How to Start a Business for Beginners

Who wouldn't want to own their own business, right? After all, imagine the freedom....the wind in your hair as you are motorcycling through the mountains or jet setting off to New York for a late night excursion with your significant other. For many, owning their own business is viewed as a means to an end...and in most cases this end looks a lot like a fairy tale ending in their mind.

But is it really that easy? The reality is that starting a business can be a lot tougher than most would think. In fact, once the entrepreneur takes off their rose colored glasses and actually gets to the "working" part of building a business, they find that it is anything but easy. And given the fact that nearly 90% of all small businesses fail within the first two years, I would say this much....

You may want to hold off on making reservations to Paris until you see what it takes to start a business. For all you idealists out there, better put on your ear muffs...

Here are 10 things to think about before you should think about starting a business.

1) Do you have enough capital to sustain a dry spell?

Not having enough capital could be the greatest reason why a small business will fail. Case in point, there was a restaurant owner that I had the pleasure of knowing. He is successful today BUT the beginning growing pains of getting started actually was, as he put it, "possibly the hardest challenge I have ever faced." I will call this owner, Bob.

Bob had a solid business plan and investors to boot. He and his partner had just graduated from college and were ready to set the world on fire with their first restaurant. "It wasn't that I didn't think that this wasn't going to be challenging," he says, "it was just that I didn't count on running out of money so quick. After all, we were supposed to be making money to spend more, right?"

Bob and his partner's restaurant got off to an initial good start. Curiosity seekers and friends alike wanted to see just what his restaurant was about. The initial surge made them feel like they were about to arrive. Then a funny thing happened...

About 2 months after his restaurant opened, the business started to wane. The honeymoon was clearly over. "Our out-go was starting to be more than our income", Bob said. "We were clearly starting to see the bottom of our initial investment (from investors). It was not looking good."

Bob and his partner had counted on continuous business but didn't have enough capital to sustain the business long term. And worse still, if they didn't find a solution quick, then their business would be in jeopardy and not see it reach its first year.

Bob went on the offensive and started to stuff neighborhood mailboxes with offers and specials. "We couldn't afford direct mail. We couldn't even afford to pay someone to do it for us. We were out until 4 in the morning stuffing mailboxes, hoping that this would build business."

The good news for Bob was that it worked. His restaurant has survived the test of time, going on 15 years now. But if Bob could have done one thing different, it would have been to,as he puts it, "included an emergency investment plan to get through the initial slowdown and inevitable drying up of investment money."

2) Expect to work harder than you ever have

Linda started her Ebay business thinking that it would be a solution to less work. "I had always thought of starting my own business as a way to help supplement my husband's income," she says.

"As an avid shopper, it seemed like the practical step. I could shop for deals and sell them on eBay for a profit".

What started as something fun to do in her spare time, quickly became a full time job. "I never imagined all the things that were required with maintaining a business," Linda confesses. "the shopping part was fun. The other stuff...well, that wasn't as fun."

Linda realized really quickly that shopping for great deals was not all that an eBay business demanded.

She had to buy the products. Then she had to photograph her finds, attach a quick summary of the product, and upload this information to eBay. But that was just the beginning...

In addition to this, once a sale was made, she would have to package the product, go to UPS, and ship the product. "In some cases, just the shipping alone ate up a quarter of my day," Linda says. "What started as something fun to do, quickly was turning into work."

"Then came the customer service part and accounting...."

All in all, Linda found that she worked more than her husband. Her part-time job was a 12 hour a day, 6 day a week job.

But there is a silver lining to Linda's story....

3) Getting investor's requires a little luck and a lot of tenacity

Jason had a huge problem. He had been trying to generate interest in his new internet cafe. The problem was that no one appeared interested. And without any venture capital, his business was just a dream.

"I was a bartender and knew a ton of people with money. It wasn't like I didn't have access to potential investor's," he says. "The problem was no one was buying into what I was selling..."

Jason kept getting the same questions asked over and over again. His pitches were met with a mild curiosity but nothing more. And this was despite the data that he had that showed what similar cafe's had done in other cities.

"I just couldn't understand how anyone could pass up this chance."

The reality is that prospective businesses have to spend about as much time courting investors as they do with actually building a business plan. If you fail to sell your idea, then you will be left looking for other ways to build capital.

In Jason's case, he managed to find an angel investor but not before he had leveled his 1,047 name rolodex. "It took me nearly 2 years to find investor's that actually believed in my business," he admits. "I opened 3 months later"

On a side note, Jason's business lasted longer than the average business but closed up after 4 years of being open.

4) Be patient and know your business's limitations

Kenneth had thought that he found the holy grail for a business when a member of his church casually mentioned that he wished that someone would start a pooper scooper business in his hometown.

