By Emily Faracca – On
Welcome to your first day of Business School! Your instructors are Alex and Spencer. The world is your classroom.
Your First Start-Up, from Beginning to End
If you’re an aspiring entrepreneur or someone in the beginning stages of starting a business, we promise you’re in the right place.
Our webinar is dedicated to small business aficionados equally as it is for those who are curious about what it takes to become a small business owner.
“Entrepreneurial behavior isn't about scale, it's about a desire for a certain kind of journey,” says Seth Godin.
It’s our belief that by the end of this video, you’ll have the confidence to take the first step in your own journey to opening your business, or the push you need to keep going on your journey.
We will break this down in 5 segments:
- Brainstorming Business Ideas
- How to Start a Business Plan?
- Should You Get Investors?
- How Do You Write a Marketing Plan?
- What Are the Techniques of Selling?
Let's get started!
Brainstorming Business Ideas
Some people are born with the entrepreneur gene. They are an idea machine, they seem to execute their first idea flawlessly, and those of us without the “gene” look at them and think: “How?”
Scott Shane, Professor of Entrepreneurial Studies at Cleveland’s Case Western Reserve University, saw this as such a phenomenon that he wrote a book about it.
Born Entrepreneurs, Born Leaders suggests that genes don’t just influence whether a person will start a business, they may even determine how much money a person will earn.
This was a controversial idea, and in an article for Entrepreneur, Jason Daley comments,
There are varying theories about what makes a successful entrepreneur.
More important than what makes an entrepreneur successful is, however, is whether an entrepreneur has an idea in the first place.
Coming Up With Your Business Idea
Alex and Spencer recommend that the best ideas for a business come from identifying a hole and filling it.
“If you yourself need something and can’t find it, it’s probably a good idea for a business,” Spencer reiterates.
Seth Godin says the four main character traits an entrepreneur must possess are:
- They make decisions
- They invest in activities and assets that aren’t a sure thing
- They persuade others to support a mission with a non-guaranteed outcome
- They embrace (instead of run from) the work of doing things that might not work.
The last one, in part, applies to starting a business of any kind - you are taking a risk. As of April 2018, small businesses employed 57.9 people nationwide.
Starting a small business is a risk, without a doubt. But Godin says, “It's easy to get hung up on the "risk taking" part of it, but if you’re acting like an entrepreneur, you don’t feel like you’re taking a huge risk.”
The idea for Arbeit Software was born when Alex, who was working in a collection agency, saw a need for a reliable and efficient solution to the volume of calls a collection agency could receive and dial out. He partnered the right people, took a risk on the idea, and now co-runs a successful small business.
“If there’s something that you like that’s not readily available to you, make it,” he says.
Score.org agrees with this train of thought in an article by Rieva Lesonsky. She provides four steps to brainstorming success:
- Get your creativity flowing
- Think about businesses you admire, use and rely on in your daily life
- Think about the issues you are facing in your own life
- Start writing down dozens of possible business ideas
Then from that list, begin narrowing down the ideas that you can conceptualize beyond the idea stage.
Have Confidence in Your Idea
Alex and Spencer go on to discuss the important role that social media and the internet play in the success of small business.
It’s easy for your specific target market to be reached with social media and the internet, says Alex, because niche markets can easily be located.
Perhaps before social media became so prevalent and widely used, a super specific idea wouldn’t necessarily have seen success.
But as users of social media grew more numerous, the world seemed to get smaller, and admirers of niche ideas and products could easily find one another.
This is great news for you, especially if you feel like your idea is too specific to see a large response.
Put your idea for unicorn-themed coffee mugs out into the world. You never know who might be searching for exactly that. There are tons of ways to see how many clicks a keyword gets in a day, a week, a month - try sites like ahrefs or Google Analytics. You can figure out exactly what kind of response your idea might receive, and adjust it if necessary. You might even find that unicorn-themed phone cases would sell better.
Finally, Find a Mentor
This can be anyone, from a professor you kept in touch with in college to someone you admire in the industry.
So to review, the steps to coming up with an idea and seeing it through to the business plan stage:
- Brainstorm ideas
- Be sure you have enough passion for the idea you choose to see it through
- Do your research
- Find a mentor
Once you have your idea nailed down, you’ve won half the battle. Here comes the fun part!
