Passion Alone Is Not Enough to Open a Business
Small-business owners usually start a company because they have a passion for a particular product or service. However, people should not open a bakery just because they love baking cakes. If you love baking, get a job as a baker.
The minute you open a bakery, you’ll discover that there is a lot more to it than German chocolate and red velvet. You’ll have to wait on customers, keep the books, order inventory and sweep the floors. Open a bakery because you want to run a business and you happen to have a great cake recipe.
There are many functions associated with running a business. Before you quit your day job, make sure that you know how each of these functions is going to be handled. In most cases, the founder will need to be good at doing the primary work of the business. It is important to remember that this most often includes selling. However, he or she will also need a plan for how to accomplish the ancillary functions -- accounting, information technology, etc.
The first step for most entrepreneurs is to sell something. Put in place the minimum amount of infrastructure that you can get by with and focus on generating revenue. Many new businesses fail because they simply cannot generate enough revenue to sustain themselves. Test the viability of your business as quickly and as inexpensively as possible.
We say, “Fail fast, fail cheap.” Learn from your failure and modify your approach. Once you identify a model that generates revenue, then you can focus on building infrastructure.
The only caveat to this advice is to, “Fail fast, fail cheap, but don’t fail because you are cheap.” That is, don’t offer an inferior product or service that has little or no chance of success because you are doing it on the cheap. Spend enough to ensure that you have a chance to succeed.
While we recommend minimum infrastructure during this startup phase, there are some things you will need. For example, in many counties, you’ll need a business license. You’ll want to keep track of the revenue you generate and all of your business expenses for filing taxes.
To minimize expense, you’ll want to handle as much of this as you can personally in the beginning. However, it’s wise to reach out to people who have expertise you lack. Initially, you should minimize the infrastructure you build, do as much of the work as you can yourself and outsource those items where you lack expertise.
As you get some traction and your business grows, you will find that your capacity is exhausted. You’ll need to begin to make cost/benefit tradeoffs. For example, would the business be better off if you spent time putting entries into QuickBooks or if you hired someone to do that work and spent your time selling?
You are in effect buying yourself more time that you can invest in other aspects of the business. The investment is a wise one when the value you create by spending your time in these aspects of the business exceeds what you have to pay to make this time for yourself.