"I absolutely envisioned people beating down my door and I would be knee high in dog poop,"he laughs.

"Plus, this business didn't require much time or capital at all...all I had to do was advertise and not forget my pooper scooper and doggie bags."

The problem that Kenneth was met with was something that most new business owners face. "I knew that there was a market for it. I just never realized that the market would be..."he pauses...."well, I never thought it would be so small."

Kenneth's first month, he had 10 accounts. "I thought of giving up at that point," he says, "it just seemed like this idea wasn't going to be enough to put food on the table for my family. My first month, after everything was said and done, cost me nearly $500 in advertising."

Kenneth's second month wasn't much brighter either. "I had to reduce my advertising by half. My wife was already growing impatient. The only good news was that I added 4 more accounts. I was growing...just not at the level I wanted to grow."

We will get to Kenneth in the next point but the point I am making is that you have to realistically set your goals in the context of your actual market.

5) A new business should keep all of their options open

There is no rule that says a failing business can't shift focus. In the case of Kenneth's dog poop business, this really applies. "After the 3rd month, it was clear that my business was going to the dogs, no pun intended," he chuckles. "I was left with a decision to make. I needed to poop or get off the pot."

Kenneth decided that his current pooper scooper business was not going to be the end all for his business. But rather than scrapping his business, he decided to add more options.

"I thought to myself...what if I added a dog sitting option?...what if I added other services as well such as dog walking and grooming?"

Invigorated by his ideas in an otherwise failing business, Kenneth decided to gamble a little and max the credit cards in advertising. This time, rather than merely being a pooper scoop business, Kenneth was in the business of all things dogs. He found a groomer that was willing to give him a commission and started to advertise his new and improved business.

"The month I added the new services, I had 70 new accounts. I was still in the red but I could see light at the end of the tunnel."

He also added a new program which paid his clients everytime they referred someone to him. "that word of mouth was what I think actually made my business," he says.

The lesson in this? All successful businesses eventually morph into what their markets want.

6) You must know your market and its competition

I will use myself in this example. I am an internet marketer that finds products and sells them in different niches. About 2 years ago, I was looking into the dog obedience market. Now I knew that I was going to be in for a challenge as this market was congested with several entrenched websites that I would be in direct competition with. What I didn't know was that I was going to be in for a lesson.

I had already done my market research. Online, the dog market was a huge 20 million dollar a year market. All I wanted was a slice..a big one but nonetheless a slice.

I quickly built a site and found a few products that I could peddle online. These included a couple how-to video series and three ebooks.

I also did research on my competition but not enough research as you are about to find out...

My idea was to use pay-per-click to drive traffic to my sales page. I created a back-end product that I thought would up my sales and used a forced opt-in to get email addresses from people who bought from me.

My competition was selling a similar product for $69. I decided that I was going to undercut them by $10. The problem was I didn't do my homework well enough for my main competitor. Had I done so, I would have realized that they were selling my very product as a loss leader. In other words, they were taking a hit every time someone purchased from them. They were doing this to get customers in the door.

Long story short, I was leveled by my pay-per-click campaign because I didn't factor into the details that my competition could outlast me because of the sheer amounts of capital they had.

Back to the drawing board.

The reason why I even bring this up is because it is easy to think of starting a business by undercutting prices, but sometimes things like advertising in the market can be the difference between profit and losses.

By the way, I abandoned my marketing campaign and focused on more profitable campaigns. Lesson learned the hard way.

7)Know Your USP

USP is an acronym for unique selling point. And although it is short, it is one of the shortest points that most businesses fail to realize. Before you start your business, you should know what makes your company unique from your competitors.

This could be price. In the case of my friend Bob (the restaurant owner), his unique selling was the fact that his restaurant was a local steak place. His moniker was "a fine dining steak grill for a blue collar price". His appeal was to regular middle class people who wanted to eat out somewhere nice without having to pay a fortune doing it.

The unique selling point can also be a bit more exotic than simply a price point. You could offer a double your money back refund for anyone not happy with the product. Hooter's USP is the fact that the waitresses will all be well endowed and scantily clad. Houston's USP is their level of service (which is well known in the South)

A USP will separate you from your competitors. It is in the small details that a business idea can grow.

In reflection, starting a successful business is not as easy as most would like to idealize. The business owner should plan for the worst and expect the best. Given the sacrifices that most business owners will have to give, it is natural to wonder why anyone would want to open a business. Long hours, tireless planning and execution, evolving as necessary....all these things can account for a very tired owner. But as my friend Bob says "I wouldn't want to do anything different. After all, I am living the American Dream."