What I wish I knew before starting a business

So it’s been almost a year ago since I served my last day as an ’employee’ (time really does fly!!).  In truth I had emotionally ‘tapped out’ some time before then and had reached the stage where it just ‘felt right’ to move on and give what had, up to that point, been a part-time hussle a bash.

A year later and I think it opportune to reflect on what I wish I had known before I took the plunge into the dark unknown that is ‘entrepreneurship’ with all it’s bumps, highs, lows, surprises, victories and defeats. Surprisingly, most business owners wouldn’t have it any other way. It’s a badge of honor that we  wear proudly.

 

1.  Running your business is your number one priority.

Perhaps the biggest misconception about starting your own business is that your only focus is on chasing your passion and that you will have all the time in the world to do so or that you have the luxury of focusing only on what you are good at (hopefully you have started a business that you are at least relatively competent in to begin with) – that’s an ABSOLUTE LIE!  In other words, you’re not just going to be making handmade jewelry, cooking on your own food truck, or designing websites 24/7. That’s maybe going to consume 15% of your time.

Instead, you’re going to spend a bulk of your time on developing business strategies, marketing, selling, interacting with customers, and doing administrative tasks like bookkeeping, invoicing, and payroll. In short, you’re a business owner first and then a web designer, chef, or creator of handmade jewelry.

I know this isn’t what you signed-up for, but the sooner you realize this fact, the sooner you’ll be able to launch and maintain a successful business because while you are focusing on your passion there needs to be something in place to make sure that the rest of your business can still function.

The Solution:  Be diligent in setting up data driven processes and goals (whether formally or not but just do it) so that every element of your business can function and be tangibly tested to see if it’s what you would expect or not.  It’s that simple!  That will allow you to start gathering data around your entire business (not just the bit you are passionate about) and make decisions from a simple viewpoint of how much money / value a particular way in which you operate is making or costing you and how best can you improve it.

 

2. If you have crap customers it’s your own fault.

Not all customers are kings – and it’s your own fault. Although there are plenty of service gurus out there that will tell you that you should go out of your way to satisfy – even delight – each and every customer (it’s a valiant goal I tell you), anyone with a bit of business experience will know that in some cases that is just impossible.

Yes there are some customers who are just blatantly out to exploit you but this is by far the minority of customers.  In a lot of instances it just boils down to (particularly when you are just starting out) that your own processes, assumptions, services etc do not match what you are able to deliver.  A couple of typical scenarios when you just start out to watch out for…

•  A customer approached you for work, you provide a more than reasonable quote (you are hungry for business after all), customer asks for a discount = DON’T DO IT!
• Customer wants your product/service but ‘can’t pay right now’ but still wants to start the work now and will pay ‘as soon as they can’ = DON’T DO IT!
• Customer wants an initial product/service for free because they are absolutely certain they will bring you in loads more business in the future = DON’T DO IT!
• You get approached for work you kinda think you might be able to do if you had some help but you really are no expert on so thumb-suck a quote = DON’T DO IT!
• You get approached by a company to ‘partner’ on a project where you will need to work for free but will get some of the future revenues when they are realised = DON’T DO IT!

The simple truth is if you are offering a great service then your clients should pay fair value for it – both parties need some skin in the game in order for both of you to give of your best in the partnership that you in essence are entering into.  The above list is not exhaustive so comment below with some additions!

The Solution: A good exercise to perform is to use the 4 P’s.  Grade each customer on 4 criteria:

Price. What price do they pay you? Do they pay a full price or constantly ask for discounts? Or perhaps you on boarded them via a highly reduced price and thus the rate is lower than others?

Prospect. What is the prospect of getting more business from them?

Promotion. Is having them good for promotion? Are they a well-known brand that looks good on your clients list?

Pain. Are they easy or a pain to work with? Do their projects run smoothly or do they cause delays with unreasonable demands, conflicts and so on?

Create a chart and plot all clients against those criteria on it. You should very quickly see potential clients to drop. Sure, it’s not an exhaustive system. But even this simple exercise can help you identify clients you should take a closer look at. Also, it allows you to identify your most cherishable customers.

A caution though – be honest in doing the above when appraising whether the reason your customers are ‘crap’ is not due to your own lack of clarity in setting boundaries or setting unrealistic expectations you’re unable to keep.  Typically you are part of the problem even when your client is a ‘No’ against the 4 P’s.

 

And remember…

 

3. Your business needs you to grow for it to grow.

This may sound cynical, but most startups / small businesses fail (or at best barely scrape by). You should do everything you can to put the odds in your favor (e.g. working at a stable company for as long as possible to make sure that you have a strong launch, choosing the right team members, iterating, etc.).

However, there is always a chance that your company will fail. You need to be brutely honest and ask yourself what skill sets you are developing and how they will make you more valuable, regardless of whether or not the company succeeds. If you can learn to sell, code, or pitch, which will truly increase your value?  At the end of the day you as the business owner in many respects are the business so if you are not growing how can you expect your business to grow as well?

The Solution: Read extensively, attend events and seminars, talk to people, listen to podcasts and above all else Google the crap out of anything and everything associated with your business, industry and every other cliche topic you can think of!

