I love the entrepreneurial spirit. People who can see opportunities where most can’t and have the guts to jump out into and make it happen, are some of my favorites. In my experience, most business owners start their companies without all the “facts.” While some might have a well-thought out business plan, most only have an idea, a lot of passion and energy and enough gambling instinct to pull the trigger on and move forward. But while no amount of education or research can prepare you for the real world of business, here’s a few things you must figure out if you’re going to make it whether you’re starting a free-lance business out of your home, a manufacturing facility, or a marketing agency.
Who is my ideal customer? My company became a lot more profitable once we decided what our ideal customer looked like. We realized that some of our clients were not a good fit for us and we let them go so we could pursue those whom we could serve better. A critical mistake early in most business is finding clients anywhere you can. Whatever comes your way, you are compelled to take because, after all, it pays the bills, right? Not always. By saying yes to a client or even a industry that’s not a good fit for your product or skills might lead you down a path you don’t want to go. I helped a friend through this dilemma who was getting several requests from small business in the food industry because he said yes to an acquaintance and undercharged for the project. He was busy with requests that were far too small of projects for his business model.
What are my true operating costs? “I don’t think I can charge more than $50 per hour,” the man across the table said. “But how much does it truly cost you per hour to operate?” Unfortunately, he didn’t know the answer. If you don’t know your true costs, you won’t be in business long.
Is my business model sustainable? I know people who have been pouring their lives in a start up that cannot pay them much, sometimes nothing at all. I remember telling someone recently, “you don’t have a business; you have a hobby.” Unless you are able to pay for your work and continue to build the business, you don’t have a sustainable model. Volume, product quality, recognition are all irrelevant at this point. If you’re not charging enough, then up your prices. If you cannot compete in the marketplace because your prices are too hight, do something else.
Have you ever started or thought about starting a business?