Too many of you business owners think success only means being the next Amazon, or you stress yourself out trying to be everything to every customer. In reality, the opportunities are greater for starting with a micro-business, ideally from your special expertise or passion, with fewer than five employees, and just enough sales to comfortably support you and your team.
This type of business has long been primarily run out of the home, well before COVID-19 made that a necessity, and it still works to keep the costs of operation down. In time, many businesses outgrow their meager beginnings, to become major enterprises, comparable to the current giants Amazon and Apple. These are proof that you don’t have to start with the mindset of a giant.
Yet my years of advising entrepreneurs and small businesses has taught me that you do have to follow some basic principles and operational strategies, even to get a micro business off the ground. Key ones in my mind include the following:
Build your business around what you know and love. I still hear people determined to start a business as a path to an easier life, or a way to make some money on the side. From my experience, these drivers are fraught with risk and unhappiness. Think first about where you have a natural advantage, or a unique insight or critical purpose.
Keep the initial scope within bootstrapping limits. Just because you want to start a business doesn’t mean you are entitled to outside equity, loans, or crowdfunding. These only make your startup riskier, and add stress you don’t need. By spending only within your means, and re-investing the money you make, you will more likely enjoy success.
Meticulously manage cash inflow and outflow. Cash flow is the nemesis of every business, particularly small ones. Don’t delegate this task to another family member or accountant. Understand and write down every expense, and budget for required costs, especially initial inventory and accounts receivable delays. Details are important.
Learn to use basic business financial tools. One of the most useful tools for any small business is Excel or Google spreadsheets, for monthly profit-loss statements and operational tracking. You need to see quickly both positive and negative trends, and understand whether the fluctuations are caused by customer or internal needs.
Take advantage of bartering and less-than-new equipment. You don’t need the latest-and-greatest computers or office furniture to get the job done well. Put the message out that you are willing to trade a little extra work for something you really need. Be creative in negotiating work agreements with vendors and even initial customers.
Limit the scope and focus of your initial offering. You must learn quickly when to say no, as well as when to say yes. Customers will always want to stretch your limits, and it’s tempting to agree to things which may be outside your realm of expertise. Attempting to deliver these can kill you, both in quality of your solution and time to completion.
Get in the habit of documenting all agreements and terms. In my experience, this is what separates a business from a hobby. Hobbyists tend to work informally with like-minded people. Skip the complex contracts by lawyers, but at least use an email to confirm terms and conditions to all parties. It’s good communication and good business.
Don’t forget to do continuous marketing and networking. There is an old saying in business that what you know is not as important as who you know, and who knows you. You have to find your customers, and people who can help you – they won’t find you. Count on spending 50 to 75 percent of your time marketing and networking.
Pay attention to competitors, and differentiate your offering. The quickest way to fail is to be just “one more” consultant or assistant. Every business solution has competitors and alternatives. Define your “secret sauce” or intellectual property, and advertise it as well as protect it. Be prepared to update it regularly as customers and trends change.
Businesses that start in the home are becoming more and more the norm. The Small Business Administration reports that over 50 percent of small businesses are now home-based. Yet these can fail just as quickly as any other, if basic business principles such as the ones outlined here are not followed.
Make the effort to do it right, and you too can enjoy the journey as well as the destination.
*** First published on Inc.com on 10/02/2020 ***