Twelve tips to grow your business.
If you already own a business, are considering buying a business or starting one, these twelve tips are designed to help you make the right decisions at the right time. These twelve quick check points should act as an eye opener.
The points refer to creating a business, not creating a job for yourself. A business continues to earn money even when you are not active in it, while a job does not. The following points are general points, which will apply in most cases but there are exceptions to every rule.
- Don’t be a lone wolf.
A lone wolf hunts alone, kills alone a survives alone. Wolf packs are lead by a strong figure but work together to achieve better results than they could individually. If you are a lone wolf you will have difficulty building a team and often refuse to take constructive input.
As a developer lone wolf syndrome can mean that you develop a fantastic piece of software in isolation from the market. Your target customers need to be involved in helping you develop the features and have input during the development process otherwise you may have a great software no-one wants.
Talking through problems with a colleague or trusted advisor can speed up your problem resolution.
My personal philosophy is to always have a partner or right- hand man in each venture, to share the load and ensure you can take your much needed vacation. As an alternative find someone you trust to help you make those difficult decisions.
- Know what you don’t know
Identify your skills and areas where they are lacking and recruit to fill the gaps. The people you recruit should be better than you in their area of specialization. Recruit strong people, not yes men.
To build a company you need to be able to share responsibility, risks and rewards with your business partners, management and shareholders. Good companies are built on good management teams.
Spend time on building a team and get your core team onboard with skin in the game. For areas where you need additional input build an advisory board that can add experience and raise profile of your business.
Cash Flow Is More Important Than Your Mother
Lack of cash kills companies. Make sure you have enough cash to get you through the first 12 months (6) if you are generating enough revenue by then.to pay your way. To preserve cash get a part-time job, bar work, cleaning, consulting, anything that will preserve your cash pile.
Building a strong business model can help manage your cash, provided you stick with your plan.
To free up additional cash, sell more! Collect your outstanding invoices faster, avoid holding onto obsolete inventory, discuss extended terms with your suppliers and get staff to trade salary for equity.
- Be honest about your ability.
Having coached hundreds of entrepreneuers, one learning has been that having the idea is not enough. You also need the skill set to solve the problem. Assuming you will buy all the know-how you need is not the answer as you may be taken for a ride and end up just solving some third-party providers cashflow issues!
You need indepth knowledge of the industry you are addressing and the skills to run a business, as well as the ability to solve the problem. Sounds like a lot? It is and that is why VCs back team not individuals.
A second strand on this is are you financially able to start your business?
Generally I would say if you do not have $50k to $100k to put at risk in the business, money you can afford to lose, then you are probably not ready to go ahead with the business. Why? If you have worked and not saved the money, then you probably do not have enough financial skills to manage your own let alone your company cash-flow. If you have not worked, then not only are you trying to start a company, but you are doing it with no relevant experience. Get a job, learn from someone else at their expense and then run with it!
- Talk about your business plan to people you trust- and document your goals.
Many people recommend keeping everything secret and not talking to anyone about how you plan to grow your business, in case they run off and steal it. Against this I would say ideas are cheap it is doing them that makes the difference. Plus if you never talk to anyone about the idea you may miss a serious flaw or opportunity that someone else would be able to see, be unaware of existing competitive products or other markets where the product could also find application. Often it is not the original idea that is the one you run with but a derivative thereof.
Remember an idea is just an idea until you write it down and think through how it would work and eventually put the right idea into practice.
- Understand Customer Benefit
Once you have documented your idea, kicked it around with friends or trusted advisers, then start talking to the most important people in your product development process: your target customers.
Define who you are targeting: age, education level, income group, understand their purchase patterns and motives.
Then define how they will benefit from using your product.
Can the benefit be quantified in terms of a monetary value, then try to quantify this monetary benefit.
Look at positioning your product to maximize those benefits and price your product to capture up to one third of the monetary value of the benefit derived from the product. i.e. if the customer saves or makes $1000 dollars by using your product, it is probably reasonable to expect them to pay $300 for it.
In sales you sell to two key emotions FEAR and GREED. Greed is generally monetarily driven and more easily quantifiable, Fear (and guilt) are often more emotionally driven sales and can be more difficult to put a monetary value on- look at lost opportunities and opportunity costing to determine a value.
Remember the market can deliver pricing and determine it, if you want to run with the herd, but if you can differentiate your product, then differentiate it on price too.
- Begin with the end in mind.
A tip from Steven Covey’s Seven Habits. When you know where you want to be with a business in 5 years you can plan how to get there from day one and you have a real chance to get where you want to be. With no defined and documented goals, how will you track your performance, drive your business and know when you are on target to reach your goals or not?
By planning from day one where you need to be this can influence the type of customer you target, the prices you charge and the type of revenue model you adopt. The old adage “Failing to Plan is Planning to Fail” although worn and looking a little obvious is a good reminder of the fact that unless you know where you are going you are unlikely to get there or realize if you get there!
- Be prepared to defy logic, ignore reality and lose your social life (at least temporarily).
Running your own business can be fun, but do not make the decision for a lifestyle change, at least not immediately. You will need to put in long days and lots of them to make the business work. However once you are on the growth path, have implemented a management team and systems to run the business you can then start taking part of your reward as increased leisure time. It is not 9 to 5.
- Do not expect everything to run smoothly or always to be plan.
In fact I can guarantee you that there will be times when you think this will not work!
Be flexible with your thinking, but also be prepared to beat the odds and succeed when all signs are pointing to defeat. Remember its 1% inspiration 99% perspiration that gets you over the line.
We hear a lot about the business pivot point these days. I have worked with entrepreneurs who have wanted to change direction every time things got difficult. When things get difficult you start earning your title as an entrepreneur.
- Remember the Business Cycle- Product-SALES-Cash
So your ready to start but your product is not 100% right, so what now- back to the design board and make those few important changes, extra design enhancements to make it even better?
A big loud NO! Your clients may never realize the item you see as critical is even needed. Get your earliest prototypes in the hands of customers as soon as possible and let them beta test it for you. Ask for their feedback and improvement suggestions, they know more about what they want from the product than you do.
Sell the product as early as possible to generate sales and make sure each customer pays in full on time, because until you collect the cash, you have not made a sale. Without sales- no cash, without cash, no cash-flow and soon no business.
- Take the money on the table and accept dilution as a fact of life.
If you need external money to grow your business, be prepared to share the risks and rewards that come with your business with the provider, investor, bank or friends, family and fools. Selling shares or equity in your business is called dilution and it is a fact of life that it will happen in business if you need access to capital. So if your capital provider wants more than you want to sell for his stake, but you have no realistic current alternative- take the money accept the dilution. A smaller percentage of something that’s funded is worth infinitely more than 100% of something that’s not.
- Take manageable risks- not wild bets.
Entrepreneurs work in a space where they accept high risks, often risks that big corporate would not contemplate, in return for hopefully high returns. However the successful entrepreneur takes manageable risks, where they can influence the outcome, not wild bets, where the result can be a random uncontrolled event.
Evaluate your market, understand your customers and with this knowledge take manageable risks to get your business going, with a five year plan, short-term cash-flow model and a big stick to fend off evil spirits tucked under your arm.
And last but not least is probably the most important:
- Enjoy it!
Because unless you do you will not last long.
 Thanks for this acronym goes to Ken Morse of MIT, Cambridge Boston. I picked this up during a seminar of Ken’s directed at High Tech Companies.