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.

Comments

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 abou…

Introducing Product Relationship Management - it's what customers want.

Most businesses these days have Customer Relationship Management (CRM) systems which store and process vasts amounts of information about us. They use this information to generate communications, amongst other things, which target us to buy their products and services. CRM is all about how a business relates to its customers: Past (keeping them loyal through aftersales and service), Present (helping them buy through bricks and clicks channels) and Future (prospecting).

Most businesses will at some stage have declared themselves 'customer-centric'. They will probably have drawn diagrams on whiteboards that look something like these:



But there's a problem with this whole approach of keeping the customer at the centre of your world and the focal point for everything you do.Is it what the customer wants? Of course companies who ignore their customers eventually go out of business. And those who treat their customers well, tend to thrive. But is it really in the best interests …

The Titus Trust Deceives British Parents to Brainwash their Kids

I have a son who went to a well known preparatory school (7-13) in Surrey. He came home one day clutching a leaflet for fun activity holidays that the school promoted every summer. The Titus Trust operate several camps around the UK where they organise fun outdoor activities for youngsters. Something caught my eye in the leaflet hidden in a paragraph in one of the sections describing the holidays. They used the word Christian. It was the only place in the whole leaflet that the word was used. My suspicions raised, I hunted around the leaflet for more clues and found the imprint which said something like 'A Titus Trust Charity' (the name of the camps was on the title of the leaflet). I dug deeper and found some disturbing evidence of who was behind these 'fun' camps. This is what I wrote at the time to the headmaster:
Dear Headmaster

XXXX came home the other day extremely excited about an outward bound camp next summer that he and his friends had been told about by a rep…