Making mistakes is a part of entrepreneurship but it's always better to learn from the mistakes of others than your own whenever possible. Some of these might seem obvious but you would be surprised how quickly you can become blinded by a great idea and then quickly overwhelmed by the tremendous amount of work that needs to get done. Here are some key points to remember before you dive in.
Focus on Profit
"Phase 1: Collect underpants, Phase 2: ?, Phase 3: Profit". - South Park Gnomes
You can get lost in an idea without a plan to monetize. Even if your plan is to create a media company you need to know how the money will start coming in and what your profit margins will be. It's not enough to just plan out the revenue that will come in. Let's say you're a talented writer that has an exciting niche and you believe you can have a very popular site within 3 years. You believe you can generate enough traffic that you can sell $4,000 in advertising on your site per month. That's enough money to support yourself but you don't have any sales experience. Even if you did you will not have time to keep your site running at full speed and sell advertising at the same time. Hiring someone you need in sales will cost $4,000 per month plus generous commissions to keep them around. Now you realize you would be working on something for 3 years that would still lose money. You need to find a niche that can bring in more advertising per month. Another good option in this scenario is to bring in a co-founder that is head of sales from day 1. At the start-up phase of the new business you can both put off taking a salary as long as possible while your equity grows. The point is to not focus on revenues or the popularity of your product. From day 1 have a solid plan on what your profits will be.
Be Willing to Give Up Your Social Life
It's not forever but a half decade or so of solitude is needed to get your new business up and running. During this time you'll be meeting plenty of clients and employees but no matter how friendly they are when push comes to shove they are not really your friends. This 5 year trade off to have freedom the rest of your life is a simplified way to look at it. Ideally you'll need to keep your day job for the first year or two. During this time you'll need to race home to get some work done every night and weekends will be when you really have the time to make progress and work on large projects. After your company is profitable enough to bring you on full time these next few years will be when you really need to work day and night. These years will make or break your business. You can make time for major events for close friends and family but for the most part you'll be spending most of your time on your own or with your start-up team. This might be the # 1 reason to round up a start-up team instead of going solo. While your friends wonder why you can't do anything with them anymore your co-founders will fully understand and can celebrate the small wins with you as you go. If you're not willing to give up a normal social life your new business will never make it.
Stay as Lean as Possible
The lower your overhead and the longer you can reinvest profits back into the company the better it will be for your new company. Setup your accounting properly so that you are saving at one third of all your revenues and paying quarterly taxes. The money you have leftover after paying taxes you can reinvest into marketing. Take all of your profits and put them right back into your company until taking a small salary makes sense.
Marketing is Everything
You can have the best product in the world and if no one ever hears about it you will never make any money. Marketing is a constant ongoing process and as soon as it stops so do your revenues. When I started my first business I had a sales background that I thought would be a huge help getting new customers. It was but without marketing first I didn't have anyone to talk to. One person on your start-up team needs to be focused on marketing. If you're doing everything on your own that's you until you can afford to hire someone.
Everyone will tell you that you need to have a niche. That's great but do you really want to waste your time focusing on the wrong audience? Go ahead and start marketing to everyone. Carefully track who your new audience and clients are. Once you start seeing trends developing start narrowing down into these niches. When I started my career in investment banking I noticed my first few clients were architects. For some reason architects liked me and I started focusing on this professional group to attract new business. I would have never guessed that architects wanted to invest in private placements but for whatever reason they enjoyed doing business with me. Architects make great money but with close ties to real estate most other investment advisers were not going after them leaving a niche that wanted to diversify their portfolio and leaving me with little competition. Start your marketing with broad strokes and start narrowing it down to specific niches when you notice trends developing.
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Here are some more good articles about this subject.
What I wish I knew before I started my business theage.com
The One Thing I Wish I Knew Before I Started Building My Business huffingtonpost.com
10 Things I Wish I Knew About Running a Business, Before I Started My Business smallbusinessesdoitbetter.com
11 Things I Wish I Knew Before Starting My Business eric-lord.com
19 Things I Wish I Knew When I Started My Business erikapoletano.com
11 Things I Wish I Knew When I Started My Business medium.com
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