By: Andrew Wong, CEO of MAD Incubator
Planning to start a business? Is entrepreneurship right for you? Ever wondered what are the challenges in starting a business? Most of the challenges in starting a business relate back to doing the little fundamental things right. Understanding the little fundamentals of business will help you overcome your early business challenges. If you are thinking about starting a business and entrepreneurship, make sure you look at these ten important rules for starting a business.
1. Understand the Entrepreneur in You
Entrepreneurship is a process of combining people, capital, market, physical resources, channel partners and other resources combined to create a business opportunity. An entrepreneur is one that has the ability to harness these resources to create the business opportunity and market. It is important for an entrepreneur to understand the process, their capabilities, goals and objectives before they embark on their entrepreneurial journey. A good entrepreneur learns to start effectually by starting with what they have and move along the journey to consolidate more resources to create new business opportunities.
2. Start Lean
Starting a new venture means that you will be burning money before you start to gather more customers and more revenues to offset your expenses. That is why, it is important to start lean. Trim off the unnecessary expenses and focus on building your revenues. Spend what is needed and not what is nice to have.
3. Validate your market
Every business should talk to its customers as often as possible. More so, before you start venturing into business, you should validate your market. Market validation is key to understand if you offer this product or service, will there be a market willing to buy; and at what price will they buy? How big will that market be? Find out what they like and what they don’t like. Approach them. People like to talk and people like to be asked for their opinion.
4. Create a compelling value proposition
A compelling business value proposition is important for the business. Buyers buy value and the products and/or services are the manifestation of the values that the business is selling. To have a compelling value proposition is to differentiate your business with your competitors. This also means that understanding your competitors is key to determine your value differentiation.
5. You must have your innovation playbook
Every business must have its own innovation playbook in order to have their value differentiation. An innovation playbook is the innovation strategy adopted by the business to achieve core competencies. Innovation need not be based on a good product performance. It can be a business model, channel, brand, customer experience, product system, network, structure, process and/or service. A good organization should have at least 3 innovation types to create a compelling core competency.
6. Business Model
Every business must have a proven business model. Business model validation is important to ensure that you have a proven way to make money and that the business model is scalable to the point that revenues outstrip costs to gain a growing profit. Most businesses fail when they do not have a compelling business model.
7. Marketing and Online Strategy
A new business needs to start working on marketing to generate leads and to communicate its value proposition. Start by networking with local businesses and local business owners. Find out what they do and explore strategic collaborations with them. Thanks to the World Wide Web, the Internet and social networks are one of the best places to start online marketing. Use your website and Google analytics to find out how people find your website and where they come from. There are also free tools available for you to reach out to potential customers. Find out how to engage with them. Do a special deal to acquire them as customers. Learn what works and what doesn’t, and repeat your successful marketing promotions. Don’t spend money if you are not able to measure any results.
8. Identify your Sales Strategy and Maintaining a Good Margin
While marketing helps to create the sales funnel, a good sales strategy will help in expanding your sales. You need to understand your sales channel whether you plan to sell direct (by hiring sales people in your company), or work with channel partners, distributors, outsourced sales representatives or forming joint ventures to expand your sales. You also need to understand your margins on all your products and services. You have to provide a good margin for your resellers or channel partners while still maintaining a healthy margin for your business.
9. Leadership and Management
Take time to think about company culture and what you want the culture to be, and make sure you bring culture into your hiring decisions. Always be on a constant look out for quality and good talent in your business. Have an organization chart ready so that your people know what are their roles and responsibilities and whom they should report to. As the entrepreneur or Head Honcho, you must articulate your vision, mission and goals so that your team is aligned to the same direction.
10. Funding and Financials
The number one reason why new ventures fail is lack of cash. You need to do good cash planning and really understanding the levers in your business that can affect your cash. Do you have inventory? How much should you have on hand? Do you collect payments from clients? How long does it take them to pay you? Are you generating enough sales? Do you have loans you need to pay back? Do you know where are your sources of funding? Do you need investment to fund some aspect of your business? How much?
Starting a business is easy but being successful in business is a journey. The best way to travel the journey is to understand the ten fundamentals of starting a business venture.
Author: Andrew Wong, CEO of MAD Incubator (Malaysia’s Largest Startup & Business Incubation Company). MAD Incubator organizes monthly Startup Workshops to help you to discover entrepreneurship and to learn the Fundamentals of Starting and Scaling Up a Business. Website: www.incubator.com.my For more information, please send in your inquiry to Sherene Kok (sherene[at]incubator[dot]com[dot]my).