7 Essentials to Starting a New Business
It’s a well understood reality that many of the small businesses that start up will inevitably fail. Research conducted by the United States’ Small Business administration indicated that in the 3rd quarter of 2016, 240,000 new businesses may have been started but it also showed that 215,000 closed their doors permanently.
In 2018 you are more likely to survive a space launch than start a profitable new business, and yet we are seeing some of the most successful startups of our time occurring all around us.
All of this leads us to the single inescapable conclusion that many small business owners are simply doing it wrong. Were it not so, the statistics would be vastly different. Fortunately numbers never lie and we can learn from those who have gone before us.
For your business to not only survive, but thrive, we recommend the following 7 essentials for every new business (existing businesses can implement them also)!
1. Every New Business Needs a Solid Value Proposition!
No matter your business or industry every single business needs a solid value proposition. The products and services you offer must meet your client’s needs or wants. The more widespread that need is, the more successful you are likely to be.
Elon Musk one of the great entrepreneurs of our time suggests that you can be successful either by offering a large degree of value to a small group of people, or by offering a smaller amount of value to a wide range of customers. In other words, you can be successful at both ends of the spectrum but know what your plan is and then stick to it.
So when starting a new business always start with your ‘why’. Why would your customers need you? What do you do for them?
2. Know Your Customer
In order to understand the value you can deliver to your customer, you must first know your customer. Knowing your customer is crucial to your new business venture. Having your customers in mind is a natural starting point.
Your clients, they are the lifeblood of your business, but everyone knows that, so let’s get a lot more specific.
What Does My Client Need?
Knowing your customer allows you to really nail your product offering. If you know your customer’s needs, you can ensure that you meet them. When you look after your customer’s needs, they come back time and time again.
Repeat customers become your most profitable customers, as you don’t have to pay for customer acquisition costs each and every time. Repeat customers help you grow and scale your business. Every successful business has learned to reduce client churn and preserve those precious customers.
What Message Are You Sending Your customers?
Second, and just as importantly, knowing your customers allows you to master your message. If you know what your customers needs and wants are, you can send a clear advertising message that will really resonate with them.
Always remember, a confused mind does not buy. When you advertise, you want your customers to hear or see it and think: “That’s me. I need that product or service.”
One particularly successful strategy is to advertise to your customers by targeting and answering common objections in your industry. UBER has revolutionized the transport industry by targeting and solving common issues and objections that consumers had with taxi companies, namely:
- Fixing prices before you travel, so that the consumer knows exactly what they will pay.
- Knowing who your driver is before you get in the car. Being able to publicly review individual drivers/vehicles.
- No need to get obtain local currency or hand over your credit card in a foreign city.
Overall the experience is simple, easy and convenient and eliminates many issues that frustrated consumers. As a result they have captured an enormous share of the market in spite of the fact they don’t own any vehicles and are competing in an industry against a well established competitor.
3. Build a Business not a Job
As you launch your new business venture you will often be a one person show. You will launch your business eagerly, only to discover that as a business owner and entrepreneur you wear many hats.
Not only are you responsible for providing the product or service your clients are after, but you are also responsible for the running of the business. The responsibility starts and ends with you. The best part about being in business is that the success is yours too. You can and will profit from your industry and ingenuity.
Do the Work Ahead of Time
One of the keys to successfully growing your business is documenting your processes. Ensure your processes are excellent and efficient. If you are producing results (satisfied returning customers) then take note of your processes. Document them thoroughly, that way when you employ others to undertake those responsibilities, you will have training materials readily at hand to ensure you preserve the same high standard.
What is Your Exit Strategy?
As you hire staff, your goal is to progressively remove yourself from the day to day operations of the business. You want to be able to put down your tools so that you can spend time working on your business strategy and actively growing your business.
You may not be able to do this immediately, but it should be the goal you move steadily toward. In the early days you may need to burn the midnight oil to do this crucial business development and strategic planning.
Successful entrepreneurs ensure they spend time working on their business and not just in it.
A starting Point for the Organizationally Challenged
The best book I’ve ever read on the subject is the E-Myth Revisited by Michael Gerber. I heartily recommend it as essential reading to any entrepreneur. Whether you are a new business owner or a seasoned veteran there is value in improving your systems.
