Despite the still sluggish economy, 2012 is a wonderful time to start a new business. Social-media tools including Twitter, Facebook and Google Plus now make it possible to conduct effective marketing campaigns for free. High unemployment rates mean skilled workers are available even to employers who cannot offer fat paychecks. And prices of commercial real estate have plunged to bargain levels in most areas. Here are the secrets to getting a project off the ground and headed in the right direction…
Put away the spreadsheets, skip the market research and get right to work on a prototype. Would-be entrepreneurs often think that they need reams of financial projections and market analysis before they actually start doing anything—but that up-front research and analysis typically turn out to be a waste of time. It’s extremely difficult to project how an idea will translate to the real world, so these projections tend to be little more than fantasy—time-consuming, inertia-inducing fantasy. The more innovative the business idea, the less accurate the projections are likely to be. Constructing a prototype—or conducting trial runs of the service that the business intends to provide—is a much more useful way to learn the real challenges that the prospective business will face.
Yes, you’ll have to put together financial projections and market analysis eventually—investors and lenders like to see these things—but delay doing so as long as possible. The further along the project is, the more accurate the projections will be. In the meantime, a working version of the products and/or services you intend to sell will help you win over investors and lenders more than any spreadsheet ever could.
Skip the business plan, too. A study by Babson College researchers published in 2007 found that small companies that lacked business plans were, on average, at least as likely to succeed as those that wrote them. Once business plans are in place, young companies tend to stick to them as if they were scripture—even when adjustments are warranted. Write up a business plan only when you begin to make inroads with potential investors.
Be polarizing. If you set out to create something that no one hates, you’re likely to end up with something that no one truly loves either—or something just like what your competitors already produce. Better to come up with something that some potential customers love and others hate, but everyone talks about.
Example: Two of the recent success stories in the auto industry are the Mini and the Scion. Both succeeded by producing unconventional-looking cars.
Yes, you will alienate some prospective clients, but you also will spark discussion and earn passionate fans.
Target a small niche. Almost all great companies started by focusing on just one small niche and expanding from that beachhead only after their initial project was a success.
Example: 3M today is one of the most diversified and innovative companies in the world, but in its early years, it focused on sandpaper.
Best: Choose a single niche for your business that’s large enough to be profitable but small enough that more established, better-financed companies are not heavily focused on it.
Innovate with your product and marketing—not your business model. While it often is a boon to a business to have an innovative product or service, it’s best to just copy the business model—the details of how you expect to attract revenue and who your target customers will be—of a successful company that does something comparable to what you hope to do. Over the centuries, people have already dreamed up plenty of ways to get paid for providing a product or service—and there’s no reason for you to dream up a new one.
Don’t trust your gut on hiring. The job applicants who feel right to a new business owner tend to be the applicants who are most like the owner—but the best employees for a young company are those whose skills and viewpoints are substantially different from those of the company founder. Such people fill in the gaps in the owner’s abilities rather than duplicating skills and viewpoints that the company already has.
Also, avoid the temptation to hire the most experienced applicants or the applicants who have the most prestigious titles and/or degrees on their résumés. Instead, hire smart but somewhat inexperienced people with “improper” backgrounds—just make sure that they legitimately love what your company does. It’s easier to teach people skills than to teach them passion. These hires won’t just work hard for you and remain loyal to you…they will spread their passion for your endeavor to coworkers and customers.
Exceptions: The people who keep your company’s books and oversee its computer systems should have experience in those fields—those aren’t areas where you want people learning on the fly.
Three ways to confirm that an applicant truly is in love with your project and is not just saying so to get the job…
1. If possible, ask the candidate to demonstrate your product or service to you. He/she should be able to demonstrate it in a way that makes it seem great.
2. Track the amount of time the candidate spends talking about your company during the interview process and the amount of time spent talking about his potential compensation. The higher the ratio of company talk to pay talk, the more promising the candidate.
3. Pay attention to the questions the candidate asks. Does he have an intuitive grasp of what you are trying to accomplish…who your customer is…and who your competition is?
Scale up as slowly as possible. Entrepreneurs want to be able to deliver as soon as demand takes off. Trouble is, demand rarely takes off as quickly as entrepreneurs expect, even for companies that do go on to be successful. Delays and missteps are the norm. Companies that scaled up quickly tend to burn through their capital and fail, while those that remained as lean as possible are far more likely to survive.
Forgo the mission statement and just craft a mantra. Corporate mission statements tend to be so long and jargony that no one ever remembers them, much less believes them. A well-crafted mantra—a two-to-four-word phrase—is far more likely to be remembered and can keep everyone who is involved in the project on the same page.
Examples of powerful mantras: Disney’s “Fun family entertainment”…Starbucks’ “Rewarding everyday moments”…and Nike’s “Authentic athletic performance.”