If I'd Only Known...
Business ownership is full of surprises. No matter how thoroughly you plan before launching your venture or how much previous business experience you have, something unexpected always crops up. These surprises are part of the fun and challenge of entrepreneurship, many business owners say.
In the 10 years I've been writing about small business, I've been struck by how often seasoned entrepreneurs, remembering their start-up, say, "If I knew then what I know now, I would have done such-and-such differently." Wouldn't it be great, I thought, to share these lessons so other start-up business owners could avoid painful and costly surprises?
In thousands of interviews with successful business owners, recurring themes emerged, 101 of which appear in my new book, What No One Ever Tells You About Starting Your Own Business (Upstart Publishing, $17.95, 800-245-2665). The following 10 lessons are among the first you should heed as you venture into the wonderful world of business ownership:
1. Don't sell what you want; sell what your customers want. Dave Markham started Venture Outdoors in Hailey, Idaho, by offering vacation adventure trips that matched his personal skills and desires. But few people signed up for his Alaskan kayaking trips.
"I had to find out what the public wanted," he explains. By asking questions of prospective customers, Markham learned he would be more successful offering trips for beginners.
Markham didn't have a big budget for formal surveys, so he set up a toll-free phone number and asked callers what they looked for in an adventure vacation. He compiled a mailing list of past customers and those who inquired about Venture Outdoors, and sent them surveys. Finally, he diligently logged--and evaluated--the responses.
2. You need a written business plan. Patricia Creedon was so busy with day-to-day responsibilities after starting her electrical contracting company, Creedon Controls Inc. in Wilmington, Delaware, that she didn't write down her business plan. But she soon learned it wasn't enough to just carry the plan in her mind: When her fast-growing company encountered financial problems, Creedon desperately needed a formal plan to attract investors. "Writing a business plan [helped me see beyond] the day-to-day grind and focus on the future," she says.
A business plan starts by explaining your company's objectives and why it will succeed. If the plan is intended to acquire capital, it must explain how the money will be used and repaid. The typical plan includes sections on organization, products or services, marketing, and financials.
3. Know your strengths. When Jo Ann Fischer launched her Fullerton, California, secretarial service, Write When U Need It, she initially accepted a wide variety of projects, from typing and writing to graphic design.
"I soon discovered clients didn't realize how time-intensive [designing] brochures was, and they tended to complain about cost," Fischer says. Writing, on the other hand, was easier for her, and clients appreciated its value more than her artwork. "I should have had the guts to focus on what I loved most--writing--from day one," she says.
Fischer refocused her business to emphasize newsletter creation, proofreading, business writing and editing. Today, if a client wants graphics as part of a project, Fischer charges more for it. And she refers callers to other firms that handle spreadsheets, databases and finances.
4. You don't have to know it all--but if you don't know, ask. A layoff inspired Jennifer Jackson-Smith to start her event-planning and tradeshow-management firm, Meeting Details Unlimited, in Pasadena, California. At first she was afraid to ask questions, fearing clients or other entrepreneurs would think her incompetent. "I had always been independent," she explains, "so learning to ask for help was my biggest challenge."
Jackson-Smith soon realized that for Meeting Details to thrive, she'd have to overcome her insecurities and start asking those tough questions. "I realized it's OK not to know all the answers," she says.
She also asked business experts for guidance on pricing and marketing her services, and discovered others had dealt with many of the issues she thought were unique to her.
5. Use classes, seminars and tapes to learn all you can before start-up. When Ron Schmitz bought a run-down cabinet shop in Sauk Rapids, Minnesota, he knew how to make cabinets--he just didn't know the first thing about running a business.
At first, Schmitz barely scraped by. Then he received a flier advertising a series of seminars on business management. Since he couldn't take the time to attend, he bought audio tapes instead. "I listened to the tapes on the road," Schmitz recalls. "It turned me around. I listened to them 10 or 20 times."