How Do You Write a Business Plan?
Before we answer this question, let’s answer a more important one.
Why should you write a business plan, or as Spencer calls it, “Putting pen to paper.” Sba.gov gives a pretty good reason: Business plans help you run your business. It will guide you through each stage of starting and managing your business. It will essentially become your roadmap, and with it you will structure, run and grow your business. It’s a way to think through the key elements of what you want to accomplish.
It can also arm you with confidence if and when you begin to seek investors. Potential investors will want to see a structured and thought-out plan; something they will see a return on investment on.
Alex recommends that the business plan shouldn’t be too structured, but he does recommend a loose plan to stay organized and keep certain milestones in check.
“When we say business plan, you shouldn’t be intimidated by it,” he says.
First and foremost, Alex and Spencer recommend you start with the purpose of your business.
“At the beginning, it should say why you’re doing this business, what is the purpose,” says Alex. “That’s something that you want to think a lot about, because you’ll need to hold true to that throughout the lifespan of your business.”
Whether that reason is to help people or you are extremely passionate about what you are producing, it needs to be clearly stated in your business plan.
You might ask, “What if I just want to make money?”
That’s okay, says Alex. “You don’t need to have some bigger, deeper meaning. It’s great if you want to change the world, but if you just want to make money, there’s nothing wrong with that.”
He does recommend that if you only goal is to make money, then all your decisions need to be based on that.
As you go on, they recommend you plan for the worst.
“Always overestimate things are going to cost and underestimate how much money you’re going to make,” says Spencer.
Alex also recommends outlining a marketing plan (which we will discuss in more detail further on), being sure to include what the best target market to advertise your product is, and your buyer persona.
Aside from those tips, Alex and Spencer say rather than putting off a business plan because it is intimidating, see it as simple as typing it into Google.
Lucky for you, I’ve done just that. While you get thousands upon thousands of search results, the overarching theme of most recommended business plans contain the following:
This is basically a brief outline of the company’s purpose and goals. This can also include your propositional value statement - what are you going to sell, why are you selling it, and how will it improve the lives of your customers?
Pretty simple - since it shouldn’t be delved into completely in your propositional value statement, describe what you do
Present the results of the research you’ve done on your industry, market, and competitors
Organization and management
Present the structure of management, the number of employees you have, etc.
Service or products
Go into basic detail about what you’ll be selling, how many varieties, etc.
Marketing and sales
How do you plan to market your product or service, what your sales strategy is
How much money you’ll need to operate over the next 3 to 5 years
Supply information like balance sheets, a sales forecast, expense budget, cash-flow statement, etc.
Optional, including resumes, necessary permits, etc.
Additionally, if you’ve already outlined and developed a strong brand, definitely include that as much as you can throughout the presentation.
And that’s all, folks!
The key is not to overthink it. If the product or service you want to sell is conceptualized well, it shouldn’t be a struggle to put something together. Remember to be prepared, but remain adaptable.
So, you have your million dollar idea. You’ve got the business plan outlined. Want to know what comes next?
This is the part that can take the wind right out of your sail to success. It’s the part that some people dread, while others thrive off. It’s… finding investors! (Du-du-duuuuuh!)
Should You Get Investors?
Before you start sweating and ironing your best shirt, take a deep breath. Let Alex and Spencer talk you through deciding whether or not you even need investors.
So when we answer the question, “Should you get investors?”
Alex says: “No.”
Why, you ask?
“You may not be ready to grow to the scale of something that an investor is going to give you,” says Alex.
If you are a first time business owner, you’re going to make mistakes. That’s just part of the process. In fact, you should be making mistakes, because it’s how you’re going to learn. But, as Spencer says, “It’s great to make those mistakes on your own dime.”
The theme in this segment of your schooling is: Start small, then build.
If there’s one thing that is certain about the early stages of building your business, it’s that there’s going to be bumps in the road. And as Alex explains, you don’t want to have those bumps exaggerated by having more money.
Martin Zwilling, startup mentor, agrees. In an article for Forbes, he says that it’s dangerous to assume that as an entrepreneur, seeking an investor is a normal part of the process.
