As a business success coach who works with entrepreneurs, I get asked this question a lot!
Most entrepreneurs are risk takers / innovators … and they believe that their idea / their next best thing is brilliant (and they have to think that!)
I've worked with thousands of small businesses entrepreneurs and what I've seen over and over is: passion, excitement, drive, you know, the “fun part” of starting something new, the bright shiny penny. That is where most entrepreneurs stop or just step over the next, very necessary step, doing due diligence. Due diligence, the necessary but often not fun research and examination of all the ideas to see if they are worth investing time, energy and money into. That is another way a business coach is helpful, to be a sounding board, a reality check, to help them think things through.
As I said, before opening a business, entrepreneurs must do due diligence. Not taking the time to evaluate, do Google searches on their competitors and other research, work through the details almost always leads to failure. Failure costs money and time, but most important, it costs you the loss of confidence and the sucking of your soul.
Entrepreneurs need to assess the competition so as to know if the product or service has a market and to create how to position themselves in the marketplace. Another critical factor in being successful is creating a road map to success, also known as a business plan. Even solo entrepreneurs should know how they are creating and growing their business with a simple business plan. Without a plan, it is a complete crap shoot.
The other critical component of planning is funding. Will it be self-funded, and if so, do they have enough savings to live while they start up. If money is not handled, then survival sets in and their thinking gets clouded, as well as selling their product becomes desperate. If they are going to a bank, or other lending institution, they must have a detailed business plan and the collateral to secure funding.
I can't say enough about this – when starting a business with others, you must take the time to evaluate the team. What I have seen, and experienced firsthand a number of times, is that if you have not looked at not only the qualifications of the team members, but there work ethics and their behavioral style and what motivates them, you are setting your company up for a train wreck later. Creating a company with 'your friends' is rarely a good idea and you need to have an objective partner in this venture.
I am the prime example of this. I started a business with friends, not once, but 4 times! And each time, failed. I would get excited about working with that person, ignore, step over any warning signs, not make sure our skill sets were what the business needed which eventually led to disaster! One of the businesses I was in with a friend involved a few other friends as well. That one was truly a disaster. Not only did it fail, but the friendships dissolved.
I was working with a medical practitioner and her office and discovered another one of the pitfalls in hiring. She hired people like herself, so they were friendly and got along, but very important skill sets were missing in the office. When we discovered that, through the use of behavioral assessments, she was able to correct that. You must think of the business as an entity vs think from your personal wants.
A few more details to consider:
· Competition: If there is no competition, you must ask yourself, is there a market for my product or service.
o If it is highly innovative, as a product, what products would it replace? If it replaced those products, why would someone try it over the one that is existing? Is the price point and profit margin worth it?
o It is critical to do the thinking before investing a lot of money in time in a product that could go the way of the pet rock.
o If it is service based, are there competitors and what models are there and learn from them. Study the ones that are successful.
o Is the space you are serving crowded? If so, how will you stand out?
o Work with a marketing professional to help you position yourself in the marketplace.
· Funding: How are you funding this new business?
o If it is your own investment, do you have enough money to live on for the time it will take you to get up and running?
o Experts say that it takes 6 months to get cash flow, however that varies.
o It is critical to take the time to sit down with a neutral third party, like a CPA, to evaluate your finances.
o Too many great ideas stall because the financial backing is lacking.
· Business plan: Depending on the size of business, you may need a simple one page plan.
o You need to at minimum, know what deliverables you are creating, the time frame to create them, and the cost of creating, marketing and selling them.
o There are numerous online business planning tools. Use them. Even if you are a solo entrepreneur.
o Think of your business plan as your road map to success.
· Hire a coach. Having an objective, experienced coach to help you navigate the often choppy seas of a startup is a great investment in your success. Everyone needs an objective partner in winning the game of being an entrepreneur.
o Do due diligence on who you hire. Make sure they have a track record of success with entrepreneurs.
o Make sure you and they are a good fit. There are many different styles of coaches, you want one that you will work with well.
o Make sure they are trained as a coach, not an industry professional who decided to add coach to their title.
o Although there is, at this time, no governing authority, the International Coach Federation is the generally accepted authority and only trained coaches can be a member.
· Evaluate the team: Companies are made up of people and the dynamics of a bad fit can lead to disaster.
o I highly recommend having someone do behavioral style and driving forces style assessments on the prospective team to see where there may be communication and working style breakdowns and where there may be good productive team dynamics.
o When you go to create the team, think from “What does this business need?” vs “Who do I want?” That will give you a more objective way to find the right people for the job.
o When looking at the team, make sure you do due diligence into their work ethics and have the hard conversations- namely about money!
Starting a business is risky, frightening and yet exhilarating, like getting on a very high twisty roller coaster. The statistics of success are not great, yet, with a bit of due diligence, you can absolutely succeed!