Starting a business is a dream job for many people who have a great idea, are willing to tolerate some risk and are looking to be their own boss. While start-ups are often glorified in the news – as some reach extremely high valuations – starting a company is a big undertaking that typically requires grit, perseverance and a little bit of luck along the way.
Over the past few years, I’ve started two companies, sold one and raised over $4 million in venture capital from some of Silicon Valley’s top firms. These companies haven’t been without their challenges, so here are the top three things I wish I knew when I was starting out:
1. Talk To Prospective Customers Before Starting Your Business
The biggest time killer in a start-up is building a product you think a customer needs, only to find out, after you launch your product, that the customer actually needs something else. Before starting my second company, Forge, I recorded over 50 conversations with prospective buyers to learn about their top three problems, how they define success and how much they’d be willing to pay to have product or solution that successfully helps them navigate their problem. These conversations helped me narrow in on building a product I knew customers needed and gave me my first few customers.
2. Reference Check Investors Like You Reference Check Employees
Sometimes raising money is necessary to get a capital-intensive business off the ground or as a way to spur growth. But raising capital, as with anything, comes with a cost. The cost is giving up future value of your business in the form of equity. Who you give this equity and other rights to – such as a board seat, which is often paired with financing rounds – can have a massive impact on the long-term business outcome.
It might seem daunting to ask a lot of questions of someone who is willing to write a cheque for a few hundred thousand or million dollars (or rands), but it’s extremely necessary.
- Have they invested before?
- Who did they invest in?
- What value did they provide to those entrepreneurs?
- Do they understand that most start-ups fail and that they might not get their money back?
- Can they introduce you to a few people they’ve invested in previously – business founders who went through both good and tough times?
Since most successful businesses are around for more than 10 years, it’s important to know who you’re going to be working with.
3. Do Whatever It Takes To Make Sure Your First Three Projects Are Successful
If you decide to raise pre-seed or seed capital for your business, take the money and spend 100% of your time working with your first three clients. I often see entrepreneurs who accept capital and then worry about how they’re going to rapidly grow their company.
In reality, in the early days nothing matters more than making your first three clients extremely happy, so you can use their success stories as case studies. Their testimonials will help you sell to client numbers 4-10, which will in turn help you sell to clients 11-100. Focus on your first three customers and tweaking your product or solution experience. Your company will grow organically from there.
Related: 21 Steps To Start-Up
Bonus: Passion Doesn’t Help You Make Payroll
The first time I had to let go of someone from my team, very early on in my career, my dad said to me, “Passion Doesn’t Help You Make Payroll.” You can have an employee who is extremely passionate about the work you’re doing, but if they can’t contribute to making it a reality, it’s better to let them go and get back to building the business.
Whether it’s conducting customer research, pitching to investors or learning from your first clients, starting a business gives you unmatched flexibility and the ability to truly learn every day.
The 10 Commandments of Social Entrepreneurship
How does a business, with a definitive social drive, practically draw the tricky equilibrium and make a difference without sacrificing the bottom line? by Lisa Illingworth, CEO and co-founder of educational start-up Futureproof and Development Sector Consultant for Evolve, Silvia De Jager.
The emergence of social enterprises on to the business landscape of the South African economy is often a point of contention due to the seemingly conflicting driving factors of philanthropy versus profit. However, there are many businesses that are underpinned by solving problems for the benefit of society at large and out of this has arisen this area of entrepreneurship.
The Gibbs Social Enterprises in South Africa Report released in 2018, give interesting insight into the growing application of this business model in the South African context but they note, as most social entrepreneurs will have first hand experience of, there is a subtle but very real balance to be struck between purpose and profit. How does a business, with a definitive social drive, practically draw the tricky equilibrium and make a difference without sacrificing the bottom line?
1. Do your research
Ensure you know your market, understand their needs and don’t make assumptions. Social enterprises are much more complex than your regular business and require a lot more research. They have various customer sets, that are either direct or indirect and blending those in operations that meet those expectations is a delicate dance.
“In FutureProof,” comments Lisa Illingworth, CEO and co-founder of FutureProofSA. “We don’t define our customer sets based on what they are prepared to pay for, but rather on what problem we are solving and for whom. This means that the children, their parents, the schools and the management, our coaches as well as those in the corporate space all have various needs and expectations of how those are met. Thus, we have 5 different types of customers and we sell a variety of solutions to each of these, even though some are paying directly for our services.”
2. Remember it’s a business
You want to achieve social impact, but your priority is to ensure you make enough revenue to not only sustain the social enterprise, but to also allow for growth. As a business, you should instil good business practices such as processes, financial planning, legal structures and governance.
A social enterprise is a lot like the human body, if you feed it only enough to survive, growth will be stinted. Give the body more than what it needs to function for the day and growth will be proportional. Don’t sacrifice your profit at the altar of purpose.
