Five Things You Need To Know Before Starting Your Own Business
If you are ready to break free from the pack and start your own business I applaud you! You have a steep but exciting road ahead! However, it’s not enough to have a killer idea, stakes are high and the landscape is always more dynamic and competitive than it appears. Risk mitigation is critical, and it starts with knowing the answers to these five questions!
What's Your Competitive Advantage?
Who’s Your Target Market?
What’s Your Financing Plan?
Who Are Your Teammates?
What Does The Legal Landscape Look Like?
1. What’s Your Competitive advantage?
Point blank, a business will not succeed unless it has clearly defined its competitive advantage, a.k.a, how it will compete in the market. There are two ways you can compete: you either do something that your competitors already do, but do it better, or you create something that is unique and rare and can’t be easily copied.
Strategy one: Your product/service exists but you do it better
This means that you are more efficient than your competitors. You have figured out a way to do what they do, but more cheaply or more quickly (if that’s a relevant metric). You are likely competing on costs. Your cost savings can then be translated into lower prices to win against your competition, or can be reinvested into growth strategies, marketing strategies, or other relevant areas to strengthen your market position against your competition. This is often the strategy for businesses with a high volume of products, and low profit margins.
Example of a businesses that use this strategy: Wal-Mart, McDonalds, Blo-Bar. They offer products that tons of other companies offer, but at a lower price made possible through major cost savings captured throughout their supply-chain process.
Strategy Two: Your product/service is unique, rare, differentiated from the competition
You offer something that no other competitor offers, and would be hard for them to do so. This is often the result of a special know-how that other competitors do not have. For instance, you carry a very unique skill set or talent, or have access to resources or information that others do not. But the key to this strategy is that you provide an experience, quality, or fill a need that is different from anything else in the market. And if it’s something that customer’s value they will be willing to pay the premium for it. This strategy is common in high fashion and luxury experiences.
Example of businesses that use this strategy: Apple, BMW, Four Seasons, Instagram, high fashion (Chanel, Tom Ford, Supreme)
2. Who’s Your Target Market?
Defining your target market is a critical step in succeeding. As much as we may like to say our product/service can be used across several markets and demographics, which may in fact be true, it’s necessary to focus on satisfying the needs and wants of a specific target market (especially at the beginning). This will allow you to compete better because your strategies will be more focused. For instance, the features you choose to add to your product or service, the ways you choose to communicate with and market to your audience, and the ways in which you differentiate from the competition. If you try to target “everyone” you will end up wasting resources and decreasing the effectiveness of your efforts.
How to define your target market: Create a profile of your most promising customer. Be Specific!
Common characteristics: Age, income, buying habits, location, occupation, interests
Example: Meet Jackie, a 26 year old millennial, who is an early adopter to all the latest technologies…
…continue with your customer’s story!
3. What’s your financing plan?
This is often one of the most challenging parts of starting your business. Who is funding it? The most common ways to finance your business at the beginning are through yourself (credit card/savings), friends and family, small business loans, or crowd funding. You may have heard of venture capital (VC) funding, where you pitch your idea to a group of investors who give you money in exchange for equity (like Shark Tank). This should certainly be a part of your financing plan, but later down the line. VC funding usually occurs after your business has shown some traction in the market and you have demonstrated some skin in the game (taken some major risks on your own to show your commitment). Don’t get discouraged if the startup costs seem overwhelming, this will almost always be the case. It’s part of the journey! But do your due diligence and research government grants, startup programs, and any other new business help you can find to help mitigate some of the financial load.
4. Who are your Teammates?
This is one of the most important components of your startup, and can truly make or break your success. A good idea is important, but being able to implement it is even more so. Starting a business is exciting but extremely challenging, you need to ensure that everyone on the team is sharp, reliable, and has an aligned vision of the goal. Define roles early on in the game based on each members expertise, this will help mitigate future conflict. When it comes to seeking funding from investors the credibility of your team is one of the leading factors in an investors decision process, often weighted equally to the quality of the idea itself. “Is this team capable enough and driven enough to pull this off?”
5. What does the legal landscape look like?
When it comes to the legal landscape there are a few areas that you need to look at. First, what type of business structure is best suited for what you are trying to build- Sole Proprietorship? General Partnership? Corporation? Second, is there certain intellectual property (trademarks, formulas, prototypes etc.,) that you should protect? If so, you should consider applying for a patent or copyright protection, especially before you start publicizing what you are working on. Third, should you bring on legal counsel? Although legal fees can be astronomical, it may be wise to seek professional legal advice when you are starting out to ask about the best business structure and business protection for your company. It’s better to get it right from the beginning than to have to deal with issues later down the line.
Good luck on this next chapter; it’s an exciting one and a powerful learning experience regardless what happens next. Stay tuned for more advice on your next steps!