Starting a New Business: Rules for Starting and Building a New Business Without Going Broke
Here’s the thing; Starting a business is a serious commitment…much more than most people realize. The problem is that you never really know how bad it’s going to be until you’re already in the thick of it. In the next few articles, I’m going to share with you some (very) difficult and expensive tips on the best way to start a small home-based business that will actually make you money and be a source of joy, rather than a rash of expenses. and headaches.
The first is the first; you have to do something you really enjoy. If it’s not fun, you won’t be willing to invest time, effort, and energy into a new business. This is not a flaw on your part, it’s just human nature. Running a business is a totally different animal than taking a part-time job to earn some extra money. No matter how lucrative it may seem, if you honestly don’t enjoy the job, let it go. Life is too short to spend your time doing something you can’t stand.
Look for something in which you have a tremendous amount of knowledge, experience, and passion. People are drawn to passion like moths to flame. Passion sells. Turning a favorite hobby into a small business is usually a good idea. There are several good reasons for this. First, you will have fun! Don’t underestimate the power of fun, in the long run, profitable businesses are fun businesses. Second, you’re probably already an expert on this topic (even if you don’t necessarily think so, others probably are). This is where you can create and deliver unique value to others.
Make sure you stay in the high end. Most small businesses charge severely for their products and this creates a “lose-lose” situation. You won’t be adequately rewarded for your work, and you won’t attract the kind of client who will truly appreciate you.
For example, let’s say you love to work with wood. Building things like dressers and other furniture is easy for you, fun, and you get a real load doing it. Rather than simply building a few “stock” pieces, it would be better to position yourself as a very high end custom furniture designer/builder, using rare and exotic materials, and customizing the designs for each individual client. This will naturally tend to attract people who really appreciate what you do and won’t blink at the price.
Understand that there is so much more to owning a business than just “getting the job done.” It’s about maintaining financial order, learning profitable marketing strategies, project management, communications, effective systems, and more. One of the worst things you can do is fall into the “Build it and they will come” trap. No they will not! What actually happens is “Build it and they will (most likely) ignore you”. True success is usually found in building an interesting and engaging path that people will want to follow (marketing) and then having them ask you to build it.
You have to learn to think like an entrepreneur instead of a “trader”. Continuing with the example of carpentry; Instead of running out and buying a lot of great equipment and tools, you should invest your money in effective marketing. In a future article, we’ll cover specifically what “effective” marketing is and why hardly anyone does it. Getting out of the “trader’s trap” is one of the toughest challenges you’ll ever face, but it’s by far the most profitable thing you’ll ever do.
Many people know that “Samuel Adams” beer was started by a fellow student, Jim Koch, who was an avid home brewer. He had a dream to take his hobby to the next level and turn it into a business. But instead of taking all the money from him and buying a bunch of brewing equipment, he focused on the marketing side of things. The actual brewing was outsourced to another local brewery using their special ingredients and recipes. This allowed him to focus his time, energy, and money on the business of selling beer, rather than just making beer.
This was a very smart move, and one that almost no other aspiring home brew entrepreneur has made. The results speak for themselves; Samuel Adams is now a publicly traded company and made Jim a very wealthy man in the process. Not bad for what started out as a “hobby business.”
Next time, we’ll talk more about how to minimize the risks associated with starting a new business. This is vitally important, because the risk is real. No matter how enthusiastic and optimistic you are, the reality is that eight out of ten new businesses close within the first five years. And not because their owners made so much money that they had to retire. Remember, the purpose of this shiny new business is to make your life better from day one, not some far off day in the never-after future. I guarantee you that won’t happen unless you make sure to plan for it.
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