Have you ever wondered why some businesses take off and succeed while others flounder and fail? I’d bet my life savings that both successful and failed entrepreneurs had passion for their ventures. And that they both had some expertise in their industry. If it’s not those things, what is it that makes successful businesses different?
Through my life as an entrepreneur, I have discovered that every successful venture I’ve been involved in has had at least five things in common. I’ve determined that if you want to increase your chances for success for your start-up you need to complete the following tasks.
The first critical element to ensuring success is preparedness. To improve the chances your start-up will succeed you need to prepare on some level. Think about your last vacation. Before you left you mapped out how you were going to get from point A to point B. And you probably made plans to have your mail picked-up and your animal taken care of in your absence. In other words you planned and made preparations before starting on your journey. You want to do the same before you start a business.
Take a look at the industry you are entering. Figure out how you are going to get customers to buy from you, rather than your competitors. Make certain you know any industry costs that will need to be met and methods that drive revenue.
It’s important to take a look at yourself too before leaping head first into any venture. You can’t be all things at all times. Be honest with yourself. What are your weaknesses as a business owner? How will you overcome those obstacles? What do you want to achieve in the first six months’ of being in business? In the first year?
This brings me to my next critical element-flexibility. No amount of startup planning can accurately predict the unexpected twists and turns imposed by reality. No entrepreneur gets to their end goal exactly as they envisioned. There are always going to be setbacks, unexpected twists, delays and unforeseen opportunities that will curve the path that leads you to success.
Entrepreneurs who can work past problems and embrace change will find success quicker than entrepreneurs that can’t. Being flexible and rolling with the punches is something that I’ve seen the best of the best CEO’s and business owners do time and time again.
Great business leaders have also never shied away from entering markets that are dominated by large companies. Some entrepreneurs can get scared off from starting a business in a market that already has multi-million dollar company’s servicing it. This is a shame because even huge corporations with large staff numbers, multiple locations and large marketing budgets can’t offer everything to everyone.
That’s why I consider starting off a business servicing a niche that is being ignored or neglected in the market to be a critical element of success. Focus your business and marketing on servicing a small portion of your overall market. This is how every business should start out, no matter the market size or customer base.
In my consulting business I always ask start-up business owners who their target market is. Almost every time my clients tell me that everyone will want their products or services and they want to appeal to the global market. My response always goes something like, “That’s fine if you want to market your product to the world; how many millions of dollars do you have to invest in a regional, national and international advertising campaign?” That statement always gets my point across pretty effectively.
No business can afford to compete with the big boys in the industry or to release a global marketing campaign. You’ve got to start off small and focus your efforts to a specialized niche market. First, determine who has the most desperate need for your product or service. These will be your initial niche market. Then when you have brought in some cash and conquered that market fairly well, increase your target market to include a broader range of customers. From there, scale up and out. The business owners who don’t follow this advice and try right from the start to market to a large, general market run out of money and fail within a short period of time.
Running out of money is one of the biggest worries new business owners face. In the early days there isn’t always enough cash coming in to sustain growth and manage the business properly. Managing cash flow is a task that is vital to the success of any new business.
If you can’t master this skill, frankly all the others are useless. In the early days, there will most certainly be more bills than you can afford to pay at once. You’ve got to be able to manage whatever money you have coming in effectively so that you can pay your bills and continue to grow your business.
Thankfully, there are a few tricks I’ve learned in my life as an entrepreneur. One is to pre-negotiate my payment terms when I buy something. Nearly every company you work with to run your business will ask for payment from you within 30 days. Those terms can be hard to meet early on when you have a lot of things to buy and not a lot of cash coming in yet to cover those bills. What I learned along the way was to include negotiating my payment terms while I am negotiating price and services with these companies. I ask these companies to give me 60 or 90 days from purchase to pay up if I agree to their other terms. It’s a negotiating strategy that works a lot of the time. This helps me spread out my bills over a longer period of time.
Occasionally though, after 60 or 90 days I still didn’t have the cash on hand to pay my bills. When this happened I would pay the invoices using a corporate credit card. This gave me another 30 days of cash flow.
I also learned not to work for free. In my business I ask my customers who buy products from me to pay me up front. I don’t extend them credit or wait to receive payment till after they’ve found their own success. And I don’t do this in my consulting business either. When I start a project for a client I require a start fee and I always invoice monthly no matter how long the project is expected to last. You never know if your client is having cash flow problems of their own and is only hoping to afford your services once you complete some work for them. You could get stuck providing knowledge and work for a client only to have them tell you they can’t pay you at the end. This could exacerbate your own cash flow problems.
The best way to manage cash flow is not to rely only on one stream of revenue. Any business that has multiple streams of income is on a sure fire path to success.
You know the old saying, “Don’t put all your eggs in one basket?” Mostly people use that to refer to investing strategies but it also applies to revenue streams. To ensure success have multiple ways of making money. Don’t rely on just a few customers or one way of generating revenue. If a customer stops buying from you or there is a change in your industry, your source of income will dry up quickly. Then you’ll either have to scramble to find new business or your business will fail altogether.
Don’t put yourself in that position. If your business relies on only a few major clients, then expand your customer segment. If you make money off of just one or two products/services, then extend your product/service line. If you only sell to B2C, expand the ways in which you make money to include B2B by taking on some consulting jobs.
As most entrepreneurs know, the business ownership ride is a bumpy one. It’s certainly not for the faint of heart or those who would throw in the towel at the first sign of trouble. All successful businesses are run by equally successful leaders. Through my years as an entrepreneur I’ve realized that those who are successful are always prepared, flexible, understand niche marketing, the importance of managing cash flow and obtain multiple streams of income for their businesses. Do these five things well and you’ll have discovered the roadmap to success.