How to Start Your Own Business
by Peter Anderson
BrokeSucks.com Editor
Ready to be your own boss? Starting is often the hardest part.
Behind all of the glamour of running your own business is hard work, long hours, and tough decisions. Most people don't think its worth it. Oh, they think its worth having their own business, and they start, or two, and they fail.
If you are an employee then a successful business cuts you a check (unless its the government, that's a different story.) What I want you to understand is that business is not just a fantasy, its an integral part of every single person's life. Businesses send you your paycheck and provide the things you spend that paycheck on. Want to get in on the profits? You need to own one.
The key to making money
An entrepreneur I know said that he spent years trying to build a successful business before he realized what he was missing: demand. He spent all of his time thinking about nifty ideas and ways to make money from them that he ignored what people really wanted.
I fell in to that same trap early on, punching out numbers on a calculator, figuring if 4,000 people bought my product at $149 this year I would make $596,000! Numbers are numbers, and when you don't have anything behind them they represent nothing.
Instead of asking yourself "What can I do to make money?" ask "What will people pay money for to have done?" Once you figure that out you are heading in the right direction.
Business to Consumer, Business to Business; what's the difference and why should I care?
A business provides a product or service in exchange for money. The myth of the billion dollar corporation is that it can just throw lots of money at something at make it happen. It can't. Often these corporations throw money at someone else who can make those things happen -- that's where business to business comes in.
Traditionally we think of a business as making something that goes on a store shelf and someone buys -- clothing, toys, knickknacks, etc. The reality is so much more.
In order to run, other businesses rely on businesses. If you register a new LLC or Corporation your mail will be bombarded with offers for business cards and custom promotional items such as pens, cups, and mouse pads. That's just the start. Then there is office equipment, office furniture, the office itself (real estate), telephones, computers, software, and the list goes on and on and on.
If you haven't figured it out already, business to consumer is selling products or services to an end user while business to business is selling products or services to another business.
Both B2C and B2B have their own set of pros and cons. Right now I just want you to be aware of all your potential markets. Heck, there is even Business to Government, which is a whole new ball game!
If you have some ideas in your head about starting your own business right now, then ask yourself which category you would fall under. Otherwise, read on.
What should my business sell?
A roadblock that hits would-be entrepreneurs is that first idea.
You don't need to be the world's leading expert on something to start a business in that industry, you've got time for that later.
If you already have experience in a specific industry (as opposed to be fresh out of college or younger) you should specifically look for weaknesses in that industry that you can fill. You could be a consultant, produce specialized software, or even make a better product.
In the 21st century knowledge is power. Sometimes those with years under their belt become tunnel visioned and miss out of massive opportunities around them. Often established businesses simply do not have the resources to fulfil them.
Huge businesses that induce massive market changes create waves of opportunity for smaller businesses and entrepreneurs. Thousands upon thousands of businesses have sprung up thanks to the changes Google's innovations have made to the internet and the way we find information. The same is true of eBay and to a lesser extent Amazon.com.
Watch big market changes closely. Chances are there are few, if any, other people who have experience in these changes. Breaking in to the oil industry might be a life long path, you can become an eBay-entrepreneur overnight.
I suggest people surround themselves in what interest them and then seek ways to make money from it. Pay specific attention to ideas which you can scale up with demand.
Where is the money coming from?
New businesses rarely have lots of money to sink in to developing new products. Many inexperienced business owner with ideas find themselves scrambling to find financial backing.
There are definite downsides to needing other people's support to starting a new business. In my own mind, first and foremost its a big distraction. Your time is quickly occupied by selling someone on an idea rather than actually making that idea in to a profitable business.
If you need it, your best bet in getting money from business loans is to ask around. Other business owners should be able to recommend you to a specific bank that can help you out. I've never had the need to ask for a loan myself, but I've heard that not all bank employees have a clue about business.
Sometimes a business has a long road to profitability and must take on venture capital to survive. Ouch! Often multiple venture capitalists argue with each other taking even more focus away from your business.
As with bank loans, I'm not aquatinted very well with the world of VC. The entrepreneurs I've seen succeed in a big way started with their own money and ended with their own money. All of the hype of the business magazines like Business 2.0 seem to paint a world of businesses being constructed solely to be bought out by big companies. That is a massive mistake, in my opinion. Build your company to be profitable and to be bought out.
