How to start your own business

Because I have started a few businesses, I am constantly asked for advice by people that want to do the same thing.  Yesterday, I got an email from a friend who sent me a business plan and asked for thoughts.  As I wrote, it occurred to me that many others might be interested in the topic.

So, here is a business post on a pianist blog.  Do what you want with it.

I went into business for the first time in 1999.  Two years later, I quit my job as a software developer and have run my own businesses ever since.  My primary business is Vitabase, which sells nutritional supplements, but I have several other endeavors going on.  I have seen a lot of successes and a lot of failures. 

Here are some things I have learned:

1) Don’t be distracted by things that are not very important. 

I know people that obsess for months over logo designs, business cards, and various other nuisances related to starting a business.  Some will spend literally years on business plans.

These things are important, but they should not be your focus.  Your focus should be on what is called “proof of concept”, meaning finding a way to make money that will actually work. 

For example, if you want to start an oil change business, start changing oil and making money.  Feel in the gaps as you have time once you know you have a good chance of success.  You can change a lot of oil without a logo.

Or if you are starting a website to sell something, don’t spend months and tons of money on design.  Just get something up cheap and see if it has possibilities.  Web site design is important but it is not the difference between success and failure.

Use this philosophy regardless of your business idea.  A business plan will write itself if you know what works.  And things like logo design are pretty much a waste of money.  Just buy one of those $50 logo design offers online and get on to the real work.  Almost no small business owner should spend more than 15 minutes and $100 on a logo.

2) Bootstrap it.  Don’t spend much until you know your idea is feasible and don’t even think about borrowing money.

I know some will disagree with me, and this advice is not right for every single situation.  But most people should start small and invest as they grow.  If you borrow money, you are almost certainly going to regret it.

And by the way, most of the time, you don’t have to.  If you are creative, you can probably avoid borrowing. 

Be careful about partners too.  Here is a quick story.  I started my first business on a $2,000 investment.  I did not have enough confidence to invest my own money so I actually brought on a partner for half of it.  By the time I realized I didn’t need a partner, it was too late.  I bought him out, but paid dearly for it–tens of thousands of dollars.

Don’t make that mistake.  Invest your own money.  Don’t borrow or bring in partners just because of their money. 

3) Stay focused on your best idea.

It is very easy to try to do a lot of things at once.  I have learned the hard way that you probably can’t.  Diversification sounds great, but what you will probably end up with is a bunch of small failures.  I am spending a lot of time these days figuring out what to do with my small failures.

4) Understand that failure is just part of business.

Have you heard the expression: “Everything he touches turns to gold”?  Don’t believe it.  Failure is an inevitable part of success.  Failure means you are trying and pushing yourself.  Laugh about your failures and learn from them.  But don’t start playing it safe to the point where you no longer fail.

5) Don’t watch short-term numbers too closely.

If you spend your time worrying about financials, you are not going to be doing your best work.  I know people that check sales numbers several times an hour.  Do you think they are a bit distracted by that?

There is another big reason to avoid watching numbers.  There is a lot of stress involved in business and nothing will compound that stress more than worrying about how much you sold in the last hour.  Worry about weekly sales or monthly sales but don’t worry about hourly sales.  Focusing on short term numbers will make your mood and attitude bounce around like a yo-yo.

6) Enjoy the benefits of self employment.

Often, one of the nice things about being self employed is flexibility.  Take advantage of that.  If you want to leave early, do it.  If you want to take off a few weeks (and you can), do it.  Spend time working on things you enjoy and let someone else do the dirty work.

As I have said before, running a business is stressful.  Compensate for that negative by taking advantage of the positives.

7) Never lose your optimism.

It is easy to be pessimistic about a lot of things going on in the world.  But you need to stay optimistic about yourself and your business.  If you can’t, you probably need to pack it in.

8) Always focus on differentiation.

Good companies are different than their competitors in some way.  You have to decide what that way is.  We call that difference a differentiation factor.  Don’t start a business unless you have one.  A good book to read about this is Blue Ocean Strategy (Kim/Mauborgne).

9) Work ON the business as much as you work IN the business.

Small business owners need to be constantly thinking about strategy rather than just doing the grunt work.  If you own a bakery, you need to be thinking about things like marketing, differentiation, and cash flow.  You cannot spend all your time baking. 

Here is a book that will change your mindset: The E-Myth Revisited (Gerber).  Don’t let your business just become a job with excessive stress.  Your focus from the beginning should be working toward a position where are not even necessary.  This book will help you get there.

10) Focus on cash.

The most important financial number for small businesses is not profits.  It is cash on hand.  Manage cash flow well and you will alleviate much stress.  Don’t start a business with your family’s emergency fund.  And make sure you have cash buffers before you spend a dime.

I know about the financial crisis out there and I know some believe it is a bad time to start a business.  But I actually think this is a great time to start a business if you can do it with low start up costs.  So go do it!