In fact, he says that more than 90 percent of businesses are started and grown without equity financing. And what about those who did seek investment? In some cases, they would have been better off without it.
Zwilling says it comes down to your needs versus your wants, and it’s very important to differentiate between the two.
But don’t get too comfortable - you’re not off the hook quite yet.
“Bringing on an investor is something you do later on, when you want to scale things to a certain size,” Alex says.
Zwilling agrees. According to his expertise, there are indicators (not exhaustive) that it might be time to seek investors, or at least seek out an advisor to point you to a solution. Three of these indicators are:
Sales are coming in faster than you can keep up
- When an investor hears that you can’t keep up with your sales, your pitch will be like taking candy from a baby.
- Investors love these odds, says Zwilling, and are quick to go for a chunk of the action.
- If you cannot keep up with demand due to lack of funds for production, it’s time to look to someone with the means to get you there.
Your company has outgrown you
- Some entrepreneurs, says Zwilling, are excellent at managing the chaos of initial implementation.
- But when your company begins to grow at a rapid pace, it can be difficult to instill discipline and keep the direction of the company at your desired pace or practice.
- An excellent entrepreneur might not be an excellent boss. If you find yourself feeling out of control of the direction of your own company, consider seeking advice from an advisor or hiring someone who has this strength.
You need a prototype or specialized equipment
- If your product is a piece of technology, you’ll need models, testing, samples, etc. and this can take up a large chunk of your start-up funds. In the same vein, specialized equipment like injection molding, medical devices or something similar can also be costly. If your start-up money doesn’t cover this or you can’t secure a financing option from suppliers, you may have no option but to seek investors.
Apart from these situations - essentially, if you are out of options - there is a general consensus that it might be best to hold off on finding an investor. It can be hard to get out of that mindset, though - the process of finding an investor has become quite engrained in the start-up process. So if you still aren’t convinced, Tim Berry gives a few more reasons to back us up:
- You are selling ownership. Once you get an investment, you are, in a way, signing on to have a boss. This means that the decision making responsibility is no longer solely yours. You’ll need to keep the relationship between you and your investor healthy and happy. Politics will matter. And to reiterate what Spencer and Alex talked about, if and when you screw up, you won’t just be hurting yourself. Berry also mentions that sometimes, if you’re not careful, investors can even take your company out from under you. Be careful who you trust - some investors become mentors and gentle guides. Others are nagging, insensitive critics.
- You will be on the defense. You will need to, at the time you meet with investors, be prepared to explain how your product is scalable and unique, or at least hard to copy. If doubling your sales means doubling your headcount, investors aren’t going to be interested, says Berry, and what’s more, if anybody can do it, investors won’t be interested in that, either.
- Just because you get the money doesn’t mean you’ll be successful. The New York Times shared a horror story back in 2011 of a startup company who secured $41 million from investors, only for their idea to flop.
What Alex calls “bootstrapping”, Berry says is an underrated approach.
“Do it on your own,” says Alex. “You’ll learn so much more about your industry cause you’ll do it at a natural pace. You’re going to grow your company at a natural pace, your systems will be better over time.”
Many entrepreneurs agree that doing it on your own - putting your own blood, sweat and tears into your idea - may work out best for you.
So you have your idea, you have your business plan, and you are armed with the best knowledge possible to make a decision about investors. The next step in your journey to your own business? A marketing plan!
How Do You Write a Marketing Plan?
Or, “How to Get Attention!”
Sales and marketing are integral to your company in that they promote your product and create sales funnels if, like many, you begin to reach a normal threshold of organic sales.
Luckily, Alex and Spencer are about to do to marketing what they do with all ideas that were previously thought to be complicated. Let’s simplify it, baby!
“It doesn't need to be that complicated. Figure out a very basic strategy,” says Alex.
Below you'll find the key elements that should be included in any basic strategy.
“No one can afford to target everyone,” says Mandy Porta for Inc.com.
Too many business, she says, target “anyone interested in my services” or much too general groups such as corporations, moms, etc.
In order for a target market to well-defined, it must include a very specific niche.
