There are so many things I wish I’d known before I started my first company.
Hindsight’s 20/20, but I wish someone had sat me down before I wasted a lot of time and money on a company I wasn’t ready to start. While the project quickly fizzled out, it did give me some valuable insights into all the groundwork that needs to be done before getting started which helped me succeed in my second endeavor.
You’ll make mistakes when starting a company, no matter how many articles and books you read, but you’ll make fewer of them if you learn from those who came before you. Here are seven essentials I’ve come to realize are must-dos before starting a company of any kind.
1. Master your personal budgeting first
Are you drowning in credit card bills? Do you know where your money is going each month?
If you don’t have your personal spending under control and don’t know how to budget, it’s crucial that you educate yourself on personal finance and master the art of budgeting before you start a company.
Why? Simple. If you can’t handle your own finances, you’re not equipped to handle a company’s.
Money seems to disappear at a startup once it hits the bank. Unless you have a detailed plan for where the money is going to go, you might run out of cash much more quickly than you imagine, then end up having to give up on your business.
Cash flow issues, the type where a company is bringing in plenty of revenue but is struggling to meet expenses can be really challenging for startups. Plus, no investor wants to work with a founder who is up to his or her ears in debt (yes, this happened to me). Running a lean startup takes major budgeting skills.
2. Market research
Performing market research means you’re going into the rabbit hole of your customer’s minds, publicly available data, and/or information on your competitors.
It can get overwhelming and confusing, which makes many new founders skimp on this step. Don’t make the same mistakes! You might think you have a great idea, but unless you back it up with solid market research, you’re making a big gamble.
Even big companies don’t do their market research due diligence every time when introducing new products. Colgate’s failed foray into frozen dinners didn’t jive with customers’ view of the brand, while Jell-o’s celery flavor just tasted awful. Some products just don’t fit into what the market needs, while others have poor timing.
3. Identify success stories
Now, let’s forget the momentary market research failures of big companies and look to their successes. When you need inspiration or are feeling discouraged, you’ll want to be able to look to successful companies that have already gotten to where you want to be.
Some success stories weren’t always so successful—even big companies like LEGO experienced declining sales at one time before they went back to their roots and began to refocus on the products their customers really loved. It’s okay to dream big—and companies that stumbled on the way can provide inspiration when you’re feeling down.
4. Test the waters for funding
No matter what kind of business you’re planning to build, you’re going to need funding from the very beginning. Whether that comes out of your own pocket or from another funding source, it’s important to choose a funding type that fits with your idea.
Some options for initial funding can serve a double purpose of testing your marketing. Crowdfunding and entrepreneurship contests, for example, are low-risk methods of testing the funding waters. These options will give you valuable information about your concept, even if you don’t end up getting funding.
For other investment options, like small business loans, venture capital, and angel investing, you’ll need a solid business plan and proof of concept before anyone will be interested in investing.
If the idea of networking makes you cringe, you’re not alone. I’m an introvert, and at my first dozen networking events, I wanted to hide behind the tables. Today, I’m the life of the party, and I’ve even met business partners at these events.
What changed? I realized that selling isn’t the point of a networking event. Sure, you have your elevator pitch and you yourself are the product, but a networking event should be about building relationships and building a network, not the hard sell. Listening and showing genuine interest in others’ projects is the best way to meet great people.
Be intentional when you attend events. What are your goals for networking? Even though you won’t be hard selling, you’ll need a plan in order to figure out who to keep in contact with.
Think about networking as a multifaceted process. You can’t just limit yourself to traditional networking events. With 85 percent of critical hiring involving some kind of networking, no founder can afford to ignore either online or in-person networking. Events, social media, online interest groups, meetups—they all offer great opportunities for networking.
6. Find a mentor
I found a mentor by accident—when I was busy losing money at my first company. While he wasn’t able to help me save the concept (which was just as well in the end), he did help me make better choices in my next project.
So how do you find a mentor? Thanks to the internet, there are tons of places to connect with more experienced entrepreneurs.
Some good examples:
It can be intimidating to ask for help, but experienced entrepreneurs know how difficult it is to get started, and often want to give back to newbies. Just make sure you’re willing to actually listen and implement what your mentor teaches you. They’re giving you their time and expertise, and you need to respect that.
7. Get to know your customers
It’s scary asking people to judge you, but that’s just what you’re doing when you ask someone to buy your product. Knowing your customers’ wants and needs inside and out will help ensure that your product or service doesn’t flop.
This is an extension of market research, but it’s so important that it bears repeating. Don’t make assumptions about what your target audience wants—ask them. Surveys, interviews, focus groups, and other feedback is key to making sure your concept is viable.
Stay humble and determined
Laying the groundwork is important for starting a business and making it ultimately profitable. Remember, it’s important to stay humble throughout the process so that you don’t make dangerous assumptions and make poor decisions.
Running a business isn’t easy, but making these preparations before you begin will make the process much less stressful—and more likely to succeed.