Career Plug: Most businesses already use customer relationship management (CRM) software to optimize their sales operations.
If you want to run your own business, you’ve come to the right page. Being an entrepreneur is a high-risk, high-reward position. It’s full of stressful situations, sure, but it’s also chock full of rewards and a sense of accomplishment. It’s not as hard as it seems — as long as you have some diligence, patience, and, of course, a good idea, you’ll be your own boss sooner than you think!
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Setting Your Foundations
Brainstorm a great idea.
Most businesses start with one compelling idea — whether it’s a service people need, a product that would make life easier, or something that combines both.
The business world is full of great ideas (and many not-so-great ones).
What will set yours apart is whether you can find a niche need to fill.
- You don’t necessarily have to do something revolutionary or brand-new to be successful.
- You just have to be better at something than your competitors.
- You will likely be more successful if you do something you know and love. Going into computer programming might make your business very marketable, but if your heart’s not in it you won’t have the energy to keep yourself going.
- If you’re having trouble thinking of an idea, create a list of things about your target market, such as places they shop and things they purchase. Narrow the list down to about three items, keeping cost, manufacturing time, and popularity in mind. Find the easiest, most realistic product you can offer.
Research your market.
The key to starting a business is to know whether there is a demand for your product or service.
Is what you can offer something that is not being done as well as it could be?
Is it a need that doesn’t have enough supply to support demand?
- There are many sources of free industry information. Search online for industry and trade associations in your target market and read the articles and press releases they post. You can also get valuable demographic information from census data.
- The U.S. Small Business Administration has a website with excellent suggestions on how to come up with venture ideas, conduct market research, how to write a business plan, and how recruit investors. It is an invaluable source of reliable information if you’re starting a business.
Talk to potential customers/clients.
You can have the greatest product or service in the world.
But if nobody wants to pay you for it, your business will crash and burn.
Talking to others will also help you prepare to persuade investors.
- Ask for honest feedback when you talk to potential customers.
- Your friends may try to be nice to you when you propose your idea, but critical feedback that points out weaknesses or problems will be much more useful, even if it isn’t always easy to hear.
Determine what you can risk.
Entrepreneurship is always a game of risk and reward, but often the risk is greater (especially in the beginning).
Take stock of all your assets and figure out how much money (and time and energy) you actually have to invest.
- In addition to considering your savings, credit, and other sources of capital, consider how long you can afford to go without making a profit.
- Small businesses are rarely profitable immediately; can you afford to not draw a salary for perhaps several months or even a few years?
Understand the idea of “acceptable loss.”
Writing Your Business Plan
Create a business plan.
A business plan typically describes what your company does (whom does it serve? what does it provide?), provides market analysis, includes a detailed description of the product or service, and projects the expected financial future of your company for the next 3-5 years. If you are hoping to attract investors, they will want to see a detailed, thorough business plan.
Write a company description.
This should be a brief summary of what your business does, what needs it satisfies and how, and why it is superior to other ventures of its kind.
Be concrete and specific, but keep this short — imagine it as an “elevator pitch”
Present your market analysis.
If you have done good market research, you should be able to talk in specifics about your chosen industry or field, your target consumer market, and your projected market share. This section should be as detailed as possible, as it needs to convince investors that you know what you’re doing.
- One of the mistakes many beginning entrepreneurs make is failing to narrow their target market and trying to sell to too wide an audience. While it’s tempting to believe that everyone needs and will love your product or service, the reality is that they won’t. It’s okay to start small.
Include a section on organization and management.
Even if your company is only you at this point, use this section to provide information on who owns your company, what their responsibilities are, and how you will structure your business as it expands. (Will you have a board of directors? How will your employees be organized?) Investors want to see that you have thought about the future of your company.
Provide information on your service or product.
This is where you can get into the specifics of what exactly your business will provide your customers. What are you going to provide? What need will it fill? What competitive advantages does it have over other similar products?
- Provide details from potential customers’ points of view. If you have already talked to potential customers, you should have a good idea of what their opinions of your service or product are.
- If you are planning to sell a proprietary good or service, including any patent information or other ways you plan to protect your intellectual property. Investors don’t want to invest in a business only to have their product scooped by a competitor.
Describe your marketing and sales strategies.
Outline a funding request.
If you are seeking investors or a bank loan, you will need to state exactly what you need to get your business started.
You should include any amount you are investing in yourself.
How much money you need from your investors, and (most importantly) how you plan to use this funding.
- Investors like specifics. A funding request that just says “I need a million dollars” is less likely to be persuasive than a request that breaks down costs and expenditures.
Outline your financial projections.