This does not mean, however, that you are excluding people outside of your target market. It simply allows you to strategize your marketing dollars and brand message on a specific market that is more likely to buy from you than other markets.
It is a much more affordable and efficient approach to marketing, especially for a new business.
This has everything to do with your brand.
According to The Cult Branding Company, a positioning statement is:
“The process of positioning your brand in the mind of your customers.”
Separating your product from the competition is going to be vital in the marketing stage of your business.
When you begin marketing, you’re going to be outlining how your product not only touches on the pain points of your target market, but how it does this differently than the product your customer is already using.
Offering to Customers
This is more than just the product.
Your offering includes all the elements that give value to your customer. This is going to include customer service, availability, delivery, support, etc. and will absolutely need to be marketed along with your product.
You have a number of options when you begin to think about your pricing strategy. The price can be set to maximize profitability for each unit sold, or for the market overall. Take into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs.. I know right? Barely anything.
If you are still not sure which one to use, just focus on generating as high a margin as possible. The marketer should change the product, place or promotion before resorting to pricing reductions, say experts at Marketing Teacher.
This is going to tell us how effectively a firm gets its product to consumers and end-users. Your business can choose to sell your product directly or indirectly, depending on what budget and geographical limitations allow.
Arbeit Software sells software, so although we are not necessarily limited by geography, we often visit our local customers to check in and see how they are working with the product. It allows an extra touch of customer service and enriches the relationship. If you don’t have that option, get creative with ways to check in with your customer to make sure they are having a positive experience, especially if your product enables ongoing use.
I grouped these together and thought it was easiest to list these for you so you can decide what works best for you.
- Allocate the right amount of resources to accomplish your sales goals
- Always be reviewing and updating your ideal customer profile and personas - use surveys!
- Document your customer journey and be intentional with nurturing them through it
- Clearly define your success metrics - what is an outperforming salesman and what is an underperforming one? Whether this be an actual employee of your company or an ad you’re running on Facebook, keep measurable factors in mind for what you are investing your funds into.
- Evolve, evolve, evolve
And that’s it! Decide the most cost-effective sales strategy and make sure take small steps toward growth. Hire only as needed.
This is going to be a core component - research the heck out of your market and never stop. A/B test when possible, in every capacity you can.
Anything else you might want to include, whether it be brand guidelines, content strategy, analytics reports, etc. - add as a supplement.
And you’re done! Keep in mind that your marketing plan will evolve as your product evolves, your team evolves, your target market evolves - always, always evolve along with them.
And now… drum roll please… your final course of Small Business School.
What Are the Techniques of Selling?
As Alex and Spencer will tell you, the most important component of the beginning stages of your business will be sales.
Or as Spencer puts it, “Sales is to a company what oxygen is to the body.”
This is especially true in the early stages of a company when your marketing budget will be limited.
“As you grow, it equalizes with everything else,” explains Alex. “Once you have a base of customers, it equalizes.”
Again, don’t overthink it!
If you’re not a natural salesperson, don’t you worry.
We’re going to break down sales strategies to live by when you have no other option but to go out and knock on doors yourself.
“Go out, grab a customer, bring em back in. Sell someone on an idea,” says Spencer.
Here are a combination of tips and tricks provided by Spencer (and the internet) to sharpen your sales skills and get you off the ground.
- Ask big questions and identify their problem. Then sell pain points. The best salesperson solves problems - help someone realize a problem they have that they didn’t even know about. We’re selling a solution to a problem
- Always agree with your customer
- Qualify customers and know when to say no
- Know when to quit
- Know what you’re good at and when to say no
These will, at the very least, get you started on the path to selling effectively and strategically. And keep in mind that if you break even in your first year, you’re doing exceptionally well. Don’t expect sales to start flooding in - be intentional and seek out your ideal customer persona. Know your product inside and out. Most importantly, be passionate about your business and product, and the sales pitches will flow out of you.
If you’ve made it this far, thanks for sticking with us!
We hope you learned a lot.
Starting a business is a brave feat and you need to be armed with the tools to make it happen. We believe these 5 topics will be enough to get you off the ground, and remember that if you need more advice as you go along, episodes of Small Business 101 are released every Sunday.