Starting your own business can be mind-boggling for first-time entrepreneurs. This is especially so if you have some great ideas but do not know where to start.
There are tons of free resources out there to help with starting your own business. You might want to check out The Strawberry Startup by Moses Lim which is an ideal read if you are looking to monetise your passion.
In the event that you wish to avoid a few of the challenges of starting your own business, then purchasing an existing business or buying a successful franchise may be better choices.
Myth #1: You do not need a lot of money to start a business
“Some of you love sleep more than you love success! If you want to be successful, you’ve got to be willing to give up sleep. How bad do you want it?”
It is a myth that one requires a huge investment to start a business.
This is simply not true – there are tons of businesses out there that you can start with virtually nothing in your pocket. Neither Steve Jobs nor Sir Richard Branson had much money on them when they started our their respective ventures.
Examples are dog-walking services, becoming a social media specialist and even cleaning other people’s offices. There are even some that I have started with less than $2,000!
Take office cleaning for example – it may not be the most glamorous job out there but there are so many office workers, bosses and supervisors who simply do not have the time to clean their offices!
Money can be earned if you start working at it full-time and you could even get started while keeping your main job because essentially, the work is done at night when no one is in the office (or at least those who don’t work overtime).
It is of no wonder there are plenty of startups revolving around the idea of cleaning your office, with the most famous of them all called Q, “a mobile dashboard that helps office managers book cleaning and other maintenance services easily” as featured by Business Insider.
Solution – Start with Small Goals
Having realistic and manageable goals is very important. It helps you to focus your time which in turns helps you to have more time to bring in money with hard work.
The first goal might be getting to your first 100 sales, or 5000 in revenue.
Saying ‘I’ll want to build a to $1m really quickly’, without the marketing dollars required, will deviate your focus on each small step and keep you off track from building your business.
Turn to Crowdfunding for Initial Capital
Depending on the type of company that you are building, crowdfunding could be the solution.
Like previous successes in crowdfunding campaigns, have a new product that your backers would like to test in the market before investing in the product themselves.
It is a great way to find funding for your company, and build preorders (which translate into sales later) in the process.
I recommend having a prototype (that has already been built and created) and conducting lots of research before considering using the crowdfunding method for generating funds for your startup.
Advantages of equity crowdfunding could include the ability to raise money quickly on websites without having to agree to fundraising commitments set by venture capital firms.
Advantage of using Crowdfunding:
Gaining many investors through crowdfunding platforms and websites could also mean online popularity for a startup. People would tweet and post about the company in order to protect their investment.
There are also disadvantages – There are huge concerns of raising capital from people you don’t know and probably will never meet. This is a principle that was highlighted in The Strawberry Startup.
These transactions are subjected to anti-fraud rules and there are big risks of litigation when things don’t go well.
#2: Is your business idea “strawberry” enough?
“When you want to succeed as bad as you want to breathe, then you’ll be successful”
Determine if the type of business is suitable for you (and your schedule). To determine whether your business idea is “strawberry” enough (a novel concept from The Strawberry Startup), jot down the answers to the following questions on a piece of paper:
Are you passionate enough about something that you are willing to sacrifice at least 3 months of no or little income?
Solution: Use a break-even analysis to determine when you are able to recoup the investment pumped into starting your business?
How much time are you willing to spend working on your business? Is my idea able to achieve significant scalability?
If you are fresh out of college and have no major commitment, the road is clear for you to work on your startup idea full-time to get it into market.
The pressure to build a minimum viable product and secure funding is less pertinent than when you are newly married, have financial commitments to fulfil or have dependents to care for, you will have to consider by calculating your risk with the returns.
Also note that an hour of work as an entrepreneur has little, or no, correlation with an hour that you spend as an employee at a corporation. Work and leisure hours tend to be two distinct experiences for an employee, but the lines become blurred in the life of the entrepreneur.
Set aside 3 years of funds to take care of your financial commitments would be the safest, and most conservative, choice of starting out on your own.
#3: Will My Business Make Money?
“I’m here to tell you, number one, that most of you say you want to be successful, but you don’t want it bad. You just kinda want it. You don’t want it as much as you want to party.”
Entrepreneurs, or people looking to start their own business, tend to worry that they may not have access to bank loans or some sort of external finance that bigger companies tend to have easier access to.
However, this may not be the biggest concern of starting out on your own.
One of the biggest reasons why businesses fail is because they face a lack of customers, and orders, which results in cash flow problems.
So let’s say you are thinking of building a used cars company.
You can get business by hitting up everyone you know with a car, going to used car lots, printing flyers and talking to people at car showrooms.
Treat every customer like gold, be on time and work hard, look presentable and be polite, and eventually you will get business by word of mouth. To understand how to look presentable, check out our guide here.
Real Case Study: How an Entrepreneur made it big
I started with a very small amount of money ($20) and bought something on Craigslist I could resell for a little more ($26).
I kept very good records, did it out of my house to keep costs down, and when I finally reached $20,000+ in inventory I opened my first store.