 

4. It’s TOUGH.  Like seriously T.O.U.G.H.

Like Sisyphus pushing that boulder up hill, running your own business is flippen hard. There are a lot of three steps forward, two steps back type of situations … and some zero steps thrown in for good measure. Sometimes that boulder doesn’t budge an inch.

And you spend a lot of time on the brink. Sometimes it’s a financial brink, sometimes it’s an emotional one, but you end up living on that edge. If you’re doing well and hiring, you run into cash flow problems since employees get paid every week or month and clients only pay you after 30 or 60 days (or even longer at times).

When you talk about it with other people, you’ll share the good stuff because no one likes to hear the bad stuff and there’s no fun in reliving the challenges, especially the emotional ones that sound silly when you say it out loud. The only people who understand those are those folks in your industry.

The solution: Find other business owners you can talk to, preferably in a variety of businesses. Build your own community or find one to join, it’ll help your sanity in ways you can’t imagine. If nothing else, find at least one person in a similar situation you can talk to. Just one will change your entire outlook.

 

5. Celebrate even the tiniest victories.

I have a two-year old son (going on three) and it’s one of the toughest most awesome things being a parent.  It’s getting so unbelievably excited when your child smiles at you or how they babble ‘Da-Da’ for the first time – you go crazy with joy (even though it’s nowhere near perfect and if you had to do that people would think you are crazy).  Or how in hindsight you can laugh at how your baby vomited or pooped on you – it wasn’t funny then but it is now!

Starting a business is alot like that.  It’s a lot of the same thing over and over again until it’s mastered then only do you head towards the next milestone and learning to get excited beyond measure at each small victory no matter how imperfect or small while being able to laugh at your defeats.  Sometimes it’ll be a good financial day, sometimes it’ll be a good PR day, and sometimes it’ll just be a customer telling you that your business is awesome or that you helped improve their lives in a small but meaningful way.

As your business grows, the victories become relatively bigger, more frequent, and hopefully, you reach an escape velocity where things start to soar. But to reach that point you have to continue grinding onward and upward, celebrating those little victories so you remain emotionally invested (& sane!).

I remember in our first year we made like hardly any money (most of the year was us just still deciding what the hell it was we wanted to do even though we had technically officially registered our business). We completed a technical analysis for a VC in a startup they were looking to invest in which took us about two weeks and got paid (it was the biggest single payment we had received at the time) – we went for supper at Signature – a very larny restaurant.

In hindsight, we could of be more frugal with the money but we were excited and that excitement of seeing some growth carried us for months after!

 

6. Know what makes your business tick.

Numbers will tell you everything. If you want to understand a business, get the numbers.

How much does it cost to get a customer? How much is that customer worth to the business? If the cost is greater than the worth, you have yourself a problem. If the cost is less than the worth, you need to invest in ways to get more customers!  Business is as simple as that.

If you don’t know those numbers, then you need to make a plan quickly to find them out.

And don’t be afraid of the numbers. If you’re one of those people who says “I’m not good with numbers.” then you need to save yourself some heartache and not try to run your own business. Or get better at it and the only way to get better is by running towards them and not away.

The Solution:  Take time out at least once a month (more would be best) and work through where you are making money, what products/services are the easiest to sell, what do you spend your money on each month, how much do you spend to get a client, how much do you spend in order to deliver your product/service and how much do you spend on supporting/maintaining your product/service.  And if numbers are not your thing then enroll in a course to get to grips with the basics – Coursera has a free course for non-finance people.

 

7. Not everything that shines is gold.

So this might seem counter-intuitive but you should not chase every opportunity that presents itself.  For a small business with bills to pay this can be incredibly tough but trust me, in the long run, it just doesn’t pay and here is why – your aim is to become the unrefuted expert for your chosen field and to not just be able to perform a job but to absolutely blow the socks off when you do so – this level allows you to make the money you deserve instead of fighting over scraps.

The only way to achieve this is to be consistent – monomaniacally so!  So everytime a ‘potential’ opportunity presents itself you will make two typical trade-off’s:

• If you have even a semi-decent skillset/service there is no shortage of ‘potential’ opportunities but in most instances these opportunities require you to shift (even if slightly) what you actually set out to accomplish or offer as your USP.
• Every time you need to meet someone, prepare a proposal, research something you think you can do but are not too sure of etc you are using valuable time.

Both of these shift your focus and in severe instances waste loads of your time and money.

The Solution:  Don’t be afraid to pass up a potential opportunity if you feel it is not something you can absolutely nail or if the client does not want to meet your fees.  A good approach is to politely decline the offer and refer the person to a colleague/competitor who you feel can meet the clients expectations.

 

8. Have fun.

HAVE FUN.

It’s hard to celebrate little victories and have fun while you’re in the trenches. When you have your head down and you’re working hard, taking a break and having a little fun seems counterproductive. Why take a vacation when you have to keep pushing in order to pay your bills?

But those vacations keep you sane. Those breaks give you the opportunity to think about your business instead of just grinding away and working in your business. When you’re sitting on the beach or hanging out in a cafe, the down time will give you a chance to re-energize, re-focus, and think about your business. You’ll realize a lot of things because much like how you can think of solutions to a problem while you’re in the shower, your brain will keep working on the problems while you relax.

Good luck and if you ever need a friend to talk about business, let me know!  And if you have started a business and are looking for a technical partner who can work with you to make your business awesome then give MTYsquared a shout!