Here's a statistic you've probably heard before: 9 out of 10 small businesses fail within the first 2 years. Pretty discouraging, huh? That means that if you start a business today, you have a 10 percent chance of making it, right? Wrong! The statistic doesn't mean anything—it's not luck that makes a business succeed, even if luck and chance do play a part. (As a side note, a little research revealed that that statistic is probably closer to 8 out of 10, but that's beside the point.)
When you crunch the numbers, starting your own business sounds like a losing venture. You have to invest a lot, with no guarantee of getting it back. Time spent working often produces no clear return, as opposed to standard jobs which pay you for the hour or week regardless of what you're doing.
So, why bother? Freedom, excitement, and the American Dream, of course!
Here are 10 tips, compiled both from personal experience and other advice from experts. While some of my advice is IT-specific, much of it is general, because many of the same basic rules apply to businesses in general. (Note: I have started my own business and know many people that also have, so I'm not coming to this topic from a perspective of complete ignorance.)
1. Make Sure You Really Want to Start a Business
I apologize for the pseudo-fake tip, but this is an important one, so I had to put it in here. Before you do anything, consider your reasons for starting a business. Were you laid off or displaced from your job? If so, you certainly have the advantage of time, but a lack of financial resources could be your downfall. Are you just sick of working for a boss? If so, I'm sure you're in the same boat as the vast majority of employees. Or finally, do you have a truly novel, inspired idea (doesn't have to be rocket science) that you believe has real business value?
If you don't already have an idea that is truly unique, or can't spell out in 30 seconds how your business and your expertise would bring something new to the table, then you should probably stay in the incubation process before taking the plunge. Because once you do get started with your business, every odd will be stacked up against you. Your idea has to be that good to counteract the challenges of the market.
2. Pitch Your Idea to Someone Smart
Now that you're really feeling good about the business you've planned and how you're going to make it happen, you need to get a dose of reality. So, find the smartest business person you can who's willing to spare an hour for a free lunch, and tell him or her about your idea. If it's hard to conceptualize what you're trying to do to a friend or colleague, imagine how hard it will be to do with hostile potential customers. Take his or her feedback at face value, avoid protesting or arguing as much as possible (though providing clarification if he or she misunderstands what you're saying is good), and take all the advice into account. Even if that individual thinks it's a bad idea, it doesn't mean it is. But, it's helpful to hear how the business comes across to an intelligent confidant—if there are obvious holes, fill those holes with your business strategy.
3. Avoid Outside Funding.
Funding can come in a number of forms. The most invasive is venture capitalist funding, which requires you to compete with thousands of other businesses to show some honchos why your business is the next Google. Unless you need tons of money to get started and feel your business has the potential to make in the multi-millions, this isn't a good option. The next option is business loans, which are almost impossible to secure for any first-time entrepreneur. There are also small business loans, which are similar but slightly less dangerous than credit card loans, which will earn you quick boosts of cash with mega interest rates. Again, not a good option unless you plan to make profit quickly, which is difficult.
The best way to fund the business is either through angel investors—friends, family, colleagues—or by yourself. If your business is a consultant role, you can probably get away with starting the business out of your home and meet with clients at their offices or in public. This means that your fees will mostly consist of equipment, legal/accounting fees (the more you can do yourself the better), and marketing.
One more thing to consider: when the money is your own or a close friend's, you are much more careful with how you spend it. Many businesses fail not because they are unsuccessful, but because they can't make enough profit soon enough to pay their employees, building costs, and loans. The less fixed costs you can have (something that you have to pay no matter how many clients come in during a given month, such as building costs and loans), the more likely your business will avoid this situation. For instance, I recall a business professor who told me that it took Amazon.com seven years to make a profit. That doesn't mean Amazon's business strategy was poor (clearly not!), but it shows how long things can take to get started.
4. Polish Your Training and Resume
Now that you have your own business, you don't have to worry about training, certifications, resumes, and all that gunk, right? Unfortunately, wrong. In fact, your training is ever more important, because you have no one to blame but yourself for not being prepared for every possible situation that might arise. And if you think you have to do a million things a minute while employed at a company, imagine how many more tasks you'll have (for many diverse businesses) if you're working as a consultant or contractor.