3. Allow for flexibility
Have a flexible mindset. When the market is changing, you won’t survive staying the same. If your solution is no longer addressing the problem you are trying to solve, it’s time to go back to the drawing board. How you adapt is important and getting regular feedback from those you are serving as well as those who are paying- whether they are one in the same person or not.
Just because you are doing good work in your own mind, creating a transparent feedback loop, will prevent your business from being infatuated with the vision despite the market losing interest in your solution.
4. Take calculated risks
Be prepared to take risks but do your homework first. This is how you learn and grow both as a business and as an individual. Which means having the mechanisms and people in place to collect the data necessary to take informed steps towards opportunities aligned with the purpose of the business but not at the expense of still turning a profit.
You will never know every risk and it’s potential upsides or downsides, but having enough information that is unbiased can help make better business decisions and maintain both impact and shareholder value.
5. Focus on sustainability
Keep your eye on remaining sustainable at all times. Keep in mind that sustainability is not only financial, it includes your operations and programmes. Socially minded entrepreneurs often make head decisions with their hearts and end up with an operationally capital-heavy structure. Hiring people based on contract positions and keeping overheads flexible will ensure that as your opportunities fluctuate, so the business can adapt accordingly and weather the famine times but grow in the seasons of abundance.
6. Have a clear mission
Have clarity on your purpose and how your business will achieve it. Ensure you have a strong Theory of Change for how you will create and deliver your social impact and develop an ability to clearly communicate it to everyone, both inside and outside of your business. This will also keep you, your team and your business from getting sucked into solving all the social sicknesses that exist in the area that you practice.
Widen your circle. Support can include conferences, business networks, fellowships, mentorships, workshops, training, incubation and shared workspaces. Don’t focus on simply expanding your social circle into those in similar fields but look outside to those with varying perspectives, yet aligned in values and culture with your organisation.
8. Build a strong team
There’s an old African proverb that says “If you want to go quickly, go alone. If you want to go far, go together.” Don’t ever assume you can do it alone. Invest in a team that can support you, both on a personal and professional level and ensure that they are not only focused on the purpose of the business, but the way in which the purpose is achieved.
Ensure you are being coached in both a personal and professional capacity so as to maintain the momentum for yourself and your team.
9. No Grit – No Pearl
You have to possess grit — perseverance and passion is essential and will get you a very long way. The refining of this business model is more complicated as the numbers may not be the only measure of success. Know what good looks like for your business and be prepared to have the hard conversations to refine your offering to meet both an impact measure as well as a profit measure.
10. Enjoy the journey
You chose this journey because you wanted to make a positive difference in the world. It’s not going to be plain sailing, but that doesn’t mean it shouldn’t be fun. Learn to enjoy the process and glean as many lessons as you can, from all sources, in the shortest time frame possible. Entrepreneurship is too hard, not to learn from the mistakes of others.
Finding that healthy tension between serving a purpose and making a profit is complicated and yet possible. One of the major benefits of running a social enterprise is that people are drawn to working in these types of businesses over those strictly increasing shareholder value. Employees feel as though they are serving something more than just making themselves and others rich, as long as the balance can be maintained with a constant activity of business introspection.
How To Start A Car Dealership
Below are some tips on how to start.
If you are passionate about cars, then starting a car dealership might sound like the perfect business opportunity for you. You will be able to be your own boss and you can spend time around products that excite you, such as Nissan Qashai used cars, or luxury pre-owned cars, and used cars for business owners. But, you might not know where to start when planning your car dealership business.
If you want to open a franchise there are steps to follow. All car dealers need to have the correct documents in order when applying for buying and selling rights of cars, and you need to have the service history of all cars for sale on your lot. Interested in opening your own dealership or becoming part of a franchise?
Do your research
Before you jump right in to finding the perfect location for your car franchise or business, it is important to perform some market research into the industry. The first step is determining the demand for your particular service, which is providing used or second-hand cars for sale to the public.
Look at how many cars have been sold in your town recently, assuming that most people are willing to travel up to 16km to find a car. This might show you that in your area, up to 100 000 cars have been sold in a year. This is a significant demand, which will mean that your business model is a viable choice. Find out which people prefer used cars over the pre-owned vehicle options to further help your decisions.
Create a business plan
Once you have performed your research, it is time to create a business plan. You need a business plan to show any prospective franchisees and franchisors or for explaining to your lender exactly what you want to do with your car dealership business. It should include your initial and ongoing costs as well as what your working capital is.
The most important part of your business plan will be the cars themselves. For example, will you be selling new, used, or pre-owned vehicles? Will you be focusing on one brand or offering multiple brands? Answer these questions first and remember to include costing for salaries, lease agreements, and other business costs. Another important part of your business plan include how you will raise money to repay any loans or finance agreements you might have.
Have the right documents
After finalising your business plan, you should do some research into what documents you need to continue. In South Africa, this includes a dealer’s license which allows you to legally buy and sell cars to the public. It ensures that all of your business activities fall under the consumer rights and protection act.
