Entrepreneurship isn’t an exact science. As I often say during my conferences and workshops: the only certainty in entrepreneurship is that it won’t go as planned!
This said, some good practices do exist when it comes to starting a business, and they have been validated over and over again in different contexts.
Since I have many entrepreneurs asking me what the key factors to success in starting a business are, I present to you here an up-to-date overview of the best practices in the field. Here are the five keys to success in starting a business.
A classic mistake in starting a business is to jump start into writing a business plan as soon as we have a business idea. While a business plan has its use in the business launch process, being too hasty with it might put your project at risk.
The business plan allows you to plan the operational, marketing, technological and financial aspects of your business. Before arriving to this compulsory step, it is imperative to clarify your business model first. This is what we call the modelling phase.
A business model is the backbone of the business. It represents the basic structure around which you’ll formulate the business activities and projects. If this core structure isn’t adequate, your business project will be in jeopardy.
Let’s think of simple building construction. Before thinking about plumbing and finishing touches, you’ll have to put the building structure in place. This framework will shape the rest of the construction activities.
Different tools exist to help you build your business model. I always recommend My Business Model, both for its educational value and the fact that it’s free. However, I recommend not jumping into your modelling process alone. Find a start-up coach that can help you out.
To know more about the benefits of a business plan in the business launch process, I invite you to read my previous article An Open Love Letter to the Business Plan.
The businesses with the highest start-up success are the ones who were able to correctly identify their typical customer. Too many entrepreneurs try to reach everybody. It won’t work. It never does! By targeting everyone, entrepreneurs believe they will increase their chances in achieve sales. In reality, the opposite ends up happening.
If you want to be efficient with your marketing efforts, you’ll need a clear message that truly speaks to a specific type of client. This way, they’ll relate to your message, but more importantly, they’ll also relate to your product.
Closing sales is therefore synonymous with targeted communication. Each dollar you invest in marketing will be that much more successful if you target with a specific client in mind. So avoid trying to get all the clients out there, because you will most likely end up alone.
You’ve heard about the concept of love money? In entrepreneurship, we talk about love money when loved ones, often family members, gives the entrepreneur funds or loans them money without interest.
In my coaching practice, I’ve widened the concept of love money to empathy resources, which includes all forms of help, support, work or equipment loans coming from loved ones. The people that care about your project have a number of resources that could be useful to you. They will be more than happy to contribute to your project by letting you borrow them, or even giving you their time.
I’ve seen countless entrepreneurs who have benefited from the time, efforts and knowledge of loved ones. Far beyond money alone, these human or material resources which are useful to your project also need to be mobilized from the start. Those who have succeeded the most have often gone through this step.
Working capital is the oxygen of your business. Without cash flow, the business will quickly face bankruptcy.
Too many entrepreneurs incur costs without keeping a cash reserve to ensure they have working capital for their business.
Working capital is specific to each business. In other words, it needs to be calculated based on the different balance sheet items which are proper to each business. For example, some businesses have account receivables and some do not. To simplify things, you’ll need to calculate about 3 to 6 months of fixed costs. For most entrepreneurs, this approximate calculation will give them a good estimate on the amount they’ll need for cash flow. Overall, my goal is to make life simpler for you, and not give you a course in accounting.
Simply remember that working capital is a little cash flow cushion to ensure the daily operations for your business can continue. Businesses which success best have good working capital to support their daily operations.
Since we are in an entrepreneurial era, advisors, mentors, coaches and consultants are popping up everywhere. Although many will have good advice to give to entrepreneurs, it remains that many have no clue on the reality of entrepreneurship. They surf the entrepreneurial wave to sell their consulting services with little to no scientific or practice-based approach. Unfortunately, no regulatory association exists yet for start-up consultants. It therefore falls to entrepreneurs to distinguish between good and bad advice.
However, don’t hold back from hearing advice. It has been shown on multiple occasions that hearing many points of view for the same project helps improve an entrepreneur’s business strategy. It’s therefore essential for your business success that you keep your ears open, but also keep a critical eye.
What’s the greatest risk when starting a business? Any ideas?
The greatest danger during a business launch is scattering. Overrun with too many ideas, projects and potential avenues for business growth, an entrepreneur needs to get back to the core of his business project.
I’ve seen entrepreneurs throw themselves into a property acquisition process when it wasn’t it all crucial to their business project. I’ve also seen entrepreneurs get involved in projects that took them away from their original mission and their target customers.
It can be difficult in everyday life to filter out the projects, initiatives or opportunities that will bring you closer to your ultimate goal from those that will move you away from it.
To help entrepreneurs stay aligned with the essence of their business project, I often do the “key resources” exercise. It’s actually quite a simple one. Faced with a given opportunity, you need to ask yourself three questions: (1) What is my business profession? (2) What key resources does my business need to success in this particular profession (expertise, legitimacy, efficiency, client relations, experience, training, etc.)? (3) How does this particular opportunity help my business acquire or maintain these key resources? If you can’t answer the third question, you should let the opportunity pass. This exercise needs to be repeated every time a new opportunity presents itself to figure out if it is worth it or not.
As I’m sure you’ve realized, scattering is a plague on entrepreneurship. You need to avoid it at all costs. Businesses with the greatest success are those that were able to stay the course on their distinct advantage and align all their actions into maintaining or developing this advantage.
I’ve now shared a few entrepreneurial success factors with you. These have been validated by research and practice. This said, remember that there are no absolutes in entrepreneurship. Those who are fueled by absolutes would be happier in a chemistry lab. With equal doses of solvent, two solutions will react exactly the same way. In my case, I don’t deal in pure science, I deal in entrepreneurship.
When it comes to entrepreneurship, nothing is less certain than success and nothing is more likely than failure. Through trial and error, an entrepreneur will build his business and win the race to profitability.
As I always say, I’m not an absolutist. Silver bullets don’t exist. With that in mind, take these five keys to success as areas to reflect upon when it comes to you and your project. Then, take the first step with confidence, while remaining acutely aware of your progress. After all, you are the manager of your own business.
Written By: Jean-Philippe L’Écuyer, Entrepreneur in Residence, Futurpreneur Canada, firstname.lastname@example.org