Post by Kevin Tardymy name is Kevin Tardy and I really could use some
information on starting up a new business. A brief
overview of some commomn mistakes that people
make when first starting a business or just some
common do's and dont's when starting up a new
business. Thanks in advance for your help and I look
forward to hearing from you.
The following is my standard advice to wannabe entrepreneurs.
"First, get experience managing a business like the one you want to open
BEFORE you open your own. Do NOT open a business you've never managed for
someone else. Learn your lessons from the School of Hard Knocks on someone's
money and not yours. And, no, being just an employee doesn't cut it. You
need to be the manager. A real manager. Unfortunately, businesses today
call employees "managers" and/or "assistant managers" who are really just
shift supervisors. Regular employees (no matter how talented) and shift
supervisors (a.k.a. assistant managers) only know what the manager does at
pretty much a superficial level. This doesn't mean that employees and shift
supervisors don't think they know what the manager knows, but that doesn't
mean they do. And they surely have no clue what performance pressures a
manager is really under. So if you're an employee or shift supervisor of a
business you want to start, send out your resume and get a manager's job.
If you're not an employee of a business you want to start, you are in even
more of a need to get such a manager's job. Customers . no matter how much
of a regular they are . know every little about the businesses they frequent
and commonly have a distorted view of it due to being on the other side of
the looking glass.
Now if you currently have a full-time job that isn't being a manager of the
type of business you want to open, you need to quit it to work as a manager
of the type of business you want to start. You might need to first be a
regular employee or a shift supervisor of it to get such a manager job, but
that's fine. Be a regular employee or shift supervisor as a part-time job
and keep your current full-time job. However, you will eventually need to
be a real full-time manager of the business type you want to launch. If you're
not willing to be such a manager, don't bother reading any further. You're
just a wannabe with a fantasy and what advice I give below will just be
wasted on you. However, if you currently are a full-time manager of a
business type that you want to start or is someone that will do the above,
read further and I will reveal the most important secret to business success
there is. The above was just the prerequisite anyone needs to open a
business. It doesn't mean you will succeed. It just means you won't make
horrible mistakes at the beginning. What follows will make you succeed."
Let's begin.
"What I recommend you do is determine what your sales territory is. What's
its radius? Double that and add a healthy 10% more distance then go and
talk to people out that distance that are in the same business you want to
start up. Literally drive there. Do not do the following over the phone or
email or through snail mail. Show up on their doorstep during the slow time
of their business day. Tell them that you want to start up a similar
business at such-and-such location and if they would consider you
competition. If they say you would be, drive further away from your
proposed business location until you find a business that says you won't be.
If you have to go to a different country, do so.
If your business' sales territory is theoretically the world (i.e., a
mail-order catalog or an online-only business), forget about the territory
stuff above and simply look for businesses that are doing business HOW
you're going to do yours but NOT selling the same thing(s) as you. For
example, if your business is a mail-order catalog that sells special dusters
for silk top hats, go and talk to people that sell food by mail-order but
not anyone that sells clothes. Hunt for them, find out their corporate
addresses, and go visit those closest to you.
HOWEVER, do not interview franchisees. They are following a very detailed
plan on how to run their businesses. These plans are very good, but the
franchisees have done nothing to write those plans up and literally just
bought them ... thus are useless to you and your pursuit of knowledge.
Franchisees are a murky mutant between an employee and an entrepreneur.
Their franchiser is the one that figured out how things are to be profitably
done and the franchisee is just following suit. As for franchisers, don't
talk to them either or you will have just given them their next expansion
location. HOWEVER, this does not mean you shouldn't consider becoming a
franchisee. It should always be an option you should consider. Not the
only option, but one of them. But even if you know deep down that you'll
eventually be a franchisee, you need to still do the research I'm laying out
here so it is an informed decision. And if after doing all the following,
you (still) decide to become a franchisee, thoroughly investigate ALL the
different chains for the type of business you want to start up and interview
LOTS of franchisees in each chain to find the one that's best for you. But
that's after you do the following and let's now get back to that.
Once you find a business that says your two territories won't overlap, ask
if they wouldn't mind answering some questions about how to start and run a
business like theirs. Play to their egos and they'll love to talk to you.
Everyone likes to feel important and worth listening to ... especially
business owners when it comes to their businesses. Have a list of questions
written out on a notepad, but do NOT write down their answers. Instead,
bring a tape recorder (yes, put it right out in the open ... no need for
spyware ... and besides it plays to their egos as their words are being
treated as worthy of being recorded) and concentrate on getting as much
information out of them as possible ... as well as picking up the other half
of the answers they give in body language, which would be something you'd
miss if you were jotting down notes. If they say something you don't
understand, speak up and ask for clarification. Let them wander off your
list of questions since where they wander to might be a place you never
thought of asking questions about and should have been. However, keep an
eye on the questions you've written down and try to ask them all before the
interview concludes. Of course, always yield to customers that come in,
but, naturally, try to continue the interview after the customers leave so
you get answers to all your questions.
After you've interviewed one owner, don't interview another but go home and
digest what was said. Listen to the tape on your way home. Think it over.
