I wish there were a secret formula to ensure that the business idea you have been madly brewing in your mind is going to generate enough income to compensate for your current salary as an employee, if not much more. Unfortunately, there are many, many factors that go into determining business success. One person can have a great, well-researched business idea that seems destined for success on paper, but whimpers out due to a poor sales and marketing effort. Someone else can have a kick-butt marketing plan that skyrockets exposure and generates lots of interest but that implodes due to poor operations planning or cash flow management.
So while there is no guarantee of success, there are a handful of things you must have in place to see if your business has a chance of success:
- Chest-bursting enthusiasm for your idea. In order to birth your business idea, you are going to have to have a tremendous amount of energy and stamina. When you are totally enthusiastic about an idea, you don’t have to worry about "staying motivated" or "dealing with procrastination," concerns voiced by many of my readers. Guy Kawasaki says in The Art of the Start: "The best reason to start an organization is to make meaning – to create a product or service that makes the world a better place. So your first task is to decide how you can make meaning."
- A solid business case. Passion is not the only predictor of business success. In addition to feeling strongly about an idea, you must ensure that you have a carefully crafted business case. Startup Nation has a set of 12 questions called the "Defining Dozen" as part of their 10 Steps to Open for Business that are a good place to start. They include things like "How large is your market and how much will you grow?" and "What’s so different about what you offer with your new business?"
- An eager market that has the means to buy what you are selling. Part of your business plan is getting clear on exactly who your customer is and how large a market they are a part of. Do they have deep, important problems that your product or service will address? Will your product or service make them money, save them time, build their brand or improve their health? Do they have access to cold, hard cash to pay your for your services? Some folks get tripped up by choosing a market that has big needs, but no cash to pay for solutions. (If you start your business for fun or learning instead of money, this situation will work well)
- Money to get your company off the ground. Almost any business requires some capital outlay to get rolling, and some can be quite money intensive. Do you know exactly how much money you need to get your business off the ground? Do you know your personal credit score in case you need to take out a loan or line of credit? (Here is info how to find out and improve your credit score from CNN.com)How much money will you need to live on during the ramp-up phase as you get the new business functional? Once you define these costs, you can make a plan to get funding. Here are some bootstrapping ideas from a prior post.
- A marketing plan. How are your customers going to find out about you? How will you build your brand and establish a presence in your marketplace? A good marketing plan will define at least a dozen ways to reach your target market including a website and/or blog, special events, email campaigns, advertisements, networking, joint ventures and a referral strategy to encourage plain old word of mouth. You can find great resources at Duct Tape Marketing which focuses on small business marketing or Action Plan Marketing which focuses on marketing for independent service professionals like consultants, coaches or accountants.
- A healthy approach to sales. I worked with salespeople for years and am convinced they are born with some special (some say mutated) genes. Excellent, ethical salespeople are totally excited by the sales process. Most first-time entrepreneurs, on the other hand, feel like throwing up at the though of asking prospects for money. The fact is that you are going to have to talk to lots and lots of people about your product or service. If you are deathly afraid of asking for money, you must get over it. (Secret hint: when you cover #1 and #2 really well, selling becomes FUN) So do what you need to do to get versed in the art of selling. (You can start by reading ProActive Selling or Selling to Big Companies depending on your market)
- Time to create the business. Most people cannot afford the luxury of quitting their day job to research and create a new business. If you can, this is excellent! (And it is a good way to spend a sabbatical, if your employer offers one and you have spent many years with your nose to the grindstone). If you have to continue working while you develop your business, create a project plan and carve out time in your schedule to make steady progress. You may need to forgo activities that make you happy such as evening television, golfing weekends or excessive volunteering. The time will need to come from somewhere, and it is not a good idea to use lots of time from your day job to plan your business.
- Support from your family. Starting a business is a very emotional experience, and you will need all the support you can get. I recently wrote about breaking the "I want to quit my job" news to your spouse. The more you make your family part of your new venture, the more fulfilling the process of starting a business will be. Creating a Life Plan together (the first step of any business) is also a great idea.
- A network of smart, savvy and encouraging friends and mentors. If you have grown up inside corporate environments, many of your friends may not be experts in entrepreneurship. I cannot tell you how many times I relied on experienced mentors when I started my business – they saved my life (and my butt) many times. There are general online forums for entrepreneurs like Startup Nation, specialized forums like MyMicroISV and some advice for finding a mentor here. You don’t need to know everything about your new business, but you should know people who do.
- A mixture of faith and mistrust in the external market and a backup plan. I feel tremendously thankful that I lived through one of the most thrilling points of our economy’s history: the dot.com boom and bust. I was a consultant in Silicon Valley at that time and saw money being thrown around like confetti. (I will never forget seeing BMW Z3 Roadsters offered as a signing bonus for recent college engineering graduates). What I learned by living through the bust is to never trust the economy! If your business success depends on the economy staying the same for the next 5 years, you are doomed to intense moments of panic and possible financial ruin. Work on worst-case scenarios, and always think of your exit plan. That said, you cannot ever totally predict the future, and at a certain point you will have to take a leap and trust that your chosen economic sector will flourish long enough for you to get a hold in the market.
I am sure I have missed some things – for those of you who have created successful businesses, what helped you evaluate your business idea?