8 Important Things to Know About Business
Apart from starting (and sticking to) a what is already working (and not getting too fancy), I've discovered eight secrets to making a start-up business work.
- Business doesn't happen until you make the first sale.Buying office furniture and printing cards doesn't make the business go. Selling product does. Yes, there are some initial preparations you need to make - but until you have that first check in hand, all you're really doing is spending money.
- The single most effective way of entering a new market is to offer a popular product at a significantly reduced price. In every industry, there is a good market for specialty and high-quality product producers - but capturing a reasonable share of those niche market segments takes money, time, and experience. When starting a new business, you are usually short in these three essentials. That's why it's better to resist the allure of high-priced, prestige products in favor of selling the most desired products and services at ludicrously cheap prices. If you can figure out how to undersell the giants, you will be in a very happy starting place.
- It's ultimately about selling. Conventional business wisdom says you make money when you buy, not when you sell. I disagree. Great businesspeople make their fortunes by increasing the perceived value of their products, thus inflating prices and measurably increasing profit margins. (Think Chanel, Rolex, Range Rover.)
- When choosing a business, select one that can be grown without your personal involvement. Many businesses - especially those built around the personality or drive of a single person - depend for their growth on the commitment of the founder. Avoid this type of business. It severely limits your growth potential. Make sure your business can expand with the addition of more money, property, or people - but not more of you.
- Have an exit plan.Before you invest your time or money in any business (or anything else, for that matter), know exactly how much you are willing to lose - and get out if you hit that stop-loss point.
- Focused effort is more effective than a diversified approach to business building. Ambitious people tend to fall into two groups: those who focus on one project at a time and those who spread themselves out on many projects. The focused approach allows you to acquire mastery faster. The diversified approach gives you more balance. I've done both. And although I'm naturally inclined toward diversification, I've had the most success and made the most money from the focused work.
- Let your winners run and cut your losses short. Most business ideas or ventures that begin poorly, fail. This is a very important to learn. It's easy to get emotionally attached to projects/investments we believe in. But, when the marketplace tells you that your great idea is a loser, you shouldn't keep pushing. Close the project and minimize your losses. If you really have a good idea, it will come back to you in the future in another, perhaps better, set of clothing.
- Pareto's Principle (the 80-20 Rule): 80% of your success comes from 20% of your resources.Most of the success/income/satisfaction you will get in your career will come from a small portion of your skills/projects/efforts. Make it a habit to ask yourself, "Where am I getting most of the benefit here?" and compare that to where you are putting in the most work.
Having your own business is the fastest (and most satisfying) way to a happy, wealthy retirement. So if you don't already have a good idea for starting a side business spend some time thinking about it.