4. Know Your Numbers
Numbers are the nemesis of many new business owners, and no list of essential skills would be complete without them. Here at Master Your Business we know how crucial knowing your numbers is to your success.
Most people hated math at school and they carry that dislike for numbers straight into business. As a result the numbers and financial reporting aspect of a business are the most likely to be outsourced to others and this can be a fatal mistake. Ensure that your reporting is timely, accurate and contains the information you need to assess the vital aspects of your business.
You are the boss and your day to day decision making will only be as strong as your facts, numbers and statistics.
Knowing your numbers is the key to solving any problem you face in your business. If you are struggling with an aspect of your business, look at the underlying numbers and use those facts to diagnose the true problem.
What Should I Know?
The essential numbers for every entrepreneur to master are:
- Cost of Customer Acquisition.
- Close / Conversion %
- Customer Retention %
- Profit Margin per Unit Sold
- The Number of Clients You Have
While this list isn’t all inclusive, it’s an excellent starting point and will have you putting your best foot forward.
Numbers may not be your strong point yet, but you have the power to change that. We’ve developed our premium course Master Your Metrics that will have you knowing your numbers in no time. We’ve even put together a FREE premium training to help get you started. After all is said and done your profit are what you take home, and your profit is represented by a number. We can teach you how to grow your profit today.
5. Start With the Right Set-up
Our 5th essential when starting a new business is starting with the right business structure. The ideal structure will depend on a variety of factors and will be different for each business, and in each country you operate in. The key factors to consider in choosing your business structure are:
The amount of tax you pay on your business profits will be determined by the type of structure you are operating. Different types of structures will come with their own benefits and draw-backs at tax time. Ensure you consult a qualified and capable tax professional in your local jurisdiction.
As important as planning for tax time is protecting your personal assets against business risk. After all, what is the point of working so hard to build your wealth only to put it at risk with careless or inadequate business structuring?
You will need to consult local legal advice to ensure your structure meets your asset protection needs. The key principle here is to ensure your business risk and liability cannot be traced back to your personal assets.
Giving Director’s or Personal Guarantees is a great way to undermine your asset protection.
Great asset protection takes consistent effort and adhering to a pre-determined strategy. It is worth the time and effort because we live in a litigious society. The next law-suit can be just around the corner.
Structures cost money, both to establish and in ongoing fees for tax and compliance work. Ensure your structure is fit for purpose but don’t go overboard. Ensure your business is viable before you expand it, otherwise you risk wasting funds that could be better spent growing the business!
6. Have Capable Coaches and Advisers
The notion of a self-made entrepreneur is one of the greatest fallacies of our time. The most successful businesses in the world make use of coaches, consultants and advisers to grow their business.
Having capable coaches and advisers is a key pillar to success. You may be an expert in your field, but the right coach will be an expert at other the key aspects of business. They will sharpen your sales and business management skills which will lead to a more profitable business.
Last but not least, the right coach will be able to use their experience to help you avoid common pitfalls and problems you might face. Remember if you don’t learn from history you are bound to repeat it. A great Business Coach is the best insurance against these types of mistakes.
7. Work on Your Business, Not Just In It
In order to grow your business needs your attention. It is easy to get caught up working on the tools and servicing your client’s needs. Equally as important is taking the time to plan for your business’s future. The market around you is constantly changing, if you do not make the time to do your strategic planning, it won’t happen, and the market will leave you behind.
Each day I set aside 30 minutes to do my strategic thinking. I use this time to:
- Do deep dives on lead generation, customer conversion, client retention and product development.
- Perform competition research.
- Develop new products and services.
- Restructure business processes for greater efficiency.
This strategic thinking has been instrumental in keeping us ahead of our competition, after all what hope do they have of catching us if they only sit down once a year to make their plans. Our strategies change and improve on a daily basis. You can put this power to work in your business today.
Success Doesn’t End Here
While we view these as the 7 essentials for every new business, there are a host of other skills and strategies that you can profit from as a business owner. You can find these along with a selection of other useful tools on our Blog.
By Samuel Stokes