I have drawn parallels in previous blogs between being a Navy SEAL and being a successful entrepreneur. One commonality is that both are relatively difficult ambitions, with far greater numbers of people aspiring to and attempting to be either than those that are actually successful. Another parallel is that people often ask me how they could either be a SEAL or start their own businesses, sometimes looking for advice, sometimes encouragement. For those looking to start businesses, there is one phrase I’ve probably heard more often than most, that the person would like to start a business but doesn’t have a unique idea that no one has thought of before. In a previous blog I quoted a friend an entrepreneurial mentor, Calvin Lam, who told me a little over a decade ago that in order to be financially successful in America you should avoid the sexy venture funded companies and Fortune 500 executive ranks and focus on starting and owning a company in a non-sexy business, where the competition is lower and the chances of achieving financial success greater. This ties into the idea that one doesn’t need to have a unique, never heard of idea in order to start a business. The classic business tome Built to Last by Collins and Porras cites this as Myth #1 in their “Twelve Shattered Myths” of great companies. The vast majority of successful businesses are started with the basics:
- First have a product (not necessarily new) or service that people want to purchase.
- Sell it to customers at a profit.
- Repeat and increase in size as desired and required to support the business.
For instance, I have heard from many people that come to me with an idea of the next generation of a solution that no one has heard of before, asking my opinion as to whether they can form a business from it. My answer is always the same – who will pay for it? If you know the answer to that question and ideally can get the customers to write checks in advance, then you have a start on step one. There are many other elements in step one, including customer identification, market analysis, competitive analysis, barriers to entry, etc, but if you don’t have customers willing to purchase your product you won’t have a business.
Step two plagues hobbyists and lifestyle businesses, as they often try to minimize their profits out of lack of experience, or in some cases demand excessive profit and lose the customers from Step 1. This becomes more complex as the business expands and suddenly there are infrastructure costs that require a minimum amount of sales, which requires expanding the customer base through marketing and maximizing repeat sales. Failure to provide good customer service or a good product at this stage often results in a decrease in the customer base, forcing the entrepreneur back to step one to find customers to purchase their product.
Step three is what turns a hobby or lifestyle business into a real business. Many people start their own businesses as an alternative to working for someone else and nothing more, with no desire for employees, infrastructure, or the headaches and risk of an actual business. Others want to take over the world from day one, becoming the Number One (fill in the blank) and a household name across the world. The rest of the businesses owners fall somewhere between those two ends of the spectrum. Step three requires more than simply understanding what the business does, it requires understanding what the business is and how to manage all aspects of it, including sales, marketing, accounting, logistics, management, HR, etc. The successful entrepreneur is usually very good at one or more of these areas and either gets up to speed on the rest or hires to compensate on the remaining areas. One very common example give of this is the new franchisee who wants to own a sandwich shop because they love to make sandwiches. As long as the owner is making sandwiches all day, they are not paying attention to their finances, inventory, personnel management, infrastructure costs, etc. Being able to manage all of those other issues personally or through good hiring is the key to entrepreneurial success, not personally being able to make a great sandwich.
Starting a business doesn’t require some world shattering idea, a genius IQ, or the work ethic of a world conqueror. Everyone can be great if they can conquer their own demons, and this applies equally as well to entrepreneurial activities as it does to life in general.