By Kevin M
Starting a new business is often a process of navigating a series of challenges. The greatest ideas can land in a ditch for unforeseen reasons. In fact it’s often not a bad concept that causes a new business to fail, but a lack of staying power. Starting a business should be thought of as a long term plan and not a get-rich-quick scheme.
Motivational author and speaker Robert Ringer provided a user-friendly re-definition of the concept of positive thinking as positive thinking through assumption of a negative result. You don’t assume failure, but you anticipate problems and prepare for them.
There is a constructive difference between true optimism and blind optimism. True optimism is based on solid planning—it springs from preparation and planning. The more common blind version rests on vague concepts like an idea that’s “too good to fail” or “I’ll succeed because I’m me, and I believe in me”. That kind of hype can quickly vaporize in the face of an empty bank account or a failed business deal.
So what kind of preparations will stack the deck in favor of your new business venture and generate a sense of true optimism?
1. Pick a business you know
If you start a business in a field unrelated to your experience and skills, you’re basically throwing a dart hoping it lands in the right place. The more closely a proposed business matches the work you’re doing right now, the greater the chance of success.
What if a business interests you but you have no related experience or skills? Begin the business as a sideline or work for someone else in the business as a part time employee, until you gain the needed understanding, experience, skill set and contacts. This is also a good way to gradually convert a hobby into a business.
The side line idea is what I’m doing with OutOfYourRut.com. It’s a side business, and I’m learning by doing it, and from what I learn from other bloggers along the way—a kind of earn-and-learn program. I think this is the best course for most would be entrepreneurs.
2. Know your competition
Knowing your product is critical but you also need to know what your competition is offering. I’ve worked in sales jobs where management did a solid dog-and-pony show on their own products, but mostly tried to ignore the competition as if it were irrelevant. No matter how confident we are, competitors are never irrelevant and they can’t be ignored. Chances are any prospect you’re courting is also entertaining bids from your competition, and you will need to know what they’re selling.
Knowing your competitors’ weaknesses can enable you to raise doubts in the prospects mind about what’s being offered, or to play your strengths against those weaknesses. Equally important, knowing your products and those of the competition can position you as an industry expert, and that can be reassuring to customers who are unsure and looking for a confident voice.
One of the best ways to understand your competitors is to contact them posing as a customer. You can do this if you’re new in the field and unknown. This is usually a better way of learning about them than reading product or marketing information. It can also provide insight on the give and take you can expect to experience with your own customers.
3. Get ready to sell
Many people recoil at the idea of working in “sales”, but if you start a business, that’s exactly what you’ll be doing. You have to be good at pitching your product or service to a skeptical prospect, to hear NO again and again, and to be fully prepared to get back up and sell to the next guy after the last one shot you down. That’s sales no matter how it’s labeled.
Many years ago I did contract work for a very successful CPA, a man who was expanding his business in the middle of a deep recession, who often said “I’m a salesman first and an accountant second”. That’s the reality of self-employment, no matter what field you’re in.
If you don’t have a sales background, take a sales course, get sales CDs and DVDs and prepare to develop (or improve) your sales persona.
4. The magic of marketing
Though “marketing” and “sales” are often used interchangeably or in conjunction with one another, they’re very different functions. Think of marketing as the process of getting customers to call, visit or email your business, and sales as closing the deal. A customer who calls you is a lot easier to sell to than one you have to call first.
Find out what successful competitors are doing to market their businesses, keeping in mind that you probably won’t have the cash flow to maintain a comparable marketing program. You’ll need to be creative to do what they’re doing for less money.
As a start up, the best approach will be to look for marketing methods that will cost little or no money at all. Marketing efforts must be consistent and sustainable so stretching your dollars will be crucial. The key isn’t so much how much money is spent on marketing, but rather how many people you can reach with your message, again and again.
5. Have a Cash Flow from the start
Cash flow is the single most important element to the success of a business. Without it there is no business. The sooner you develop it, the better the prospects for success.
There are at least three ways to have a cash flow when starting a new business: 1) continue working at a full time job, running the business as a side venture, 2) run the business full time, but supplement income from unrelated sources (i.e., part time or contract work), or 3) buy a business that already has an established clientele and cash flow.
Pick one, keeping in mind that the third requires capital, as well as a risk of loss of that capital should the business fail. As well, the cost to acquire a business is generally commensurate with the volume of the cash flow you’re buying.
6. Have a savings cushion
Having several months of living expenses tucked away to carry you through the first few months of operations raises the prospect of success a few notches.
Financial planners recommend three to six months savings for most people; if you’re going to start a business you’ll want to be at the higher end of that range at a minimum. This isn’t for business capital, but for living expenses until the venture becomes self sustaining.
If you don’t have a cushion, you may be able to build one relatively fast. It would be time well invested to delay the start of your business until this is accomplished.
7. Keep your parachute in good working order
This may seem like the ultimate counter motivation, but having a Plan B, in case the venture does fail, may provide the confidence needed to pull through lean times. A sense of doom over potential failure will not be a constructive traveling companion. Customers can often sense fear and might take their business elsewhere.
You’ve undoubtedly heard the saying “never burn your bridges”; this is fundamentally more important if you’re trying your hand at entrepreneurship. Returning to a previous job can be a welcome port in a storm should the worst happen. Never bad mouth previous employers—you never know when you might need a job or a reference! Otherwise, stay active in your business networks and keep an ear to the ground for possible parallel opportunities.
Having a ready parachute is much like the analogy of owning a gun: it’s better to have it and not need it, than to need it and not have it. Confidence is a big part of success, and just knowing you have other options can eliminate the fear of failure.
If you’re starting a new business, you’ll need to be optimistic in order to even make the effort. But make sure your optimism is based not on hope alone, but on tangible plans that will increase your chance of success in very real ways.