Be Sure You Want to Be a Small Business Owner
By TORY JOHNSON
Jan. 3, 2011
If we learned one thing from the job market last year it’s that nobody’s coming to take care of our careers. We can’t wait for a big bailout, a massive economic turnaround or some miracle to grow our paychecks. We’re each responsible for taking charge and making things happen for ourselves.
Among the workplace highlights of 2010: small businesses experienced the fastest growth in the private sector. One of my big goals this year is to help more people launch and grow their own ventures.
First step: Be sure you truly want to be a small business owner. This isn’t something you should pursue because nothing better has come along. It’s not something to seek because of financial desperation. It’s incredibly hard work with inevitable obstacles along the way, which means you have to really want it if you expect to be successful. Starting a business must be your primary plan, not your fall back.
Next, figure out the small business idea that you’re most excited about making happen. Don’t attempt to reinvent the wheel. Take a look around and you’ll see the same thing: People buy cupcakes, we all get haircuts, everyone likes some kind of jewelry. Walk any mall or Main Street and you’ll see multiple coffee shops, banks and clothing stores. Competitors can co-exist quite successfully as long as the product or service is sold effectively and delivered with excellence.
Skip the lengthy business plan. Forget the conventional wisdom that you must write a detailed business plan. It’s impossible to predict how much money you’ll be making three months from now, let alone three years from now, so don’t waste your time guessing.
Similarly, if you wait until every I is dotted and every T is crossed, you’ll be stuck in planning mode forever. Create a one-pager that addresses exactly what’s needed to get going right now. A Babson College study backs this up. It found that similar ventures launched with formal business plans did not outperform those that launched without them.
Pinpoint your customer base. Determine exactly who your customers are. Don’t say “all women” or “anyone who wears jewelry.” Be specific: I’m going to provide bookkeeping services for restaurants. I’m going to create social media campaigns for self-published authors. The more you can pinpoint your targeted client, the more focused your marketing efforts will be to reach them. You’ll be able to ask for the right referrals and you’ll know who and what to search for on the Internet.
The majority of your time must be devoted to sales. Getting clients is the most important aspect of your business. Instead of looking for a bank loan, an investor, a grant or some kind of infusion of cash from a stranger, put all of your effort into getting clients and customers. It’s the best source of capital — and it’s the one that is absolutely within your total control.
Keep costs down — way down. If you’re starting a business that needs a ton of cash that you don’t have, find another business idea. Until you start bringing in sales, you must keep costs down. Think creatively: it would be great to rent a fancy commercial kitchen to bake those cupcakes, but use an inexpensive (or free) church or community kitchen in off-hours instead.
Forget hiring a fulltime staff; ask friends for help, train interns and use hourly talent. Barter for key services. Put off incidental expenses until you’re making money.
Price for profit. Your pricing shouldn’t just cover your costs; it must also generate a profit for you. Don’t undervalue your time and talent. Work the numbers from the top down: What are you looking to make annually? How does that break down monthly and weekly? How many products must you sell or how many clients will you need to bring in to meet those numbers? What are all of the costs associated with delivering that product or service? None of this requires fancy charts or advanced accounting skills. Figure out the numbers so you know what’s realistic.
Get moving now. And perhaps most importantly for everyone trying to do something new this year, keep this top of mind: dreaming is good, but doing is great. Start exactly where you are. Make smart decisions and take action every day. When you start hustling, you’ll see great results.
Tory Johnson is the workplace contributor on “Good Morning America.”
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