Entrepreneurship 103: Creating A Business

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Creating A Business Plan

Get financing if you need it

Look at how much money you need to start, then budget and save for it

  • Making a product a few people love is better than one many people like

Accommodate your plans if you need more money than you have

Your investment options depend mainly on how feasible investors see your business, so revise the business plan several more times

Give equity to avoid borrowing money, but choose your stakeholders very carefully

Learn the nature of loans before borrowing

  • Try to borrow against business assets instead of personal property
  • Learn other entrepreneurs’ funding with WhoGotFunded.com

Research your investors’ reputations

  • Investors outside any governing authority like the SEC might change loan terms arbitrarily

Use investors and lenders in your network

  • Borrowing and not paying back the wrong person can destroy your reputation forever
  • Don’t borrow from family members unless you know for sure you’ll pay it back
  • As a general rule, the closer you are to them the more carefully you should borrow from them
  • Search for university, MBA, and technology incubators
  • Connect with your city’s Chamber of Commerce for funding opportunities

Look outside your social circle

  • Network with everyone you meet to find opportunities in every capacity
  • Crowdfund with Kickstarter, GoFundMe, Indiegogo or many others
    • Successful crowdfunding requires extra work to create investing incentives
    • Effective crowdfunding is highly unlikely
  • People who fund startups (Angels) have multiple networks (e.g., AngelList), though finding and convincing them to invest is often challenging
  • Conventional banks like Citigroup or Wells Fargo are highly reputable, but you will probably need collateral
  • Look for trade-specific startup groups
  • Look into Republic or Pave for crowd-sourced financing

Start your business legally

File your articles of organization/incorporation

Enter a buy/sell agreement if you’re forming a partnership

  • No matter how well you know someone, you don’t know when they will want to retire or leave
  • Money can corrupt, and clarifying with a contract keeps everyone legally safe

Apply for an Employee Identification Number (EIN) or Tax ID

  • Open a small business bank account
  • Obtain business licenses, permits, and relevant insurance policies
  • Pick employee and owner retirement and health insurance plans

Start writing an employee handbook if you have any employees

Use software or download forms

  • Don’t edit another company’s handbook or it may force you to carry out something against your will later

Stay legal but flexible

  • Clarify employee behavior expectations
  • Don’t specify any disciplinary action in the employee handbook
    • You can obligate yourself to do or refrain from doing something against your will later

Always include the following key legal issues

  • Harassment and discrimination
  • Wage and hour issues
  • Hours of the workweek and rules for breaks and meals
  • Safety policy which complies with state and federal regulations

Build your team

Even if you start alone, a successful business needs others’ help

Authentically ask for someone’s advice if you want their devoted help

Every worker, especially the owner, will perform numerous small tasks

Your spouse can be a vital co-creator in the business

  • Establish boundaries by clarifying job definitions and working conditions beforehand
  • You should both agree on your commitment
  • Leave work away from personal time
  • Constantly thank them
  • Consistently review if the business arrangement works

Try to prepare as much as possible

Get everything done as much as possible before your launch date

  • Create a legitimate website, then create an email that references that website
  • Order all relevant marketing materials beforehand
  • Make an extensive list of possible avenues for marketing and lead generation

Expect the planning to permit success, but don’t expect the business to start easily

  • Every well-prepared entrepreneur is still unprepared for numerous unforeseeable things until the launch date

At its onset, an entrepreneur works about twenty small jobs

You must stay motivated through your perceived vision

  • The work will pay off months later if it ever does
  • Expect constant chaos and learn to channel it to your purposes

Separate the work that creates results entirely from personal projects

  • Mixing personal endeavors with work will make scaling extremely difficult when your work increases

An entrepreneur must keep a day job until the business can give a livable paycheck without harming operations

  • A day job provides a means to survive and cash to continue investing

Most small business work is alone

  • Brainstorming possible ideas
  • Advertising
  • Networking
  • Researching legal limits
  • Managing finances
  • Cleaning or taking out the trash

Stay productive more than busy and watch for warning signs of unproductive busyness

  • Holding many meetings to decide what to do
  • Multiple people doing tasks one person could do
  • Focusing too much attention on irrelevant numbers like how many people contacted or how many employees
  • Frequently attending networking events without generating any leads

