6 Tips for Starting a Successful Business

Successful entrepreneurs measure twice, and cut once

By Josh Davis, Fort Worth Entrepreneur

Over the years I have been the beneficiary of invaluable advice and knowledge from many successful entrepreneurs, industry leaders, high net-worth investors and have sat in on hundreds of lunches and meetings with small business owners, bankers and other influencers. I’ve also met many struggling and failed entrepreneurs.

From these experiences I’ve learned what makes a successful entrepreneur, and what makes a failed entrepreneur.

Entrepreneurship, like life, is a constant learning experience. We don’t always make the right decisions, but the person who can learn from those mistakes, and constantly improve and evolve, will be the ones who succeed.

Some of the first questions I ask, and advice I give, when someone presents me with an idea or new business plan, are as follows.. And please have the answers to these before you start talking about what the logo is going to look like!

Are You Solving a Problem?

Sounds obvious, right? You’d be surprised how many people find solutions to problems that don’t exist. Then they invent problems to rationalize the solution. If there is no potential customer base, you’ll have no sales, thus no business. People are always searching for ways to improve their life, their processes, save time, save money, etc. If your business can do that, you might be on to something. If you’re not inventing something new…

Are You Improving an Existing Solution?

Some of the most successful companies weren’t the first to market, or the inventor of their widget. They took an existing product or service, and made in better. Facebook didn’t invent social networking, but they made it better. Apple didn’t invent the computer, but they made it better. Dyson didn’t invent the vacuum cleaner, but they made it better. If you have figured out a way to make something better, to provide better value for customers, you still need to make sure there is enough of a value proposition to get users to switch. Are the improvements you’ve made enough to entice customers? Understand the market — is there a low barrier or high barrier to customer acquisition? Is your improvement a feature or abenefit? There is a difference.

Make Sure it’s Viable

Before you liquidate your 401k and quit your day job, make sure your new business is even viable. What does that mean? Well for starters:

• How big is the potential market? Who is the customer?
• What are your startup costs?
• Who are your competitors?
• What makes you different from the competition?
• How are you going to acquire one customer? Ten customers? Ten thousand customers?
• What is your distribution plan?
• How much is it going to cost you to produce xyz?
• What is your marketing plan?

Test The Market

Testing the market at a small scale can help you better understand not only the reaction of your potential customers, but also help you understand the metrics of your business, and develop a system of processes.

My best friend wanted to start parting out motorcycles — that is, buying wrecked bikes, dismantling them, and selling the used parts. But before he went all in and bought a dozen bikes, he started with one bike. He took it apart, and listed each part on eBay. He tracked how quickly he sold each part, which helped him gauge demand for each part, which is important — you want to stock and sell the parts people demand. This exercise also helped him figure out how quickly he could break even on a bike. He was able to interact with customers and learn their needs, what’s important to them when looking for parts, he learned his customer acquisition cost, overhead, firmed up his marketing plan, and many other valuable data points.

By doing this small scale test, he was able to determine the viability of this business, and even verify if this was indeed what he wanted to do. From there it’s easy to scale up those processes he created. Had he just started by buying a dozen bikes with no prior market engagement, he would have been stuck in mud trying to figure it all out. He may have even found that his business model was no good. Better to find that out with a small time and cost investment, rather than investing it all.

Do You Have Good Credit?

At some point, you’re going to need to borrow money. It might be the money necessary to start your business, buy your building, or expand in the future. If you’re unable to get the necessary loans or credit, you’re going to have a tough time expanding or even starting your business. Really bad credit, and/or past bankruptcies, can make you look toxic to bankers and future investors.

Are You Willing to Stand Out?

Success comes from standing out, not fitting in — Don Draper, Mad Men

If you’re going to do something, if you’re going to risk time and money, you might as well give it everything you have. Don’t be afraid to be different, to be criticized, to stand out from everyone else. Most people just want to fit in with the pack. They want to do what everyone else is doing, they’re OK with doing what their competitors are doing, as long as they can get by. But if you really want to be a leader, and be incredibly successful, you have to be willing to be a lone wolf. You can’t be afraid of, or care what others think or say about you.

Hopefully these six tips will help point you in the right direction, and help you analyze your business and better define what it is you want to do. Good luck and stay hungry!

Thank you for reading. If you enjoyed this article, if it helped you, or you think it can help someone you know, please click the “Recommend” button! If you want more, you can visit my blog at joshfw.com