Schmitz has since attended thousands of short courses and seminars on business, and listened to about as many tapes. The informal education has certainly paid off: His sales topped $7 million in 1997.
6. Live within your means. Like many start-ups, Maureen Murphy was uncertain about what her revenues and expenses might add up to when she started Murphy Marketing in Santa Monica, California. "I overspent at first, partly because I didn't realize how fast my start-up capital would go," she says.
Lacking a realistic budget kept her mail order catalog consulting firm from growing. Murphy finally put her business on a simple bookkeeping software program. "Suddenly, I could see I wasn't being extravagant. When I realized how much money I needed [in order] to flourish, I took the steps to earn it," she says. "When I began targeting higher financial goals, I achieved them."
7. Cash is king. Bringing in enough to pay the bills is a challenge for any new business--and it was for Paul Hsu and his Marathon County, Wisconsin, ginseng farm. He could sell ginseng for $45 to $65 a pound, but first he had to invest up to $20,000 per acre and wait four years for the harvest. "[Lack of] cash flow can kill a business," Hsu says.
To maintain cash flow until his crops matured, Hsu sold ginseng for other farmers. He also borrowed from relatives and friends until Hsu Ginseng Enterprises could qualify for a loan. Eventually, a line of credit solved his cash-flow problems, and today, Hsu Ginseng Enterprises has become a $20 million company.
8. You need a marketing plan. After writing their business plan, Kathy Donoghue and Judy Nevins thought they were ready to start their Tampa, Florida, consulting and training business, Another Alternative. Although the business plan included a section on marketing, the partners soon learned the value of creating separate, more in-depth marketing plans for each new service, geographic area and industry they targeted.
A marketing plan establishes your strategy for reaching your customers by spelling out the competitive advantage of your product or service, market size, anticipated market share and major competitors. Effective marketing plans also specify a budget and a timetable for the campaign, plus ways to measure results.
"[All business owners think they] have the best [product or service] and that everyone will realize it," Donoghue says. "But especially with a new business, you have to sell yourself."
9. Marketing--even on a shoestring--is essential. Like many new business owners, Pearl White didn't have a big marketing budget when she opened Confidante Keys, an Irvine, California, business support services firm. So she used ingenuity and persistence to make up for the cash she lacked.
"Every little bit of marketing helps," says White, who started by printing simple fliers that described her services, qualifications and location. She hand-delivered the fliers to every business near her office in an industrial park. She also joined the local chamber of commerce and agreed to be the paid coordinator for a business leads group, which gave her a steady source of income and showcased her abilities for members.
10. Delegate to grow your business. When entrepreneur Richard Yobs first opened Painten' Place, a paint and wall-coverings store in Denville, New Jersey, he tried to do it alone. Yobs spent all his time in the store doing a minimum-wage clerk's job--instead of hiring someone so he could devote his time to cultivating new customers.
"I needed to learn to delegate so I could spend more time growing my business," he says.
Yobs had to get over his concern that employees wouldn't do the job exactly the way he would. He trained new workers to service customers and run the store. "Then I had to say `Bye, I'm going out on the road.' It took a few years for me to get comfortable leaving," he says. "But if you allow [employees] to make decisions, they will. They may make mistakes, but they'll learn and do better the next time."
Jan Norman is a writer who specializes in small-business issues.
Another Alternative, (813) 633-0867
Confidante Keys, (949) 651-1068, http://www.cruznet.net/~ckeys
Creedon Controls Inc., http://www.creedoncontrols.com
Hsu Ginseng Enterprises, T6819 County Hwy. W., P.O. Box 509, Wausau, WI 54402, (800) 826-1577
Meeting Details Unlimited, (626) 798-1148
Murphy Marketing, (310) 395-9722
Painten' Place, (973) 627-4050, fax: (973) 627-5890
Ron's Cabinets, P.O. Box 250, Sauk Rapids, MN 56379