Entrepreneurs always sell when they’re not creating

An owner constantly maintains customers

  • Perpetually and tenaciously looks for new customers
  • Uses every form of conventional and guerilla marketing
  • Keeps customers with trustworthiness, character, and happiness

Sells by focusing exclusively on customer needs and wants

  • Ignore what the customer feels
  • Ignore what potential customers think outside your marketing focus
  • Focus on the image you sell the product or service as and not what it is
  • Focus on your target market and consider adapting product lines for them
  • You must understand and observe your market’s economic movement and fluctuations

Fully clarify terms of any service agreement before customers sign it

  • A customer could sue you for any damages
  • Without their awareness, a customer could negotiate you to work for free

Focus every dollar into making the most profitable sales

Avoid impulse spending near the beginning

  • Carefully assess every dollar you spend
  • Sponsoring conferences to appear large isn’t cost-effective
  • Cut out any expenses that don’t create results as much as you expected

You’re selling yourself, not the product, and your personality will close deals

  • You must tailor each product sales pitch to each potential client
  • Loyal customers have more value than money, so advertise and celebrate them with referral bonuses and perks

A startup budget doesn’t have any room for a hit-or-miss marketing strategy

  • Only sell to a familiar market since an unfamiliar one will cause massive losses
  • Use social media networks intentionally since a wrongly used channel might be worse than not using it
  • Trying to keep dissatisfied customers is less cost-effective than losing them and working to gain new ones

Only hand the customer the product after the customer paid you

  • The person holding the product always has bargaining power
  • The customer hasn’t bought the product until they pay for it, so only use lines of credit as a backup plan if they don’t pay

Micromanage vendor relationships

Take pictures of business cards people hand you just in case you lose them

Trust your gut instincts with them

Rate your vendors and suppliers correctly

  • Make performance indicators
  • Classify every supplier and vendor
  • Determine who has more power and influence
  • Maintain good relationships with everyone
  • Sever weak links

The company won’t make much money for a while

Slim or no profits will test your patience and resilience for weeks, months or even years

Persevere through unsuccessful times by understanding how low points are opportunities for growth and learning

Re-analyze periodically

  • Conduct new market research or segment the market
  • Reconsider the product from a different angle
  • Revisit the business plan

Poor expense management is one of the most common ways to lower profits

  • Learn ways to shave down costs
  • Speed up everyone’s workflow with better software, better equipment or new technology
  • Improve your relationships with employees to boost morale by giving incentives

Sometimes you need a vacation to clear your mind

Scale the company as the work increases

Re-invest every dollar possible

  • The more money you put back into the business, the more it can grow

Avoid overpaying taxes

  • Track every receipt and have a reputable accountant review your information

Ignore competitors’ financial statements

  • Try to use your resources better instead of how much money others invested

Slowly scale the company

  • Adding markets too quickly leaves the company unprepared to take on new challenges
  • Expanding too rapidly stretches resources too thin to recover from an unexpected event
  • Slowly scaling takes both patience and flexibility
  • Practices gradually harden into company policy as it grows and requires micromanagement to avoid bureaucracy

Outsource work when it becomes cost-effective

  • A full-time worker is unprofitable at first, so hire consultants and part-time workers
  • Research automated solutions with tools like Cloudwards and PC Magazine reviews

Never split large-scale goals

  • Pursue one venture at a time and build the business up, then transition to another as you free up responsibilities

Stay focused on the big picture as you perform each task

  • Some of the most important tasks don’t scale with a company
  • Each worker, especially the owner, will progressively work more at niche-focused core abilities

Your growing business will allow you to do more of what you excel at and less of everything else

  • A company reaches its limit when the owner is overworked in tasks outside their expertise

A company’s ability to adapt and change will slow down as it grows

  • More people create more thoughts, which complicate projects
  • Try restructuring the business or making it small again
  • If the company grows past a certain size or trajectory, sell the company if you feel like it
    • Many entrepreneurs love the thrill of creating a business from nothing so much they make a living selling companies they built

Most entrepreneurial skills don’t change as the organization scales, so always act like a startup

Leadership skills are the only limit to the size of a business

Next: How To Be A Leader