I started a business. It didn’t succeed but it taught me heaps
Remember that Shane Warne took 1/150 in his first test match?
It’s a great thing to keep thinking about after your first business winds up. He also used to look like this, which is another great thing to think about.
I started with what I thought was a solid idea, and a drive to get out of the corporate world. It seemed like it couldn’t fail, I mean the numbers and projections I came up with had me holidaying on the moon in just a couple of years.
Unfortunately, you are accountable for the numbers and projections in your own business, unlike a lot of corporate businesses. Put together a nice presentation and solid projections in a large corporate and you’ll probably get called ‘innovative’ and receive a bonus – doesn’t matter what actually happens after this. Put together a nice presentation in your own business, and you’ll sleep well for a night, before realising you have to actually hit those targets.
I had an amazing presentation, and didn’t hit the targets. But what I do have is an enormous amount of lessons of what I’d do again (maybe 10%) and what I’d do differently (90%).
Start with a co-founder or 2 or 3
Make sure they’re good people too, who are willing to work as hard as you plan to. Speaking to humans is an amazing thing, and something you won’t appreciate enough until you’re working by yourself.
Whatever business or industry you choose, make sure you’re happy to work in it for 10+ years
The stats show that most businesses fail, and the successful ones take over 7 years to become profitable. So if you want to be a successful business, you’ll be in it for 7 years and assuming you become profitable then, you’ll want to hang around to enjoy the profits for 4-5 years (at least).
So that’s a lot of your life – make sure you like the industry and you’re passionate about the work you’re doing!
Work out how much money you’re willing to lose on the venture, and put that in a separate account.
This is your start-up capital. I recommend only using this money to get to one of three points:
- Becoming profitable so that will fund the business ongoing;
- Get to the point where you can raise investor money of $600k+;
- Close the business.
The fourth option is raise a small amount of money (~$150k) which may sound appealing. If you are going down this path, be aware you will not be earning much at all for a decent amount of time. You’ll need to be incredibly careful how you spend the money because $150k doesn’t go as far as you might think.
If you’re selling a physical product, leave plenty of margin for the cost of acquiring a customer ($80 minimum, $800 better)
Did you know that it costs money to acquire new customers? Might sound silly, but I assumed that people would roll through the customer door, ya know…just cos it was a good idea and my friends thought it would succeed.
All businesses pay to acquire customers at some point and you need to work out what this costs as quickly as possible. PayPal paid users $10 to join in the early days. This sounded a lot to me, but if you can acquire customers at $10, you’re onto something special.
Not all businesses can pay to get users, and you’re probably going to have to pay for advertising. This cost is substantial. Not only do you have to think of creative (that is pictures and words) that will convince people to buy your product, you need to work out where to place it (Facebook, Instagram, Billboards etc) and measure how each one goes. None of this is easy and you’re competing against companies that spend millions on this.
Solve a problem, rather than creating a market
Make something customers actually want, and would pay for. A hundred people may tell you what a great idea you have, but will they actually pay you? This is a step far greater than you’d think.
A proven method is to find something that really annoys you, or others, and solve that issue.
Become a product-led business
I generally categorise businesses in 3 groups – product-led, marketing-led and corporate-led (I’ll go into them more in another post). Junkmail was marketing-led because the product was great, but not 10x better than anything else out there.
Having been involved in businesses that fit each of the categories, I have strong opinions that product-led businesses will have the highest chance of success in the long-run.
Create a product that targets a niche in the market that’s easy to define
This is for corporate people who assumed marketing and advertising was easy (of which I used to be one).
You can run numbers on a massive market and think “I only have to sell to 0.1% of these people, and I’ll be buying my beach house next week.” Selling to everyone is much harder though. Targeting niche groups has been made so much easier with digital advertising, and you’ll save a lot of money advertising only to niche groups.
Understand what type of business you’re getting into
Work out exactly what industry your business is in, and learn everything you can about that industry. The skills you’ve learnt in the corporate world, won’t translate to starting a business.
If you’re one of the millions that are blown away by the ‘ease’ in which you can sell products online, remember that this business is marketing and advertising. If this isn’t your background, you’ve got a lot of learning to do. It is definitely possible, but read, listen, watch anything you can on advertising and e-commerce.