If you’re just starting out, you won’t have much historical financial data to work with.
You should include any collateral you have that can guarantee your loan.
But only list what you can truly afford to lose.
- You should also include information on prospective financial data.
- This may seem like simply making up numbers, but it should incorporate the data from your market analysis.
- How well are your competitors doing? What do their expenditures and cash flows look like? You can use these to help you make projections for your company.
- Make sure that your financial projections match the figures in your funding request. If your projections show that you will need $500,000 but you’ve only asked for $200,000, this could suggest to investors that you haven’t done your homework.
Include appendices, if necessary.
If you are just starting out, you may want to include other documentation to boost your credibility.
Items such as letters of reference that can speak to your qualifications and skills or credit history may be useful.
Write your executive summary.
This actually goes at the very beginning of the business plan.
But you’ll need to wait to write this until you’ve thought the rest of the plan out.
The executive summary is a “snapshot” of your venture as a whole: its goals, its mission statement, and an introduction to yourself and your company.
As a new entrepreneur, you should highlight your background and experience with your chosen product or service. It should be no longer than one page.
Preparing Your Pitch
Develop an elevator pitch.
This type of pitch is called an elevator pitch because it should be concise and informative enough to let someone know who you are, what your business does, and why they should be interested — all in the time it takes to ride an elevator.
- First, consider the problem or need that your venture addresses. This is often effectively stated as a question, which is why TV advertisements often begin with questions such as “Did you know that….” or “Are you tired of…” or “Have you ever had a problem doing…”.
- Second, consider how your product or service fixes the issue you’ve identified. This should be no more than 1 or 2 sentences but should be as specific as possible without getting into jargon.
- Third, describe the main benefit of your product or service. This could be a description of how it achieves something for the customer, or how it outperforms your competition.
- Finally, consider what you need from investors to get your venture going. This part can be longer because it needs to express your basic needs, your experience and credentials, and why your investors can trust you to succeed.
- Keep your elevator pitch short! Many experts suggest that it should not be longer than one minute. Remember: attention spans are short. Hook your audience quickly, or you may not hook them at all.
Create a PowerPoint that summarizes your business plan.
This should summarize all the information in your business plan.
You should be able to deliver it, without rushing, in about 15 minutes.
Practice your pitches.
Ask for feedback.
Taking Your Ideas to Others
Network, network, network.
Attend trade and industry shows in your field and talk with exhibitors.
Join relevant professional associations.
Build a strong social network with other entrepreneurs, both online (using social media and professional sites like Linkedin) and in person.
- Attending networking events such as local fairs hosted by your chamber of commerce is a great way to connect with other entrepreneurs in your area.
- These connections can provide you with support, ideas, and opportunities.
- Be generous to others. Don’t consider networking with other entrepreneurs only in terms of what they can give you. If you offer advice, ideas, and support to others, they will be more likely to want to help you as well. Nobody likes to feel exploited.
- Pay attention to others’ ideas. Even if you’re in direct competition with someone, you can probably still learn from them. You can learn from others’ mistakes as well as their successes, but only if you listen to them.
Develop a strong brand.
You need to be able to effectively communicate your business to others in person and online, and that means having a strong brand presence.
Professional-looking business cards, a website, and social media accounts (Twitter, Facebook, Pinterest, YouTube, etc.) that provide information about your business in an attractive, cohesive way will help show that you’re serious about your venture. It will also give people the opportunity to look you up and learn more about you.
- Look at the websites and branding of some successful companies. See what they have in common, what they do that’s interesting, and try to emulate that formula with your own brand. (Never steal or copy someone else’s intellectual property, though.)
- Consider starting a professional blog, especially if you are in the service field. This can be an excellent way to show off your experience and ideas and help investors and customers get to know you.
Ask network contacts to refer you to investors.
Chances are, you know someone who knows someone who’s looking for something to invest in. Many investors won’t consider “blind submissions” (business plans sent without invitation) but are happy to hear a pitch from an entrepreneur recommended by someone they already know and trust.
- Remember to return this favor whenever possible.
- People are more likely to want to help you if they feel that you will help them when and if you can. Goodwill is essential for an entrepreneur to have.
Pitch your idea to any potential investor to get money to start your company.
The type of business you’re starting will help determine who wants to invest in it.
Networking is an excellent way to hear about investing tips and opportunities.
- Keep in mind that venture capitalists (often referred to in the business world as “VCs”) are focused on two things: how much money investing in your business will make them, and how soon that profit will happen. While hundreds of thousands of businesses are started every year, only about 500 a year get VCs as investors.
