Don’t quit your day job. That’s the kind of advice you hear when you come up with an idea for a new business.
It’s good advice because if your idea doesn’t pan out, you still need to pay your bills.
As Darrah Burstein points out for Business Collective, “There is a strong possibility that your business may fail. This is simply a statistical reality.”
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Needless to say, you don’t want to saddled with a lot a debt if things should go belly up. Here’s a no-nonsense look on how to start and scale a low-cost side business, based in part on the experience of Max Anderson in starting his online home furnishings company, Spilled. “Six months and way too many late nights and weekends later, we broke the $60K revenue mark.” You could, too, by keeping this advice in mind.
Do Your Homework
You don’t start a business because you want to start a business. You start a business because you’ve identified a customer need and have an idea to fulfill it that differentiates you or (better yet) is unique from what anyone else is doing in the market. “Clearly defining your niche is probably the hardest thing for most startups to get right,” Anderson notes. But as Chris Ducker points out:
Finding a niche as an aspiring lifestyle designer, digital nomad, web entrepreneur, internet marketer–whatever you want to call yourself–is about as important as remembering to take your skiing equipment on a visit to Switzerland! If you don’t, you won’t get very far.
Make Your Product and Get It Out There
You don’t need to compose a mission statement, figure out your title, decide if you need to incorporate or not. As Anderson puts it, “Until you’ve started selling a product, none of it matters.”
Set a Realistic Startup Budget
Anderson’s startup costs were $300. That included the cost of product design, manufacturer sample, domain name and website. You don’t need fancy offices or exclusive distribution deals. You need the most basic and least expensive way to bring your product to market and let potential customers know you are out there.
Define Your Target Market
“New entrepreneurs sometimes resist defining a target customer base, thinking it might limit the business or reduce the number of potential customers,” notes small business legal expert Peri Parkroo. “It’s much more effective to focus your marketing efforts on potential customers who you have determined are likely to buy your product or service—rather than wasting time and money courting the vast world of prospects who merely could become customers.”
Related Article: Types of Businesses Most Likely to Fail in 2015
Let Your Customers Know About You
Anderson calls this the difference in whether you make your first $10k (which, if you don’t make it, is why you kept your day job). If you don’t have an effective marketing plan, nobody is going to know about your product, and nobody can buy a product they don’t about. This seems obvious. Yet, as Jeff Scheinrock and Matt Richter-Sand point out in The Agile Startup, “Marketing also happens to be one of the hardest things to get right in business, making it a common startup killer.”
Thanks to the internet, you don’t need to hire an advertising company. You do need to figure out where your customers are active on social media. Then post away to let them know what you have to offer and why customers are going to want to buy it. Not just a post now and then. Schedule multiple posts on multiple social media sites every day. Don’t just repeat yourself. Each post should focus on a particular feature or product benefit. Make it interesting and attention-getting. As Paul Graham points out, it’s essential to recruit users manually. “Nearly all start-ups have to. You can’t wait for users to come to you. You have to go out and get them.”
Set Reasonable Customer Expectations
Don’t promise what you can’t deliver. If it’s going to take you three weeks to ship, make it clear that’s how long it takes. Again, that seems obvious. But as Shawn Graham points out, “Unfortunately, all too often businesses make promises only to drop the ball and totally blow it with their customers.” In fact, you’re better off under-promising—that way when you exceed customer expectations you achieve what Ross Beard characterizes as the “whoa” factor that turns customers into more than just customers, but advocates for your business.
Related Article: Too Legit to Quit: Is It Time To Take Your Side Gig Full-Time?
Manage Cash Flow
In the early stages, it’s best to run your company on revenue. That means paying suppliers and partners with money you’re making whenever possible, not by dipping into reserves or credit lines. When cash flow is, well, flowing, it may be tempting to want to take something out of the business to reward yourself for your time and effort. But remember, you’ve still got that day job. Best to plough whatever profits you have back into the business to improve it until the day comes when you can truly afford to quit your day job and not only run your own business, but make a living doing it.
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