Bottom line, my style -- figure out how you can get your business off the ground with as little money as possible (if you have none to start with.)
Keep your eyes wide open, there are a lot of rip offs out there waiting for new businesses owners to drop freshly loaned money in to. The "opportunities" will drain you dry fast and you'll be struggling get back just a fraction of your money.
How will your product/service be made/executed?
If you have a product you want to sell first ask if someone else can make it for you. Right now your goal is to get something out the door at a low profit margin or break even. You can drop the big bucks in to producing it yourself later.
As an example, an article in Millionaire Blueprints detailed how a mother started making her own cookies and quickly moved to having a bakery produce them for her. The bakery didn't make them in the beginning -- she did.
The internet and globalization makes this process much easier than it was in the past. Web sites such as Alibaba.com can hook you up with a company that can manufacture your goods to specification. If you want to produce custom printed t-shirts many different companies can do this. Google is your friend.
Services, in my opinion, are a little easier to start off, rougher when you need to scale up.
Any service you should be able to do yourself. If you can't do it, what happens when an employee doesn't show up for work?
Once again, if you can do this yourself in the beginning you'll be easier off. Performing a service on your own won't give you the overhead stresses of managing other people. Rather you'll be able to focus on being the best at what you do.
How will you market your business?
In my experience the biggest struggle business owners have is marketing. Not surprising, this is usually what makes the difference between a massive success and a complete failure.
An un marketed business can't get customers, and when it does it has to give them a heavily discounted price. A well marketed business has so many customers that it turns some away despite charging an arm and a leg.
I am going to explore some of the avenues to marketing/promoting/advertising your business. Forget semantics that they told you in business school, its really all the same stuff.
-Advertising in Newspapers. Marginally effective to a complete waste of money.
-Advertising in the Yellow Pages. Its nice to have your name in there but you'll have trouble breaking even if you spend more than the minimum.
-Being active in your local community. If your business is locally based, this can be very effective.
-Networking events. Not very effective, everyone is there to promote themselves to everyone else.
-Attending trade shows. Very effective and important for building contacts within your industry and meeting prospective customers.
-Sponsoring events. Can be effective if done right; often is too expensive for smaller businesses.
-Reading and interacting in industry web blogs. Very effective. Publishing your own blog can be time consuming but it will raise your publicity above your competitors who aren't doing it.
-Writing articles for industry publications. Very effective. Like blogs this is time consuming. However, this can mean the difference between you being another person and a recognized expert -- a.k.a. the go to person.
-Attending charity events. Modestly effective, depends on what your business is.
In summery, you want to lean more towards those areas that do not cost you money but raise your visibility to your targeted audience. Obviously if you have a local lawn service your approach will be very different than if you are an expert accountant.
It is very tempting to cut a check and spend the afternoon watching a movie. Often the difference between who makes the money is not who has the best business or product but who has the most visibility.
How will you maximize your revenues?
I have witnessed many business owners ignore potential revenue streams. Sometimes they do it out of laziness, other times they prefer not to compromise their image. The merits of the latter are debatable.
One of my favorite marketing "gurus", Jay Abraham, has a great book -- Getting Everything You Can Out of All You've Got. The basic premise is that you could double or even triple your business's revenue by making a few basic changes.
I'm not going to summarize the book for you but I will give you some examples.
Lets say your run a mail-order cigar business. What could you do to increase your sales and consequently your revenue? (without pushing your expenses up too much)
First we need to increase the number of people who get our catalog. How could we do this? Look for another company who has a mailing list in a similar market and partner with them. You could offer to give 2,000 of your names in exchange for 2,000 of their's. The goal is to make this expansion "free" for you by giving them something of value.
Next you need to increase each order size. You could do this by offering bonus bundles of cigars for all orders over $100.
Third, how are you going to get your buyers to order more often? You could start a cigar of the month club which automatically bills $20 to the customer's credit card every month, thus creating a residual revenue stream. Perhaps that customer only remains a member for 2 months, perhaps 2 years.
One of Jay Abraham's key concepts is to take ideas from other industries and move them in to your own. Often one practice is than every business follows in one industry is unseen in another. This is because many business owners fixate on only what their competition is doing and trying to follow, rather than seeing what unrelated businesses are doing.
For more details read "Maximizing your Business Revenue"
..