Adjust your business plan accordingly. Adjust the questions on that notepad
and then on your next free day (or the following day if you've got both
off), head off in another direction and do the same thing. Try to interview
at least twenty business owners. A hundred would be ideal. Interview the
good, the bad, and the ugly. If you're lucky, you'll interview one that is
going out of business or has just went out of business so you can hear about
the dark side ... as well as possibly pick up good equipment, inventory, and
supplies for a song. Likewise, interview those businesses you think are
bad. Keep in mind that since they're still in business, they are probably
doing something right ... if just being the only game in town for your
products/services.
Share as you give. Let them know what you think is a good idea and they may
tell you their own gems. Don't get paranoid that they'll steal your good
idea. They will! Or rather, you should HOPE they will as that means your
ideas are actually good ones. These are the individuals that are the best
judges of your business ideas. However, you'll never know if your business
ideas are good unless you tell these business owners them ... or blow a ton
of money actually doing the idea and thus finding out the hard way. Also,
if you're not willing to share, don't expect them to as well. In fact, it
will likely take you telling them your best idea for them to tell you
theirs. Also, ask them to read over your business plan right there before
you. Naturally, don't leave a copy of it behind. What one of these
business owners is going to tell you will be better than ALL the advice from
ALL the business professors on the face of the Earth. Even from the ones
that are going out of business! These business owners are DOING IT RIGHT
NOW ... whereas business professors live in the fairyland of academia. Oh,
and that smack-down goes the same for SBA's Small Business Development
Centers (which are manned by business professors and burnt-out business
executives) and SCORE (which is an abbreviation of the Latin phrase: "Grumpy
Old Men Waiting to Die").
Don't forget these individuals after you interview them. Once you get home
from interviewing them, send them a nice thank-you snail mail letter for
taking the time to answer your questions. When your business opens, send
them an invitation to come and see it. Ideally, hold a special Grand
Opening dinner and invite all the good business owners you interviewed to
it. Give them a group tour of your business (no matter how small the shop
is ... even if it is a desk and a computer in a corner) and then treat them
to a nice meal. I'd recommend a barbeque at your house/apartment so it is
informal and relaxed. Do NOT drink alcohol or do drugs at this dinner.
Listen, listen, and listen some more. You've got the most valuable think
tank right there eating your hamburgers. They'll just naturally talk shop
and focus most of that talk on YOUR shop. The only downer of all this is
that it would be bad form for you to tape record it. However, you can put a
small notepad in your back pocket and when someone tells you something good,
whip it out and write the thing down. It will again play to their ego and
will actually get the other business owners there to open up as it plays to
their egos and competitive spirit.
Now if you want to really succeed, see if the good ones are also willing to
sit on your Board of Directors (or Board of Advisors, if you don't want to
give them any control power). The rest of your Board of Directors should be
made up of marketers (at least have one) and one and only one accountant.
I'd recommend the board number nine. Your Board of Directors will help you
keep the big picture in mind and an eye on the future.
And don't stop doing the above business visits after you open yours. At
least once a month (if not once a week), visit still more businesses. And
for one afternoon, make this part of any vacation or business trip you take
anywhere. In fact, you'll very likely get more out of these interviews
AFTER you open your business than before you did. After you open your
business, you can really start to talk shop since you're now currently
running a shop. This worked great for a little-known starting-out
pizza-parlor owner by the name of Tom Monaghan ... the founder of Domino's
Pizza.
Lastly, if you're not willing to do the above, you don't have what it takes
to start and succeed at your own business. Period."
Additionally...
"Work on a business plan. Regardless if you're going to get a business loan
or not. A business plan forces you to think of all aspects of your
business. Question every aspect of it. Think how you can do it better,
cheaper, and faster. Always remember to K.I.S.S. it. Keep It Simple,
Smartass. [Yes, I know it is usually said as "Keep It Simple, Stupid", but
it is the smartasses that make things more complex and difficult than they
need to be. Stupid people keep it simple (usually too inadequately simple)
because they're stupid.] And forever keep in mind that this is a business
you're starting and a business is to turn a profit. It doesn't turn a
profit and it's just an expensive hobby of yours. Your goal should be for
the business to work for you and not you work for it. Your end goal should
be that you don't have to even show up at the business for it to turn a
profit. Golf, anyone? For if you need to always be at the business for it
to turn a profit, the only thing you've made is a job for yourself. If
that's all you want, don't start a business (and all the headaches it
entails) and just go work for someone else.
As for how much time to invest into your business plan, studies have shown
that those that work less than six months on their business plan have a 90%
failure rate. Those that work six months or more on their business plan
have a 90% success rate. And to start off, get a copy of Michael Gerber's
"The E-Myth" (Harper & Row, 1986). Its real value is helping you determine
if you're a Technician, Manager, or Entrepreneur. Be honest with yourself
and you'll save yourself a lot of grief.
