July 27, 2012
Doug Richard is fond of saying, “All businesses are not created equal.” One of the reasons he founded School for Startups was to help new business owners learn how to evaluate business opportunities the way investors do.
Entrepreneurs put time, energy and money into every business they start, and they give up the opportunity to put those assets in other businesses. So choosing a business to start is a crucial decision. Starting the wrong business will cost you both time and money you could better invest in other things and there are only so many businesses you can afford to start in a lifetime.
Many of the students who attend our one year School for Startups and School for Creative Startups courses come to us with an idea for a business they think they would like to start then end up dropping it to create a new business they find they like much better. Even those who already have enterprises they’ve been running for a while have been known to let them go in favor of starting a new business with a fresh slate and a much better chance of success.
For most entrepreneurs, particularly creative entrepreneurs, what matters most is having a business that pays them well to do what they love. We teach them that their skills and resources can build businesses of many shapes and some of those enterprises will, by their very nature, cost less and pay more than others.
For example, you may think you want to start a restaurant because you love to cook. But you could also start a catering company, put your enterprise in a gourmet catering truck, or just serve your excellent food at markets and fairs. Choosing the right opportunity for your kind of food and the lifestyle you want to lead will ensure you spend more time making and selling great food to wonderful people at a great profit.
If you have been running your business for more than a year and are still not operating profitably, chances are good your startup is under performing and you can take steps that would vastly improve it.
There are exceptions to this rule. Software development companies, some web based enterprises and companies that depend upon tooling up factories sometimes don’t see any revenue at all in their first year, for example. But those businesses, when they are going to be successful, often have their first customers lined up long before they start work. Getting orders before you have a business is one of the things we teach people how to do.
If you are starting to wonder if the business you want to start is likely to succeed, or if the one you’ve already started has what it takes to survive, here are some questions to ask yourself.
Do you know exactly who your customers are and how to reach lots of them for nothing or almost nothing? Do you know where and how they decide to buy your product, what makes them choose one product over another other than price, and how they like your kind of product or service delivered? If you can’t answer these questions in the affirmative, you have a serious problem. Many people start their business to create a product for people they don’t know at all. A sculptor who doesn’t know who buys sculpture or why, a fashion designer who doesn’t know where folks who buy their kind of fashion shop, an application developer writing accounting software when they don’t know lots of accountants ready to buy it are all going to end up developing a product they can’t sell.
Do you know how to price your product or service? Do you know how to set a price that your customers will understand based upon the features and advantages offered by your nearest competitors? Does your price reflect that what you’re selling is a good value? Does it leave room for you to cover your cost of production, your cost of marketing, your salary and the margin you will pay to your resellers and strategic partners? If you get pricing wrong you will have a serious problem on your hands. Startups should almost never compete on price. They shouldn’t have the lowest prices because they almost never have the returns to scale required to produce more for less than their competitors. That means, as a startup, your price should probably be in the middle to upper middle range of prices relative to your competition. That means you have to offer more value (but perhaps not more features) than most of your competitors provide to some target market that is willing to pay a premium for exactly what they want.
Do you know how to sell? To sell a product or service online you must be able to sell it face to face. You need to know your customer, your product’s benefits relative to the competition, and why your product or service is priced correctly. Once you can comfortably sell your product face to face, you can then begin to sell it online through your website, online channels and social media. You can sell it to resellers and tell them how to sell it to others. You can sell it to distributors and explain how they can sell it to resellers. You can sell it to marketing partners who can extend your visibility to customers worldwide. If you don’t know how to sell, your business will struggle.
It sounds like a lot to learn doesn’t it.
But the cool thing is, once you learn how to build one startup, you know how to build a dozen. If you have friends who own businesses, you know that they start enterprises the way other people find jobs. Sometimes their businesses fail because the economies they depend on change or the customers they need find a replacement for what they sell, but entrepreneurial people always seem able to build another business when they need one.
Doug founded School for Startups and School for Creative Startups to help people start better businesses more quickly.
“Entrepreneurship can be taught and must be learned,” is the the core principle our social enterprise is based on. Working with dozens of UK Universities, lots of commercial sponsors, as well as local and national governments, we’ve trained well over 10,000 entrepreneurs since 2008 . . . and we help new people all the time.
If you have a creative startup you’d like to get rolling, visit School for Creative Startups and look into our one year program. Apply for one of our sponsored spaces and join us for a full year of exceptional instruction and mentoring.
We look forward to ensuring your new business gets off to a great start.
