Starting a business is a gamble. You never know how the chips will turn: you may hit the jackpot, or break even, but sometime you may lose. You must make sure that you have the right elements to make money and ensure that you create a successful business.
Max Fallek in his book “Finding Money for Your Small Business” identifies what he calls “money keys” that will make your business a success. According to him, you must:
1. Have a Desire to Make Money.
If you want to become successful as an entrepreneur, you must first and foremost have the desire to make money. To turn this desire into reality, Fallek cites four factors that comes into play:
- Understanding the costs of doing business. Your profitability hinges on your understanding of the true costs of your business. By knowing what it actually takes to run your kind of business, you will be able to identify the right pricing strategy that will cover all the costs of doing business.
- Making sure relationships with family and friends do not interfere with your business. You are in business to do business. Families and friends that purchase your products or services should be treated just like any other customer. Sure, you can give them a courtesy discount. But if you give away the store for them, you will not be in business for long.
- Hiring the right individuals for the job. If you are hiring employees, they should be hired for only one reason: they are qualified to do the job. Do not hire someone simply because he or she is a cousin, or is referred by a friend. Rather, take them in only if they are capable of doing the tasks the position demands.
- Placing advertising where it will help you most. The success of your business will depend on how well you are able to reach your customers. This in turn will depend on the effectiveness of your marketing and advertising strategies. However, you also need to understand that advertising entails cost. Therefore, you must select the right venues that bring the most return-on-investment.
2. Know all about the features and benefits of the products or services you sell.
As the owner of your business, you must know everything there is to know about the products or services that you sell. What are your product lines? What are currently available? How can a customer use your product?
However, you must go beyond the physical dimensions of the gift baskets that you create, the contents of your e-book, or your web design service. Instead, you must understand the features that offer valuable benefits for your customers. You need to know that added values you provide customers.
Keep in mind that you may not be the only one that offers the same exact products or services. You may have a dozen, if not hundreds, of competitors fighting for the attention of same customer. You must be able to convince the customer to give his business to you. As Fallek describes it, “a good salesperson sells the sizzle, not the steak. But before you can sell that sizzle, you have to be an expert on the steak.”
3. Know how to get money from the customer’s pocket into your pocket.
To achieve this, you must have a deep understanding of your market – who they are, what is their size, how can they be reached, what makes them respond and other crucial details about your potential customers.
You must know about their demographic characteristics. If you plan to start a dry cleaning business in a rural farming area, you may want to rethink your business because farmers may not find a need to dry-clean the shirts they use for herding the cattle or toiling the farm. The key is to determine whether the market size can support your planned business and make it profitable.
Once you have identified who your customers are and verified that they really need your type of business, you must then think how best to reach them.
- What will make them buy your products or use your services?
- Do they respond to coupons? Or do they need a personal presentation or demonstration?
- Do they buy your type of product only if they see it being advertised in the local newspaper?
- Or would they rather hear about your business on the radio?
- Or do they rely on recommendations from their peers, families and friends?
Some customers respond to hard sell. Others want a more subtle form of marketing. Still others respond to price. You can experiment and see what strategy is most successful in getting them to take their money from their pockets and put it into yours. Your business stands a greater chance at success if you know how to push the “hot buttons” of your customers. As Fallek advises, you must “know what appeals to your customers and prospects.”
Why are they buying your products or using your services instead of your competitors? What sets you apart from the rest of the pack? You may want to casually ask your clients why they chose your business, instead of your competitors. Your customers’ views and opinions are a gold mine of information that you can harness to your advantage. Then use this information to harness a very important ingredient – your sales expertise.
4. Know how your leading and most successful competitors make their money.
To succeed in business, you need not be the most original, most creative and the first mover in your industry. In fact, you can make good simply by knowing your competitors and following the direction they’ve taken – AND taking it up a notch. You can beat your competition by improving on your competitor’s pricing strategy, adding more value to your products or services, offering better customer support and service, even providing a better ambiance to your store or web site.
Fallek cites the example of McDonalds. McDonald’s, perhaps the world’s most successful fast food chain, was not the first in its field. When it first opened, there were already A&W Root Beer, White Castle Hamburger shops and others. McDonald’s simply copied what others did, but went a step further – and succeeded. You can follow McDonald’s example, making sure that you always improve what is currently offered by your competitors.
According to Fallek, you need to look at various elements of your competitors. You must analyze the kinds of services they offer – do they offer gift wrapping, personalized customer support, free delivery, etc. Can you offer the same? If not, how do you compensate for it (e.g. your e-business competitor offers free shipping while your bottom line shows you that it is not possible)? Perhaps you can add a new twist in your service, and highlight this addition that only you offer.
You should know how they operate their business, including the business hours and days of the week they are. More importantly, examine their inventory and how it is managed. If you are in the business of selling baby gift packages, what kinds of packages are being offered by your competitor? What are their shapes, colors and sizes? Do they have a separate product line for corporate and consumer clients?
Knowing these things about your competitor can help you examine your strengths and weaknesses. It can help you identify how you can market your business by focusing on what sets you apart, or what marketers call your “unique selling proposition.” Getting all these information may not be easy; but understanding the factors that contribute to your competitor’s success and using these same factors can enhance the likelihood of your success.
5. Know how to find and use somebody else’s money in order to make money.
One reality that you have to bear in mind when starting a business is that your entrepreneurial dreams could easily crumble if you have insufficient funds to sustain it and make it grow. The ideal situation would be to have all the money in the world to finance your venture.
Alas, that is not always the case. More often than not, you would find that all your savings, credit cards, investments, life insurance, home equity, or sale of personal assets are still not enough. You may still need to seek out additional financing from other sources.
Your success will depend on your ability to secure resources for your business. You must know where to find them, and how to get the additional money that you need. As Fallek says, “the more successful a businessperson is, the more he or she knows about obtaining the necessary money for the business.” Of course, it wouldn’t hurt that you have a well-conceptualized business with a ready market and a product or service that the customers really need.
Recommended Books on the Keys to a Successful Business:
- The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses
- The Most Successful Small Business in The World: The Ten Principles
- The Ultimate Blueprint for an Insanely Successful Business
- Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses
- The Facts of Business Life: What Every Successful Business Owner Knows that You Dont
- Top 10 Ecommerce Mistakes
- 12-Step Template to Write an Effective Sales Letter
- How to Raise Money to Finance a Franchise
- Pros and Cons of Financing a Business
- 13 Marketing Mistakes to Avoid