The first step, of course, is getting assignments. And as they say, it's easier to ask for forgiveness than permission, so securing the client is always your priority. Getting up-to-date certifications will certainly help. You probably have some certification from the previous track (MCP, MCSE), which might allow you to skip some of the more basic, MCTS (Microsoft Certified Technical Specialist) exams which are the lowest level under the new model. If you're looking to serve as a consultant for enterprises, you may consider beginning the long journey to earn a MCM (Microsoft Certified Master) certification. More on certification in the next tip.
One of the biggest rookie mistakes new business owners make is trying to be all things to all people. The fact of the matter is, you can't, and by propping yourself up as capable of this task, you alienate all potential business. No, you have to specialize. Who do you work best with: enterprises, medium-sized businesses, or startups? What's your expertise: Windows, Linux, or IBM? Do you have more experience with Exchange, SQL Server, Security, or something else?
Choose your core skills, earn certifications in those skills, and hold yourself as the absolute expert in your specific niche. And, believe it or not, if you do this, you'll get more business for tasks unrelated to your niche. Think of it this way: if I tell you that I'm an amazing tennis player but I need some work on golf, hockey, football, basketball, dancing, and swimming, you'll not only believe that I'm good at tennis, but you'll consider me reliable and honest, right? If I tell you I'm the greatest athlete in every sport ever invented, I just sound like a schmuck.
6. Try to Keep Working While Getting Started.
I'm sure you don't want to do this, but it would be my recommendation. If you remember my point about loans earlier, the same rules apply here—the last thing you want is for your mortgage payment to be the undoing of your business. Think: if my business doesn't make enough money to provide my basic needs for a year, will I be OK still? If your spouse works, or if you're retired or have some other source of income, you may be able to skip this point. But otherwise, you'll probably want to keep working. And if your new business could possibly compete with your current employer, then that's an issue that you need to discuss with your boss. (Or at least get a copy of your employment agreement before pursuing.)
7. Master Marketing.
No matter what your business is, the difference between success and failure usually comes down to one word: marketing. Granted, word of mouth is the most powerful form of marketing, but you have to build up that client base to start. So, here's a few things you can start with:
- Print some basic business cards—you should be able to get a box of 250 cards for $50-100.
- Build a simple website—even if it's one static HTML page, something is better than nothing. But with open-source CMSs like Joomla, creating your own website isn't that hard.
- Talk to your local newspapers—local papers are always on the hunt for interesting local news. Find a basic article on how to build a press release, find an interesting angle for your business, and shoot out some emails. There's a good chance you won't get any coverage, but at least you'll have established contact with these individuals.
- Milk all of your contacts—networking is marketing, and yes, you have to do it. Friends at other businesses, small business owners, anyone you know: tell them all about your business. You never know—it could land you a client or two.
8. Prepare for the Onslaught of Unsolicited Advice.
Once people hear you're starting your own business, the unsolicited advice will come like a tidal wave. Most of it won't be overly useful. Most people will say some mix of "Good luck," "That's so cool you're doing this," "I heard it's really hard to start a business," etc. Even though it can be nauseating, don't let on—always seem grateful for people's words. It just doesn't do any good to be negative. And when you do get some useful advice, listen closely.
9. Remember: Starting a Business is Learning.
More than the money you might make and the freedom you'll gain, the greatest benefit to starting a business is how much knowledge you'll acquire. You'll learn to be your own lawyer, accountant, marketer, business manager, and more…and that's not even counting how significantly your knowledge of IT will expand! Working with a wealth of clients in different business sectors will drastically improve your understanding of the world and business in general. These lessons will stay with you forever, whether your business succeeds or not.
10. Have Fun with It.
Anyone that gives up a cushy 9-5 job (or even 9-7) for the endless hours associated with starting a business is a little crazy. The only way to stay sane is to have fun with it—do everything you can to succeed, but be prepared for the reality that you might not. Take your mistakes with a shrug, because every mistake you make will make you better prepared for the next speed bump.