You will also need to have documentation showing that you are leasing or own the property you will be operating from. You should look into a surety bond, which will protect you from any damages to the property. Speak to your lender about the other documents that you need for a franchise agreement, as these might be slightly different from what is required for a normal dealership. Also be sure to provide the correct documents to those you are purchasing used cars from.
Investigate inventory opportunities
The most important aspect of owning a car dealership is, of course, having cars to sell. This means that you will need investigate inventory opportunities, such as going to bank auctions to find cars that you can bid on and then resell at a fair price, or you could offer to purchase used cars from people who need to sell them and then resell these after much needed repairs and sprucing up.
You should always keep your budget in mind when purchasing inventory, as it can become costly if you are continuously running over-budget on purchases. This is when it is important to keep your business plan in mind as it will show you exactly how much you have to spend on inventory so that you can stick to this budget. If you would like to appeal to those who have discerning taste, you should remember that luxury vehicles might cost more than others.
Don’t forget about marketing
Once you have done your research, drawn up a business plan, and found all of your inventory, start working on marketing your business. Invest your money in a company that can help you to reach your audience by using modern digital tactics as well as traditional techniques of marketing. Remember to have the right documents together so that everything is legal and above board before you open your doors. Soon your car dealership will be booming and you will be helping people to find the cars of their dreams.
Got An Awesome New Business Idea? Here’s What To Do Next
If you’re stuck in the brainstorming stage, the first step is to focus on two questions: ‘Why?’ and ‘Who?’
Do you constantly have great business ideas which fall to the wayside because you just don’t know how to turn those daydreams into reality? If you’re stuck in the brainstorming stage, that’s probably because you don’t know what to do next.
Around 550 000 people, according to the Kauffman start-up index, become entrepreneurs each month and you could be one of them. While there’s no guaranteed formula to starting a successful business, there are steps to take in the planning phase that will not only help you determine if your business idea has what it takes but help you get the ball rolling, too.
Sound like you? Here’s what to do next.
Determine the “why” and the “who”
The first step to take after you’ve come up with a new business idea is to concentrate on the “why” and “who” of it. You may think you’ve thought up an awesome idea, but your business won’t be successful if you don’t know the real reasons behind why it’s a good solution, and whom it would be a good solution for.
Start to really think about what problem your business idea solves. Your business may solve a problem for you, but does it solve a problem for others? If nobody else has the problem that your business proposes a solution for, then who will buy that solution?
After you’ve taken a deep dive into why your business is needed in the first place, determine who will be the target audience of your business. Think about the demographics of your target audience, what’s important to these people and how you will reach them. You can use a free tool like Hubspot’s Make My Persona to get detailed about who your ideal customers are. A business isn’t a business without customers, after all.
Related: 10 Business Ideas Ready To Launch!
Search for similar solutions
No business idea is 100 percent unique; there will always be businesses out in the world that are similar to yours. So, don’t sweat it if there are companies doing what you do; in fact, that proves there’s a market for what you do. What you do have to think about is who your competition will be, what exactly they are providing and what you will do differently or better than they do.
To stand out from the competition, you will need to know what sets you apart. Start doing research on the companies that could become your competition. Look at how much they charge, who their target audience is and how they market to them, to name just a few research points. There’s no need to reinvent the wheel, but do look at what these companies are lacking in and how you can improve upon those areas in your business, so that you capture their customers.
Talk to your potential customers
Similar to your efforts to study your potential competition should be your effort to study potential customers. Get out there and start talking with your target audience. See if your product or service is something they would use, find out how much they would pay for it and ask what comparable product or business they’re using now to solve the problem.
You could even get super in-depth and ask people to fill out a survey providing answers that will help you get to know your audience even better. Even negative feedback about your business idea can help you refine your idea.
Lock down the details of your business
Coming up with a new business idea is exciting; your mind is probably buzzing with lots of plans and designs – maybe too many. So, sit back and lock down the finer details of your business. Will you be offering a product or a service? How much will it cost? How will you be marketing your business? You need to know your new business concept inside and out before you launch. A great and easy way to organise your thoughts is to use a business plan software like LivePlan.
Also, if you haven’t named your business yet, now’s the time to do it. Do some brainstorming and come up with a name that no one else has already taken.
Related: 20 Quick Money-Making Business Ideas
Determine the “how”
After you’ve worked out all the details of your future business, the next step is to figure out how to turn your dream into a reality. Obviously starting a business costs quite a bit of money, so that’s one of the major “how” factors you need to consider. Decide if you’ll talk to investors, take out a loan, or maybe even start a Kickstarter campaign.
Determine everything you’ll need to get your business up and running. For instance, if you’re offering a product, how will you build it and how much money will it cost? This last step is one of the most important in order to take your business from out of your head and into the real world.
Over to you
What are you waiting for? By following these tips, you’ll be well on your way to starting your very own company. If you take the time to plan out your new business idea, you won’t just build a business, you’ll build a successful one.
This article was originally posted here on Entrepreneur.com.
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