Two things may appeal to you when considering a new business: 1. You can produce something enjoyable; 2. A boss doesn’t tell you when and what to do. From here, the fantasy blossoms.
Don’t Deceive Yourself
Running your own business requires much more than doing something you enjoy. It is time for a reality check. Every aspect of a company falls on your shoulders: customer service, sales, marketing, inventory management, legal requirements, lease negotiation, warehousing, budgeting, accounting, payroll, human resources, management, and more.
The truth is that you may excel in some of these areas and fail miserably in others. Though you may not enjoy having a boss tell you what to do, there are plenty of government agencies, customers, and vendors that do so when you own your own business.
To reach that self-employment “nirvana” you dream of, surround yourself with people who make up for your deficiencies. Your support system may be family members, employees or third-party vendors. Like you, they should be willing to handle multiple responsibilities.
Unless you have abundant personal finances or venture capital funding your startup, you will not be able to outsource or hire all the personnel you need. This means you will still have multiple roles. Rather than working 40 or even 60 hours per week, as the owner, expect to put in 80 to 100 mostly unbillable hours—not just initially—for the duration of the business. So the time to strengthen your weaknesses is before your business doors open. Take night-school or online courses at a community college.
After figuring out the cost of your products and services, you are in a better position to calculate your price list. Your wholesale price along with your overhead costs must be divided by the number of orders (or units) you sell each month, plus a 20–50% margin. This gives you some money in the bank to pay other bills and hopefully build your savings. With startup debt and scarce customers, your prices may exceed competitors.
No Profit—No Business
Forget about positioning yourself as the low-price leader. Prior to 1990, businesses competed with local shops. Today, nearly every business is competing with billion-dollar conglomerates like Amazon, Walmart, and Google. Here is a tip: in a price war, the company with the deepest pockets wins. If you want to charge the lowest price for something, consider opening a 99¢ Only Store franchise. Even they have competition from Dollar Tree and 98 Cent Discount Store.
If your passion is to produce a high-quality product (and make a living from it), seek to distinguish its unique properties. It is not just well-made travel luggage, it is indestructible luggage. It is not just a swimming pool, it is a solar-powered, self-cleaning vacation from work in your own backyard.
Familiarize yourself with what competitors charge, but distinguish yourself enough that customers feel justified paying a little more. A commodity is something that people can purchase many other places. When you sell a commodity, you may need to bundle and repackage it for distinction. Put two or three items together and promote the fact that you get everything you need to do XYZ in one box. Offer a gourmet cup of coffee with a half pound of fresh-roast beans for $9.99. Sell environmentally safe coffeemakers with thermal cups from recycled materials.
Know Your Customer
High-price, high-value items are sold to people willing to pay for quality. Guess who their associates are? Other people who can afford to pay for quality.
Guarantee each person will be satisfied with your work. Bend over backwards to please him or her. You have just created an advocate. As this customer boasts to friends about satisfaction, they will want the same experience. Replicate the satisfaction and your growth continues.
If you are opening a brick-and-mortar store, plan out how to implement social distancing during the pandemic. Customers will come—though less than under ideal circumstances—if they can put confidence in your protocols for safety.
Most of your first customers will shy away from large orders to “test the water,” so to speak. We call these bread-and-butter orders. They keep the lights on and the inventory moving between the real work. Treat “bread and butter” as well as you do the “meat and potatoes.” Referrals from both help your business expand.
To find the ideal orders, you may need to spend some money. Buy ads, pay for booths at conventions, print a catalog, brochure, build a killer website, or hire someone to make cold calls. Frankly, whether you produce any advertising materials or not, you should have a great website. Many entrepreneurs have success opening franchises. These include a guidebook for success.
Does any of this sound too difficult for you? Are you unable to convince someone to partner with you? Rather than fantasize on how wonderful it will be to have your business, perhaps you can refocus on how great it is that you have a job where others have to worry about all the minutia of running a business.