control or predict. However, there are also factors we can, at least to some degree. And, we should focus on those and do what we can to improve our odds of success. I hope that this article will help you with it.
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