Greetings from Kansas City – Scott Asner of Eighteen Capital Group (18CG) here.
As somewhat of a lifelong entrepreneur, I have never seen such an exciting time to start up a new business venture. The rest of the country seems to feel that way too – the enthusiasm is everywhere. We are always hearing about the “gig economy,” “startup culture,” and “hustle.”
Clearly more and more people are interested in creating their own business. So today, I wanted to share some helpful tips from my life that all prospective business owners should know about the realities of running their own business.
Understand Your Market, and Develop a Solid Business Model
It doesn’t matter how much startup capital you have, how great your idea may be or how little competition you may have out there – without a strong business model and a general grasp on the overall economy, your new business might be little more than a pipedream.
Before taking out a loan or ditching a solid income, it is vital to have all your ducks in a row and to be prepared for hard times ahead. It is said that 20% of all businesses fail within their first year, and 50% fail by the fifth year.
You have to understand the risks that you’re undertaking when stepping out into a new venture. To do this, you should know whatever field you’re hoping to get into, from inside and out. This includes networking and speaking to other businesses owners in your field, researching the industry and its current/future challenges, and staying up-to-date on trends. Any business owner will tell you that running a successful business is not something that you can set and forget once the clock strikes five – it requires serious consideration and understanding.
This also requires developing a fail-proof business model, especially for the first couple of years. You will need a product or service – something that you can offer the market – and then you need a way to provide it. Whether that means developing a sales funnel, working out operational logistics, or prepping for a lack of demand – you must have an answer for any challenge.
One helpful tip here is to work backwards from your goal and anticipate the worst case scenarios to plan for them for when disaster strikes.
Concentrate on Meeting a Demand
Some aspiring business owners get too carried away about “what could be” rather than considering the realities of the market. While it’s always great to dream big and to be ambitious with your business goals – the ultimate focus of a new business should be to meet the customer’s demands.
We have all seen novel ideas that were neat, but ultimately did not meet a substantial demand. These types of businesses tend to come and go because they simply did not have a market.
For instance, apps are a new market that a lot of younger people seem to want to explore. You may have heard the phrase, “there’s an app for that,” and there seems to be no limit to what people can package into a simple software platform – but for every wild success story of a new app, there are always the unknown ones that failed.
I am NOT saying that business owners should not pursue their dreams or off-beat business ideas – but ultimately, the customer is what matters most in business. Your idea should be marketable to their demands.
Having said that, sometimes novel ideas – to downright silly ones – can turn into huge money makers. Remember pet rocks? They swept the nation like wildfire and certainly made somebody a lot of money.
If you have an idea that can capture the interest of consumers – by all means, try to generate interest and capitalize off of it. But understand that profits might be short lived before trying to establish a larger business around a singular idea or gimmick.
Monitor Your Budget and Income
Sometimes when business opportunities explode, it can become quite a challenge to keep tabs on all of your financials. Once your business starts to really take off, you will want to have someone or a team in place to manage and analyze all of your income and expenses. Those who fail to do so can miss out on a mountain of profit and not even realize it.
Things can add up when you’re running a business: office equipment, software subscriptions, staffing and all of the overhead that comes with any organization. If you’re starting out – try to minimize these expenses as much as you possibly can or it may force you to scale back and stagnate, or go bust completely.
New business owners should keep a close eye on their expenses and maintain detailed ledgers of transactions. Make sure that every item and every purchase is kept on record so that you can balance your budget at the end of every week, month and quarter.
New business owners who experience explosive growth can easily lose track of factoring in all of their expenses, as they’re riding high on success. But they should understand that growth spurts also come with contractions, and they should be prepared accordingly.
Risk and Reward
With any business venture, there is an inherent risk that comes with it. Sometimes it requires the help of a loan from a bank or business partner; sometimes it takes giving up a sure thing to journey into the unknown. That is just a natural part of business.
Running a successful business is always worth the risk, but anyone thinking about jumping into the fray should consider everything that goes into the process. Hopefully these insights can help anyone seeking to make that jump.~ Scott Asner Kansas City, Founding Principal of Eighteen Capital Group (18CG)