Starting a Business

First Steps

A friend is considering starting a micro-business. Where do you start to think about it? The pre-strategy stage. I am sure there are more than four questions, but these are the first four that came to my mind:

  1. What are you trying to accomplish?
  2. Who will be your customer?
  3. What will those customers value?
  4. What, if any, are the deal breakers?

What are you trying to accomplish?

There is almost no limit to this aspect. From Steve Jobs, “put a dent in the universe.” to fill up some free time and earn a little money. Most people have a truly chaotic vision of their purpose. It ranges from easy money to, I have a skill that others could use and share, to it’s a way to get my children involved in work and business and that could help them.

The mistake is to work outward from what you are good at already.

Who will be your customer?

Peter Drucker believes the essential purpose of any business is to create customers. The more clearly you can see who that customer might be, the more clear the technique for attaching them becomes. There are simple questions. Where do they live? How old are they? Male or female? Income level? Time availability?

The more you select here, the easier it will be to find an approach.  You can expand your customer definition later when you have more experience.

What do your customers value?

This is the key question and one that many people often fail to notice. It really does not matter much how good you are at something if no one cares about it.

Most successful business spend a lot of time on this question and continue to ask it. Their strategy is to seek what people want to buy and then figure out how to deliver it. They usually start with what they think they could do, but only to focus the beginning of the search for value. Jeff Bezos did not start Amazon with a great knowledge of the book business.

Customers value many things. Convenience, a new solution to an old problem, an opportunity, fashion, inspiration, and lastly price. Never start with price. Your minimum price will become your maximum price as soon as you say it.

Identify the deal breakers

This is an early task because if there are any, the sooner you find them the sooner you can make the decision to overcome them or go elsewhere with your ideas. Purposefully quitting quick is a sound skill. It requires the absence of ego and high levels of objectivity. It is not an amateur skill.

Some common deal breakers are:

  • License or franchise requirements.  You cannot set up a named restaurant just because you think McDonalds should sell hot dogs. You cannot set up a TV station or a bank because the government requires a license for those. Think through the idea of natural franchises. In a small community, one bowling alley might flourish while two would both go broke. Same thing with newspapers. Who is your competition and what do they do well?
  • Location. Some businesses need high visibility, parking, and other factors. High ceilings, southern exposure, excellent drainage. Who knows what? I had a client once who deleted his plan for a fish farm because he could not find property where he could could economically maintain the proper water temperature.
  • Labour force. How high is the skill set needed? Notice in the beginning you need highly skilled people on a mission. Geeks fueled the tech industry for a while, but not forever. Start ups sell to other geeks and early adapters. Both of those customer types need a different experience than customers who come later. High skill, with high excitement adds a value early on you cannot easily find.
  • Money. Having enough is all that matters.  More can make people careless. Prepare a cash flow budget that assumes no customers at all for six months and see what happens. If you can afford that, you can likely expect to beat it.
  • Cheerleaders. I co-edited a book on running your own business more than 30 years ago and got to write the introduction as well. A key point was, everyone needs emotional refuge when things are going less well than expected. Cheerleaders matter. Could be family. Could be friends. Could be employees. Be sure there is someone who can keep you level. Even tell you, “Good try; now time to try something else.” You cannot be your own cheerleader because you will try to fix things rather than change things.

Running a business is exciting and terrifying at the same time.

Better preparation will increase the satisfaction a bit and reduce terrifying a lot. Once you have worked through the list above, you can begin planning. Never start with planning. If you do, you will end up with an internally consistent work of fiction.

And that serves no one.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

One Comment on “Starting a Business

  1. I appreciate your great knowledgeable advice and approach to starting a Business. This is very helpful!
    Thank you,
    Angie

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