Lessons Entrepreneurs Should Learn From Traditional Businesses
Note: This article was inspired by Adriana Lopez‘s recent article over on Silicon Bayou News titled Six Buzzwords That Entrepreneurs Abuse. We added on to her article with the mostly serious suggestions of “pivot” & “monetize (later)” which led to the below Twitter exchange.
We debated responding in 140 characters, but decided that this was a topic which would be better broached in a complete post, which leads to the below.
As a digital company formed only one year ago, we occasionally get the odd look when we point out how essential studying traditionally successful businesses will help your long-term strategy. After all, companies like ourselves are all about recommending “entering the third wave of the digital social-centric ecosystem,” to borrow some of Ms. Lopez’s chosen words.
But here at Online Optimism, we work hand-in-hand with many traditional businesses as they adapt to the connected world that exists in 2013, as well as some local start-ups. What the combined experience has made us realize, is how the ease of starting your own business has perhaps made entrepreneurs just a little too excited – and how a simple few steps back at the start of the process, while lowering the number of entrepreneurs for sure, would also lower the insanely high failure rate that starting your own business comes with.
1. Don’t believe the hype – have a plan to monetize from the beginning.
Our “Monetizing (later)” joke concerns how many companies are formed without an actual end goal of profits. While dreams of investment are wonderful, they’re more often than not, exactly that: dreams.
I’m not declaring that you instantly need to have profits, from the very first day you’re at work. In fact, if you have no examples of work or successful case studies to show to potential clients, that’s a horrible idea. But you should know where money will come into play eventually. Perhaps it’ll be advertising? Maybe you’ll start selling services as a partnership with another company? Or you could raise the price of the cakes you’re selling! It’ll obviously depend a lot on the business. What’s important, despite those fun little stories of companies becoming valued at billions without actually making profits, is accepting that you most likely won’t be one of those success stories. Bite your tongue, and come up with a plan to monetize from the beginning, even if you don’t implement it yet.
2. Perform Full Market Research
Trying to start your own business is as easy as solving people’s problems! Which is to say, it’s a very difficult job indeed.
Tools may have been invented to try to make idea-creation easier and more data-based. Use Google’s Keyword Research tool, or something like Ubersuggest, to see what people are searching for. After all, if 90,500 people are searching for “New Orleans Restaurants” every month, that means over a million searches a year! You’re practically losing money not starting your own restaurant.
But that’s not real market research. If you’re going to start a business, you need to acknowledge all of the data available today, but also compromise it with more traditional methods for researching potential markets. Go out into the field! Talk to restaurant owners. Discuss with potential customers what they’re looking for. Speaking to real people, rather than numbers that indicate real people, will help you find out the actual reasons behind people’s problems. As much as we love data (and we really do,) there’s still not statistic more amazing than the answers we get when we ask real people “why?”
3. Have Plans and Goals for 1 month, 1 year, and 5 years out.
“Pivot,” for those unfamiliar with the term in the business world (specifically with start-ups,) is the idea that if your original idea is failing, you should try to manipulate what you’ve already created into a new business model. The idea of pivoting is becoming more and more looked upon as acceptable, when in all honesty, it should be a last ditch effort, saved only for those who have given up. You can say that Pivoting is responding to the customer’s unforeseen needs – but performing steps one and two appropriately would’ve found the unforeseen needs. Pivoting is 99% of the time a result of improper planning.
It would do all entrepreneurs a benefit if they simply sat down, and spent a day, rather than planning on scaling – to create a good ol’ fashioned business plan. You should have a mission statement. You should have your unique selling proposition. You should have a market analysis (see step 2,) with an understanding of how you will fit into that market. You should have a sales goal, and concrete steps to reach those sales goals. You should have a plan for who your first employee will be, and your second, and your third. You should know when you’ll need a manager other than yourself to take charge of the ever-growing number of employees.
Yes, you will definitely change this plan. Yes, you might have to end up, to use the dreaded word, “pivoting.” But that should be an absolute last resort.
Save yourself the struggle. Actually, scratch that. Entrepreneurship, no matter how great of a plan you have, will always be a struggle. Rather, save yourself from the unnecessary struggle which will bring you from the black to the red. Spend an extra couple days planning and researching before you start, and you’ll save yourself from making a mistake that a traditionally created business would’ve seen coming.
We’ve helped traditionally successful businesses in the past form a digital strategy, and we’ve helped digital companies try to realign their modern strategy with an actually coherent and reasonable business plan. Adding on digital ideas is easy. Adding a legitimate backbone to a floundering business? Now that’s nearly impossible.