I entered the world of business at the age of 17. More than 30 years later I’ve worked for, with and around young and growing companies more often than I can count. It’s the benefit of having had a career as a consultant.
The most common question I get asked by people starting a business is “what should I think about?” There’s no definitive answer to this – it depends on what business you’re starting and what your aims are. Some people are happy having a shop that makes a living and nothing else. Others want to build something they can sell for large sums and retire before they’re 30.
What follows isn’t intended to be definitive. It’s a guide to the areas I think a successful new business should think about. It’s intended to make you think, question and research more. I’m assuming you know what sort of business you want to start and you’re being honest about your reasons.
Every successful business has a clear direction and knows how to get there. It understands how customers, competitors and suppliers are being affected by changes in the marketplace, has planned for them and is executing that plan. There will be problems along the way and plans may change. The plan might be wrong and need adjusting. Something unexpected might happen. The key point is, their strategy is under control.
The Blue Ocean Strategy is the best approach I’ve seen to creating a strategy. It walks you through a simple framework that gives you an understanding of your markets and customers, how your competitors shape up and helps you identify ways of differentiating yourself. Most of my strategy work over the past decade or more has been built on this framework.
Two other frameworks you may find useful are the Value Proposition Canvas and the Business Model Canvas. The former gives you a structure for mapping your proposed business to specific customer segments. It will help you align your products and services with the jobs customers expect to get done, the pain they experience and what the benefits they want. The Business Model Canvas then helps you understand what you need to deliver this value, how you can earn money and where you will spend it.
I’ve used a combination of these three to great effect for business and product launches. There are a couple of factors I think make them successful. The first is you can do them to a level of detail that’s “good enough” for what you need. The second is they’re living documents, which means you can constantly revisit and refine them as more information becomes available and see the impact they have on your business.
A business lives or dies by making more money than it spends. Keeping track of all the expenditure and income is the basis of Accounting and any entrepreneur should have a basic understanding. I’m not suggesting you should become an accountant, only that you should understand the principles.
Understanding Business Accounts for Dummies is the book I swear by for this. It will give you the basic knowledge you need to either complete your own management accounts, or understand what your accountant is talking about.
While the principles of accounting are more or less the same the world over, there will be differences in the detail that affect your business. These are likely to be around tax, paying employees and suppliers, credit control, tariffs and practices. If you’re unsure of these, talk to an accountant in your region.
Marketing is central to the success of any business. Without it no one will know you exist and you won’t sell your products. It’s a wide and complex topic that embraces branding, direct marketing, advertising, social media, search engine optimisation and a host of other topics and tactics.
If you’ve understood your strategy you’ll know how to brand and market your business in a way that reaches the right customers.
Creating a Brand Identity is a reasonable pragmatic introduction to branding. It comes at the topic from a design perspective, so omits some high-concepts that can surrounding branding. For a new business with a handful of employees, having a strong visual identity can be more effective than spending months debating brand principles.
If you want to go deeper into marketing, remember techniques and tactics might change almost weekly, but the principles remain the same. Marketing for Dummies will give you a basic understanding of the principles, then you can explore the tactics through sites like Growth Hackers and the work of Seth Godin.
The second biggest mistake I see with new companies is not having discipline in their operations. These are all the processes, procedures, people and technologies that keep the business running. If you don’t have effective, well-managed operations you’ll waste money putting problems right, dealing with poor quality, staff who have little direction and spending money on technologies you don’t need.
Good operations stem from solid processes. These link all the tasks you need to complete one activity in your business. For example, you may have a process for manufacturing your product, another for hiring staff, a third for paying staff and so on.
A good starting point for understanding the processes you’ll need is the Value Chain. You can use this as a template to work out your processes. At the outset you’re unlikely to need complex documentation, a few flow charts and bullet points should be enough. As your business grows and matures, you can add detail and start looking at where you can cut tasks out, automate them or do them more efficiently.
Regulation affects every business, some more than others. In Financial Services there are thousands of rules and regulations covering everything from what information you give to customers, to whether you’re even allowed to trade. Some regulations will apply to all businesses, such as employment law, registration and tax. Others will be specific to your industry or markets, like what you can say on packaging or the ingredients you use in your product. If you’re exporting, you also must comply with any laws in your destination markets, such as customs rules or packaging contents.
Your market analysis should identify the regulators that have influence over your business, and talk to them to understand what’s expected. If you’re planning on exporting, you may find the country’s embassy has information and even help to get you started.
It’s your responsibility to ensure you comply with laws and regulations. If you’re unsure of anything you should seek professional help.
The final area I see new business owners make mistakes with is management. Management has become a bit of a “dirty word” in entrepreneurial circles, partly because of our focus on inspirational “leaders”. The reality for most new companies is management is more important than leadership because without it your business will fail.
Management is about administering your business. Tracking targets and performance, making sure things get done and keeping everything running against plan is often underappreciated. Inspirational leadership means nothing if you can’t pay employees and suppliers on time.
For a young and growing company I suggest you focus on three areas:
Your processes. Make sure they’re happening on time and efficiently.
Your accounts. Keep track of where your money is, what you’re due to collect and what you owe.
Your marketing. Know what works, what doesn’t and what activity you’ve got going on.
As the business grows, you can think about becoming more of a leader. You will need to learn new skills, such as delegation and strategic thinking, while letting go of some detail. This is part of maturing as a businessperson and growing your business from a great idea you had to something that’s sustainable and profitable.
This is a starter for ten to get you underway. If you need more, or want to chat about your specific business ideas feel free to drop me a line.