Are you ready to leave that “safe” cushy job at BigCorporation, Inc. and do your own thing? If you answered “yes,” then good for you. Before you jump and form your own small business, however, here are a few things we’ve learned from starting two new companies in the past two years and observing others do it, too. Hopefully, these lessons will help you as you begin your startup journey.
What you need to know before starting a business
#1 You Simply Can’t Predict How Your Startup Will Unfold
Before starting your business, you probably have an idea of how things are going to go. Which customers you’ll try to attract. The products and services you’ll offer. Where you’ll open up a store or office. What customers will pay. How long the process will take. How you’ll raise money to get started. In fact, you may even write it all down in a business plan. In fact, if you haven’t thought this out, you’re probably not ready to do your own thing.
Now you can set the plan aside because nothing is going to follow the outline. As Steve Blank says, “In a startup, no business plan survives first contact with customers.” You need to be able to adapt to all kinds of things you didn’t plan for. Everything will take longer than planned. Money will be hard to come by. Many potential customers will say “no” for everyone that says “yes.” The ability to change direction, create new solutions, adapt to new markets or pivot to completely new ideas is a critical skill to develop if you’re starting your own small business.
#2 Good Advisors are Worth Hanging on to
As you share your startup idea with others in your field and pitch to investors, you’re likely to hear a lot of people tell you that you have a good idea. They may even give you some feedback off the top of their heads and agree to be on an advisory board. But really good, in-depth advice is hard to come by. Advisors who will spend several hours thinking about and helping solve the business problems you face are rare—and when you find one, make sure you develop the relationship, even if it means paying for the advice. An experienced advisor (even better, several of them) will help you get your startup off the ground.
Conversely, you will also come across individuals who would love nothing more than to see your business fail. These individuals will do almost anything to sabotage your business idea, including stealing your company name, branding initiatives, and business ideas. In order to deter others from doing so, it’s important to file for trademark and copyright protection as soon as you launch your business or products.
#3. Raising Money is Hard
You can’t just show your bank revenue projections (even if they’re good) and a business plan and expect them to give you a loan. And pitching investors is even harder—they want to see consistent growth in a market that loves your product. Even better if you’re making money already. Most people are risk averse (even angel investors and VCs). They don’t want to put up their money unless they think there’s a better than even chance they’ll get it back with interest. Unless you’ve successfully sold a startup before, raising money for your new small business will be harder than you think.
#4. Finding Customers is Harder than You Think
In a way, finding customers is a lot like finding investors—you need to convince them to give you money in exchange for your product. The conventional wisdom is that if you build a better mousetrap, customers will beat a path to your door. That’s just not true.
You have to do more than just build a better product. Customers have to hear about your product and understand how it solves their problem before they’ll even consider it. They want to try it first (free if possible). They want to hear their friend’s experiences with it. They’ll have to be able to find it and afford it. A few examples: Betamax was of higher quality than VHS, but failed. New Coke tasted better in tests but failed too. Tivo had a great product, lots of money, and the first mover advantage. But today it’s an afterthought in the digital recording market. The list goes on. You need to learn how to market your product both online and off if you’re going to succeed.
#5. You Don’t Need an MBA to Start a Small Business
This one is tough to admit because we have an MBA and wish that it conveyed a special capacity for small business or startup success. It doesn’t. An MBA is valuable for the relationships you develop with students and alumni, but it’s not likely to give you any particular skill you need to start a business. Learning the basics of accounting, marketing, and management in an MBA program won’t hurt. But the only pre-requisite for starting a new business is a solid idea and the stamina to see it through.
#6. You Do Need Passion to Start a Business. Lots of It
Your new startup is going to take a lot of time, energy, and focus. Unless you absolutely love what you are doing, you’ll struggle to keep going. There will be highs and lows. Some days it will be easy, others will be more difficult than you can imagine. Starting a small business is a bit like eating donuts. I love donuts—you could even say I’m passionate about them. And eating one is a real treat. Eating two or three is good too, after all, I love donuts. But that’s more than enough. By the 12th donut, I’m sick and never want to see another donut in my life. Running a startup is like eating two or three boxes of donuts every week. You better love it or you won’t keep coming back.
#7. You Are On Your Own
If you’re a solo-preneur, you are truly on your own. If you have a partner, it’s just the two of you. At least it is at the beginning. Failure or success is entirely on you. There’s no guaranteed paycheck, no benefits, and no end-of-year bonuses. There are no big corporate support systems, no one there to say no or yes to your ideas. Even friends and family may tell you that you’re crazy for starting a small business, that you’re going to fail and lose everything (they may be right). But don’t let that stop you. If you’ve really thought out your idea, made a plan, are flexible enough to adapt to changes, and you love what you are doing, trust your gut and go for it.
Of course, once you start down the small business road and work for yourself, you ‘ll learn your own lessons. Once you do, come back here and let us know. If you’re curious to hear some words of wisdom from other small business owners, here are a few additional tips before starting your business.