As for what to put into the business plan, go to your public library and
pick up a book about writing a business plan. Skim through it to see if
they give a comprehensive example of what a plan's Table of Contents should
look like. Look it over. Does it match your business plan's needs? If
you're unsure about a section title, read the book's section on it. The
book I like using ... though it has a corny title ... for its Table of
Contents example is "Business Plans that Win $$$: Lessons from the MIT
Enterprise Forum" by Stanley R. Rich and David E Gumpert (Harper & Row,
1985). Their Table of Contents example is on pages 32-33. Then you simply
open up a word document, copy the Table of Contents into it, and start
throwing your business ideas into the appropriate sections. Do NOT use a
computer program to "help" you write up your business plan. Bankers and
experienced investors can smell those from across the street. Your business
plan needs to be in your voice and not someone else's. You should already
have lots of ideas for your business. Slap those into the appropriate
sections of the business plan. Add to them. Refine them. Flesh out each
section. Make that plan part of you and it will shine. Bankers and
investors will instinctively know that you know your plan inside and out
since you wrote every single word in it."
Also...
"The lifeblood of capitalism is communication between businesses and their
customers/clients. Yes, this means advertising, but that's just one aspect
of the communication I'm talking about. There's also public relations (such
as appearing on local radio talk shows), business image (everything your
customers see), and, most important of all, word-of-mouth. Approach all
expenditures on such communications as simply an investment. Track how much
you spend and what profits it generates for you. Be always willing to
experiment with new approaches but discontinue unprofitable ones once
they've shown themselves to be this. If you employ a marketing firm, hold
them accountable. Ditch them if they don't produce profits for you after
six months. Don't let emotion decide their fate. Let's the cold hard facts
of accounting be the heavy. And nothing gets a marketing firm to work hard
for you more than them knowing you expect results and will ditch them if
they don't produce.
As for what gets you the best bang for your advertising buck, that would be
postcard advertising ... as long as you have a message that can be
relatively short and concise. The key to postcard advertising is the
mailing list. The fresher the list, the better. You want to target those
who will most likely become your customers/clients. Spend a lot of time
thinking over who this might be. Once you're in business, find out the
demographics and psychographics of your customers and market to those. As
for the postcard itself, EVERY single word on it should be carefully chosen.
The goal of the postcard is to get its recipient to take some form of
action. That action could be calling and/or visiting your business or
visiting your business' website. The best way to get them to visit your
physical location is to make the postcard a meaningful coupon they can use.
Use color, bold, and all caps in the text of the postcard sparingly and to
just give impact to key words. ALWAYS send out two differently designed
postcards. One to one half of the mailing list and the other to the other
half. Design them so you can track results, such as giving different
telephone numbers to call. If one pulls in more than the other, try to
figure out why that happened and test that theory in your next dual mailing.
Advertising should always be considered to be fluid and not etched in stone.
Adjust with the times, be topical, and always be willing to experiment.
Now if you put up a website for your company, do NOT take the attitude of
"If I build it, they will come." That only works in Hollywood movies.
Instead, work to get your website high in the results generated by search
engines for keywords that potentials customers might enter into a search
engine to find you. To get a high ranking on such search engines, you need
links linking to your website. One way of doing this is by heavily posting
to newsgroups and online forums with a link to your website in your post's
signature. If you post to newsgroups and online forums whose topics of
discussion involve your business in some way, you might also be able to
directly get customers that way. However, this is very time consuming and
requires you to be a good prolific writer. If you're not, hire a service
that will work to get your website a high ranking in results generated by
search engines. You pay them a small monthly fee and they work to keep your
ranking near or at the top. I'm the Sr. V.P. of Strategic Marketing &
Communications for one such company (www.AdServius.com). Engage it or one
like it. View it as simply an advertising expense. For if you don't work
and/or pay to get your website high in results generated by search engines,
don't bother putting up a website. That would make as much sense as putting
up an unlit billboard in a dark alley."
And finally...
"Barter, barter, barter! Almost all businesses can barter with other
businesses. This is a great cheap way for you to get something (product or
service) you need for your business for a fraction of its cost ... if not
essentially free. Think what other businesses have that your business
needs. Not wants, but NEEDS. Don't overdo barter or you'll be strapped for
cash. Now think what they (or their family members) might need or want from
you. Note I also said "want" this time. If they foolishly use barter for
their desires, that's up to them. Don't you make that judgment call for
them. One person's desires can be another person's needs. Now go and talk
to them about a trade.
Lastly, ONLY buy used. Never buy new anything that doesn't ABSOLUTELY have
to be new. All it has to look like is being in good condition ... and not
even that if it's in the backroom and your customers will never see it. Go
to sheriff auctions, business liquidation sales, and garage sales; scan the
classified ads in newspapers; browse the online auction sites (like eBay);
and hunt for bargains. Find a place to store these bargains during this
collection phase. This collection phase usually takes about six months ...
which is just fine since that's the minimum amount of time you should be
working on your business plan anyway. One of the key to being a business
success is keeping your start-up expenses as low as possible and buying used
is one of the best ways to do this. [The other way is barter.] If you do
buy something new, it should be with a great deal of thought on why it has
to be new and not used. Again, if the customers see it, it only needs to
LOOK like it is in good condition and that's it."
Good luck!
Scott Jensen
--
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