I tapped into a line of credit, but that could have been avoided if I kept the business in my house longer and sold some inventory in bulk for operating capital.
The Line of credit was used to expedite the process, similar to just having $50,000+ to start I could have avoided the 2 year building up period.
I now have two stores, a warehouse, a repair center, and am looking at getting into manufacturing and distributing. All of this with a full time (50+ hours/ week) job.
The company is profitable and it all started with a $20 bill, a whole lot of patience, and a vision of the future knowing I wouldn’t be slinging $50 Craigslist bundles forever.
Myth #4: “I do not need a marketing plan or any marketing materials. My product and/or service sells itself.”
If you fail to plan, you’re planning to fail.
The same can be said of your marketing efforts – if you do not have a marketing plan, your business is likely to fail.
Starting your own business includes setting up a budget for your marketing efforts, where marketing is considered an investment in your startup.
If you’re doing it right, your marketing efforts is likely to pay back by itself and see a healthy return on investment (ROI).
Take cues from Nike and other established brands around you, and start developing a basic branding strategy.
Get your marketing campaign rolling so as to get your company’s products and/or service out to the public over and over again to build your brand equity.
Create your best product – Quality matters
Generally, my advice for anyone thinking about marketing is this – build the best product that you can with your existing budget.
Listen to your customers in order to understand them and fulfill their expectations. This may be the most difficult part.
After which, start complementing it with other strategies, such as marketing, advertising and your PR efforts among others. Be sure to actually build a product that people will want to use.
Myth #5: You need a partner or a cofounder to have a successful business. Is this true when starting your own business?
We have to disagree that someone needs to have a partner in business in order to be successful.
Today, there lies plenty of resources out there for young entrepreneurs that it is almost seen as ignorance to think that you need someone else as invested in your business as you are.
From personal experience, as long as you show a passion for your business and put yourself out there, people are more than willing to help you out.
Going to your local small business centres and networking events for aspiring entrepreneurs or small business owners, you are likely to meet many people who are willing to take time out of their schedules to help you.
Of course you can’t do everything by yourself but that does not mean you need to give away 10-50% of your business to someone else.
By doing so, you run the risk of having someone in your team that does not agree with your style of running the company.
If you have a passion or idea. Pursue it.
Case Study: Real Story of a Solo Entrepreneur
Started out 2 years ago, I own a fritter business (hence the username). Basically I make various types of fritters which are a high quality pastry. When I started out I made just one type of fritter, the apple fritter. I was happily surprised by the reactions I was getting when I first introduced the product, I now make 11 different flavours.
When I started, I was still working part time. In my spare time I would make these fritters. On weekends I would attend local farmers markets and sell them there.
As I continued to grow, I realised that I needed a proper bakery to make all my products. It still wasn’t reasonable for me to rent my own bakery because this was just a job on the side.
I wasn’t making enough of an income off of this venture just yet; but I knew there was potential. So I decided to rent a small 200 square foot space from a bread bakery.
It wasn’t much but it got the job done.
Fast forward a year and a half and I’ve quit my part time job to focus on my business and make a steady income from it.
I am now looking at leasing my first building and hope to continue growing steadily as I have been.
There is an article published on Medium that writes about Successful Solo Founders that is worth checking out.
Some statistics and graphs are also available in that article that turns against the stigma of being a successful solo founder for your own startup!
Myth #6: Venture Capital Funding is Critical to Success
This is one of the most common myths that has been debunked in The Strawberry Startup.
On the contrary, it has been found that less than 1 percent of start-ups have raised funds from venture capitalists.
In other words, starting your own business is a self-funded venture – most of the times.
Many entrepreneurs also give in to impatience in getting their ventures funded within a year or two of coming into existence. They could already be doing sustainably well, but are looking to expand their business to new markets.
Also, venture capitalist tend to look at a number of things before signing an agreement to fund a start-up. Scalability and expansion of a start-up are two key factors that are highlighted in The Strawberry Startup.
So, before you expect funding from outside, it would help if you can maintain a decent amount of cash reserves towards sustaining and stabilising your business model.
What should I do then?
As emphasised in The Strawberry Startup, you need to write a business plan that works.
This includes some basic knowledge of a profit/loss forecast and a simple cash flow analysis. (Learn how to write effective business plans here)
It is always useful to jot your thoughts down to allow for better clarity, such as knowing when your business is running out of cash and hence the need to raise funds or increase revenue arises.
Essentially, the business model should capture your product/service model together with your revenue model which is explained in details in The Strawberry Startup.
Although you may not initially understand all aspects of the business plan, it is still important to gain an appreciation for the business model for your business.
About the Author
The Strawberry Startup is an ebook that teaches you how to reinvent the way you live, and start living the way you want by building your own business.
Starting your own business can be challenge and should ideally be founded on your interests.
This way, passion will keep the creative juices flowing, and if you stay long enough in any business, the profits will come in sooner or later.
Find out more about our ebook in this blog post here.