Do you have a burning desire to start your own business? Do you have the confidence of knowing you can succeed? Do you wake up in the middle of the night thinking on ways you will market your product? If so, you probably have the entrepreneur bug!
I’ve been involved in several Internet and social media companies over the past 12 years, and I’ve put together my five top tips that may help you on your path to success.
Pick something you can see yourself doing for a long time.
One of the first mistakes new entrepreneurs make is believing that they will be an instant success because their idea is so astounding. They dream of working a couple hours a week, blinging out their new Porsche, and throwing parties in their hilltop mansion.
In a world of instant gratification, it’s important to realize that entrepreneurship is not about the quick hit. We all hear stories of overnight success stories like Facebook that raise tens of millions of dollars and grow huge in just a couple years. These stories are the exception, not the rule.
Most likely, your business is going to be an arduous, uphill climb. It will be a struggle during the first couple years where you will be fighting each day for your survival against more established rivals. You’ll probably need to adapt your business plan to the real marketplace (instead of the marketplace you envisioned) and change business models a couple times. That’s ok. It’s normal.
If you make it past the beginning stage, your competitors will start to notice and will adopt what’s working in your business to theirs. To stay ahead, you’ll need to stay hungry, think strategically, and plan quarters and years in advance.
All of this adds up to a long-term commitment. There are very few instant successes. So when you are considering starting a business, ask yourself if you can stay with it for years and perhaps decades.
Believe in your abilities, but not your hype
I’m a true optimist. I read Dale Carnegie and listen to Tony Robbins. I love being positive and believe in the power of envisioning the future. Hype is good and necessary, so as long as you don’t blind yourself to the realities in front of you. It’s important to be able to take a look at your forecasts, strategies, competitive analysis, and product with a critical eye. Believe in your abilities and in your product, but be ready to back up that belief by continuously testing your assumptions.
You’re forecasts are going to be wrong. Your strategies will not work the way you thought. You’re probably going to underestimate your competitors, and overestimate the customer’s love for your product.
You must learn to look at your ideas and plans just as a skeptical investor might. Surround yourself with smart people who care enough to poke holes in your theories and question your products. Listen to them. Get a vision of where you’re weak. It’s by understanding your weaknesses that you can make the changes necessary to become strong.
Belief is important. But belief alone doesn’t build successful businesses. You must also have a clear strategy that gives you the highest probability of success. Seek out those that ask the hard questions and make you review your operating plan. Think about how the competition is going to react to your entry into the market because they probably won’t sit still and let you take their customers without a fight.
One additional comment on hype: use it sparingly. Smart people are going to follow up with questions, and if you can’t back up your hype with facts and results, you will be viewed as full of crap. Always show off your good side, but focus more on building something real than building hype.
Build a Team
There’s an old saying that none of us is as strong as all of us. That’s very true with your new business. When you’re starting out, make it a point to start surrounding yourself with bright people. There are smart people available right now that are tired of the corporate rat race and looking for a new venture. They might even be able and willing to work for little pay for a while in exchange for equity. Seek out these people and start building a team with a results-based culture. Those that get things done and make the company better will be even more committed to the cause. Those that are looking for a free ride will soon weed themselves out.
While you’re building your team, don’t be afraid to recruit people smarter than you in different areas. We can’t be excellent at everything, so surround yourself with people who are great at what they do.
Remember, your job is to ensure things get done in accordance to the best possible plans – no matter who comes up with the ideas. Be willing to hear ideas from others and use them for the good of the company. You will be responsible for the final decision, so gather all the ideas from your brightest people and then decide to execute on the strategy that has the highest probability of long-term success.
Capital – have enough when you’re wrong.
You’ve heard it a thousand times. Capital is the lifeblood of your business, and you’re going to need more capital than you think. Your revenue projections will fall short sometimes, and you’ll incur expenses that you never thought about. Make sure that you have enough capital to execute on your plan. Whatever cash you think you need for the first year, double it. That amount will be closer to reality.
Many startups are initially funded by the founders and friends. If you are founder, put in enough cash to allow the company to make a few mistakes and figure out what the customer wanted. For the first couple years, plan on struggling, working out of your house, taking little or zero salary, handling customer support through a cell phone, and having meetings at Starbucks to discuss strategy. Then, understand that even with all your penny-pinching, you’re probably going to need more cash, so have some on the sidelines in case you need it. If you can’t get the extra cash, you’ll be in a dire situation.
This doesn’t mean that you have to have a lot of cash before you begin. In fact, too much money is a detriment (see my next tip). But, you need enough working capital to allow yourself the flexibility of being wrong.
If you don’t have the necessary capital to get started, look to friends and family as your first source of funds. You can structure the deal in the form of debt or equity. There are benefits and detriments to each. With debt, you keep 100% ownership of your company, but you increase your risk of default because you have to pay the money back. With equity, you give up some ownership, but the cash doesn’t have to be repaid. This may be very important if your revenue projections turn out to be incorrect.
Capital – too much cash can breed poor strategy
Back in the Internet bubble, I was a bright-eyed twenty-something full of belief and optimism. I was an employee of a few companies that took a large amount of cash from private equity and venture capitalists.
After the raise, I watched the businesses start to implode as they were pressured to grow as quickly as possible at all costs. Strategy seemed to change week by week. There was no end to the cool office furniture, free lunches and dinners, and perks reserved for profitable firms.
These companies made the mistake of correlating the money in their accounts to the success of their product. They substituted the extra cash for proper strategic thinking, and the money allowed them to forget the need to create something of value that the customer is willing to pay for.
Of course, after the money ran low, these companies had such huge amounts of overhead that they couldn’t sustain themselves from the revenues being generated. And they folded.
Learn from the Internet days. Sometimes, too much cash can hurt you.