Skip to main content

How to start a successful business

After around four decades of trying to work out what does and doesn't contribute to business success, these days I spend much of my time mentoring others to help them discover the same thing (fortunately I can afford to do this because I did eventually manage to work out some of the answers). Over the years I have come to realise that successful business founders share a number of characteristics which seem to be lacking from those who try, but fail. Perhaps serially. So here are some observations:

Who is the business being created for? I am often confronted by excited wide-eyed people clutching business plans that tell you about the fortunes they are going to make, but which lack the single most important factor any business requires, and which is answered by the question - Who wants it to succeed most - the founders or their customers? If it's the former, then the business is being created for the wrong reasons. Businesses that provide what customers need and really want to buy, will succeed. Businesses that provide products and services they HOPE their customers will want to buy, invariably won't.

Business is not about making money. Of course you need to make money otherwise your business won't survive. And of course your shareholders, usually, want to make as much money out of their investment as they can. But making money is not the most important thing a business does or aims to do. It might be the most important result for a business, but it should never be its founding ambition. The most important thing a new business should aim to do is SELL. To make money you need to maximise your revenues and minimise your costs. But if you don't have sensible revenue in the first place, it doesn't matter how much you reduce your costs or attract investment to keep going, the principal driver of your business is fundamentally missing. Work out what to sell, to whom, where and at what price, and you might have a business. If the word 'sell' isn't at the top of your agenda, forget it.

The most important people for your business to succeed are not your customers. When asked who was the most important, his shareholders, his customers or his staff, Richard Branson reputedly answered, 'my staff'. I agree. If you have happy, well motivated staff who enjoy their jobs, they will deliver great products and services - which pleases your customers, which in turn will please your shareholders. Never take your staff for granted. Never assume they're happy. Always treat them with decency. They dedicate most of their waking hours to your business. You have a massive responsibility to respect that dedication. Focus on them and your business will grow.

Don't disrupt, enhance. I hate reading business plans that start off 'this is a disruptive technology/business etc'. The point I made before is that you must solve real customer problems. Purely disrupting something that already exists is not necessarily solving a problem. In fact it may be creating more. Just being different is definitely not a reason to start a business. I love the expression "There may be a gap in the market, but is there a market in the gap?". If your business contributes something to customers that previously didn't exist - perhaps a cost or time saving, perhaps more fun, additional skills or useful information etc - then you are enhancing something that potential customers will understand and then hopefully decide to buy. If they can only see disruption, what impression is that likely to make? Your message needs to always be positively presented. Evolution not revolution. Oh and by the way. When you want to finally sell your business, use the word disruptive as often as possible to describe it. For some reason financiers get very excited when they hear it (and it's probably why none of them have ever successfully founded a business themselves).

Don't over finance the business. Most businesses need an injection of cash to get started. But in my view the ones that get started with the tightest of budgets at the outset are the ones with the best attitude for success once sales begin. Business is not about spending money, it's about winning it. OK you will need to spend some money before you start winning it, but if you can acquire customers by spending less than you expected you might have to spend, then you've got a business that will generate momentum automatically when you do add coals to the furnace. It's already on fire. Give a business too much funding at the outset, and you may be prolonging the difficult decision to kill it. You've masked the fact that it shouldn't have been started in the first place. Few businesses ever failed because too little money was spent on them. Good ideas will always attract the funding they need once sales momentum has been established. So spend as little as you can possibly get away with to test that there really is a market for what you want to sell, then ramp up your operation once you know you are on to a good thing. Never be afraid that if you don't instantly dominate the market from day one, someone else will get there first. It never happens that way. Instant successes like Apple, Microsoft, eBay, Amazon, Facebook and Google are myths. All of them were evolutions from previous attempts, and all of them started on shoestrings, and usually in their parents' garages.

And finally if you don't genuinely have a passion for your product, how do you expect your customers to enthusiastically pay for it? Passion comes from a deep belief, not a suspicion, that your future customers will love what you sell them. Don't start a business if you're only guessing.


Popular posts from this blog

Phillips screws - yes I'm angry about them too

Don't get me wrong. They're a brilliant invention to assist automation and prevent screwdrivers from slipping off screw heads - damaging furniture, paintwork and fingers in the process. Interestingly they weren't invented by Mr Phillips at all, but by a John P Thompson who sold Mr P the idea after failing to commercialise it. Mr P, on the otherhand, quickly succeeded where Mr T had failed. Incredible isn't it. You don't just need a good idea, you need a great salesman and, more importantly, perfect timing to make a success out of something new. Actually, it would seem, he did two clever things (apart from buying the rights). He gave the invention to GM to trial. No-brainer #1. After it was adopted by the great GM, instead of trying to become their sole supplier of Phillips screws, he sold licenses to every other screw manufacturer in the world. A little of a lot is worth a great deal more than a lot of a little + vulnerability (watch out Apple!). My gromble is abo

Would we pay more for their stuff?

I'm confused. Brexiters argue the Germans, Italians and French will still want to sell us their cars, so continued free trade with the UK is in their best interests. But we'll have to negotiate this (with an EU unwilling to make leaving easy) by threatening to make their cars more expensive for British people to buy. We'll do this because WE need to make imports more expensive to try to restore our balance of payments. Are Brits prepared to pay more for their Audis, Fiats and Renaults in order to make British cars more appealing, or do Brexiters want to pay more in order to punish them for taxing our insurance and banking products? Either way, imports will cost more. While in the EU, we buy their cars because we like the choice and don't want our own government to tax them. Indeed it would be better for British car manufacturing if we went back to the good old days of being encouraged to buy cheaper British cars (made by foreign owned factories). Is that what Brexite

Addictions. Porn, Drugs, Alcohol and Sex. Don't prevent it, make it safer.

In 1926 New York, during Prohibition, 1,200 people were poisoned by whiskey containing small quantities of wood alcohol (methanol). Around 400 died, the rest were blinded. The methanol they drank was in the moonshine they had bought illegally. In fact it had been added by law to industrial ethanol in order to make it undrinkable. Prohibition existed to protect everyone from the 'evils of the demon drink'. However, people still wanted to enjoy alcohol. So bootleggers bought cheap industrial alcohol and attempted to distill it to remove the impurities the state had added, but the process wasn't regulated. The state was inadvertently responsible for the suffering - although it was easy for them to blame the bootleggers and to justify escalating the war. This didn't stop the bootleggers. In fact it forced them to become more violent to protect their operations, and even less cautious about their production standards. Volumes of illicit alcohol, and therefore proportionat