- If you are providing a professional service, such as consulting, accounting, law, or medicine, consider forming a partnership with someone who is already established in that profession. Someone who is familiar with your field (and your knowledge of it) may be more likely to invest in your success.
- Starting small and pleasing a small number of customers at first is a high-probability way to get there. If you can get your business started without spending a lot of money, that might be your best route.
Having a Healthy Mindset
Understand that there is no one-size-fits-all approach to success.
Not every successful entrepreneur needs the same amount of sleep or goes to bed before midnight. Winston Churchill stayed in bed until 11 a.m., because he liked working in bed. Albert Einstein slept 12 hours a day because he felt that it gave him much more clarity. It seemed to work perfectly for them.
- Don’t just follow the same routines the most successful people adhere to. Create your personal routines.
- Make time for yourself and your routines, especially when you are busy.
Create a business plan that fits into your life, not the other way around.
Much of the advice for entrepreneurs is centered around finding ways to make time for themselves between their business activities.
Do it the other way around and find a business structure that fits into your life.
- Evaluate if your personal goals are still compatible with your business goals.
- If yes, and you are energized and motivated, then keep going! If not, try to find ways to make your business fit into your life better.
Avoid loss aversion.
Is your investment in the business is the only reason that is keeping you from reinventing your business?
It’s a common but also very irrational thought.
The psychological phenomenon -of loss aversion- describes why this feeling is irrational.
Loss aversion makes us feel more depressed at the loss of $100 than happy at winning $100.
- For instance, it’s a typical mistake that stock investors make. After buying a stock, investors are likely to hold on to their stocks even though they may have lost a tremendous amount of money. People just hate to sell something at loss. They hold on to the stock although the most rational action would be to sell their losing stocks and invest what’s left of their money in a more promising stock.
- Cut your losses and reboot. Come up with a better strategy and do not focus on what you have lost but focus on what you can win with your changes.
Starting your business while you have another stream of income can be less stressful.
- Try to obtain a part-time position, where you can learn valuable lessons for your own business in a related industry, learn a transferrable skill (like marketing and SEO) or where you could network in your business area.
- Don’t expect to build your empire overnight, it is totally normal to start out small.
Take a vacation.
Examining Your Personality
Think about your priorities.
Ask yourself some questions about what you want out of life, as well as out of your business.
What does achieving your goals in life look like? What is important to you? What are you willing to sacrifice?
- Consider what you need to make these priorities and goals happen.
- Is it a certain amount of money? A certain amount of free time to spend with friends and family?
Decide whether your personality is a good fit for entrepreneurship.
Becoming your own boss is a goal for many people, but some people are better suited to this lifestyle than others.
Knowing how you are likely to react to events will help you achieve your goals.
- Are you comfortable with a lot of responsibility?
- Entrepreneurs often have no backup and are responsible for the success or failure of their business.
- Do you enjoy interacting with people? Almost all entrepreneurs have to do a lot of customer service, particularly at first. If you aren’t good with people, you may have difficulty getting your business off the ground.
- Are you able to accept uncertainty and even failure? Even the most successful entrepreneurs — for example, Bill Gates, Steve Jobs, and Richard Branson — have had businesses fail on them, often several times, before they found a formula that worked.
- Do you thrive on problem-solving and creative solutions?
- Entrepreneurs at all levels face many problems that they need to find creative solutions for. A high tolerance for frustration and the ability to think through problems will serve you well as an entrepreneur.
- Meet other entrepreneurs to assess whether being one yourself is a good fit.
List your strengths.
Be honest with yourself as you consider your strengths and weaknesses.
When you talk to potential investors or sell to clients.
You will need to have a very clear idea of what your strengths are so you can communicate them to others.
Determine to succeed.
Energy and determination will get you through many of the hurdles you will face as a beginning entrepreneur.
Be idealistic enough to believe in yourself, but pragmatic enough to examine the realities of your situation.
You don’t necessarily have to go it alone.
Particularly for new startups such as law firms or restaurants, having a team of people with experience and skills in the field will boost your chances of success.
Entrepreneurship is hard, even when you’re successful. Try to maintain healthy relationships with your friends and family so that you have the emotional support you need.
Don’t get complacent once you’re successful. Businesses have to continually adapt to changing market needs and customer demands, even when they’re doing well. Continue to network, communicate with customers, and innovate.
Ask for customers’ feedback about your products. This helps to know what to improve on your products.
8 out of 10 small businesses fail in the first 18 months. Even if you do everything right, failure is always still an option, so while you need to believe in yourself, you also need to understand the risks you’re taking and accept the possibility that your first business won’t work out the way you wanted.