Thinking About Starting Your Own Business? 11 Tips From Our First Year
Starting your own business is a big risk. After considering it for years, last Spring I finally let go of a steady paycheck, starting F'inn with three partners. F'inn is a consultancy that focuses 100% of its energy by helping companies innovate. We inspire leaders to discover and develop great ideas, give them purpose, and make them real.
As I shared my plans, everyone made it seem like success was inevitable. Friends, family, colleagues, clients were so encouraging. While I was optimistic about the road ahead, it felt like anything but a guarantee. Starting and running a business is an adrenaline pumping blend of fear and excitement.
As the first year of comes to a close, it's too early to say, "Our friends were right, we did it", but there are some positive signs. We helped bring five new products to market, designed and implemented a new global brand platform for a B-to-B services company, and helped a startup win its biggest sale ever.
If you have ever considered starting your own company, you might find some of these insights helpful. These are my biggest learnings as I thinking back on the first year of F’inn.
1. You have to take a chance
Most small businesses are self-funded - they don't have venture capital funding. For me, losing the steady paycheck and health insurance, made all sorts of questions run through my mind. Can I still provide for my family? How will we fund college accounts? If my car breaks down, can I afford to fix it?
Like many of life’s big decisions, there is never a "right time". If you want to start a business, you have to accept this risk. I imagine the fear keeps many people from ever taking the chance.
2. Sock away some money first
Long before you actually go for it, think about the lifestyle you'll need to live in your early startup days. Do you need a fancy car? Do you dine out all the time? Do you want to have all of the latest tech gadgets, or the nicest wardrobe?
A new business owner needs to build up a large enough bank account to cover business and personal costs in the early, lean days, while earning little or no pay. Instead of setting aside enough to bankroll your first year, these higher costs work against you by depleting your savings. Before starting F'inn, my wife and I went through every line item in our monthly expenses, and made big cuts to force ourselves to live with less. My partners love to make fun of me for drinking Pabst, but that PBR is a great reminder to keep the costs down until our business really takes off.
3. Treat people with respect
Here is another area where you can prepare years before you start a business. Throughout our careers, my partners and I always tried to be fair and honest with employees, clients, and vendors. When we started our business, the payback was immediate. Suppliers continuously go the extra mile for us. Friends and former employees are eager to bring business our way. Countless people have offered to come work for us.
We’ve all heard stories of business titans who walked all over people as they climbed their way to the top. I'm sure that works for some people, but being decent human beings works better for us.
4. Value good suppliers
This is an extension of the prior point, but is worth calling out separately. Businesses will often go out of the way to help their clients, only to turn around and beat suppliers into submission. When you find a good partner, appreciate them and treat them well.
Look for opportunities to bring them more business and ask them to do the same for you.
Give them genuine feedback - share the things that they are doing well.
When things don't go well, take a long term perspective and try to solve the problem together.
By surrounding ourselves with great partners, we've been able to establish a competitive advantage by offering higher quality work in less time.
5. Know your industry
There's a steep learning curve in virtually every aspect of running a business. It helps to begin in an area where you are already knowledgeable. In the case of F'inn, all four of us previously worked in innovation: research, branding, strategy or marketing. We understand who buys, how projects are priced, the competition, and how to establish a point of difference. Looking back, it would have been really tough to figure out an industry where we were rookies, while also trying to get our new business off the ground.
6. Know your numbers
Draft a variety of budgets. If you think you'll reach $1MM in sales, then run conservative budgets that are much lower. Do the same thing for your costs and margins. If you think you'll earn 30% gross margin, then run more conservative budgets at 20% and 25%. Drafting different budgets doesn't take a lot of time but can give you a great deal of perspective.
Regularly analyze your sales, tracking your performance vs. the budgets. Startup business finances are stressful. When you remove the guesswork, and look at financial performance on a regular basis, that stress level is reduced, and you make better decisions. For F'inn, we were able to estimate how much we could pay in salary, what and when we could spend on marketing efforts, when we could reimburse one another for business expenses, and when we could finally add health care insurance.
If you do not know how to run a budget, then either take a course in finance, or find a friend with accounting or business management experience to teach you. You have to figure this out before you start a company.
7. Test your (communication) ideas
You have to be able to confidently and clearly articulate who you are, what you do, and most importantly, why you are different or better than others.
Learn how to introduce yourself covering these points in 30 seconds or less.
Practice sharing your story with people you know (in your industry) and insist on honest feedback, even if it is negative.
Observe if they get excited when you share your idea. Ask them what caught their attention most. Find out what’s confusing, what they didn't like, or didn't believe.
Here's the most important part: listen to what they say and make refinements. Your goal is not to convince everyone you have a great idea. It is to learn if your offer is relevant, and if people understand it. If your business is hard to communicate, you're not ready. When I started sharing the F'inn story, I learned that I was trying to say too many things. It took weeks of sound-boarding with friends and clients to simplify the message to the points that mattered most.
8. Take care of your customer
This seems obvious enough, but as customers, we're accustom to getting burned, because many businesses do not take care of their customers. It takes a lot of effort to win a new customer. It doesn't do you much good if they go away. Even if your business doesn't require repeat purchases from the same customer, you'll want advocates who will recommend your business. So when you win a customer, care for them. Be selective and take on only the type of work where you can do an excellent job.
As F'inn wraps up its first year in business, nearly every client has come back for repeat work. We believe this is because we continually prioritize taking care of our client to ensure they have a great experience.
9. Find the best tools
It is possible to start a business with very low costs. There is an abundance of tools that make it easy to be a small business owner. We pay for affordable monthly software for our financial management (Quickbooks), payroll (Gusto), contractor management and benefits (Zenefits). Squarespace is a low cost tool that gives you a high quality web page. Cloud based storage through DropBox makes it easy for us to store and share files, ensuring that all of our documents are backed up securely. And Slack keeps our team truly connected.
It takes time and commitment to learn these tools, but they save thousands of dollars (compared to hiring people to run marketing, IT, HR, Finance, etc.).
10. Don't stress the little stuff
I'm trying to take my own advice as I write this, because our benefits payments for the month didn't go through as planned. As a result, I've had to spend hours tracking down online and phone support with our software provider, and talking to tax advisors to make sure I'm following the law.
There are hundreds of things to do when you run a business. You're not going to be expert in all of them, nor is it likely you'll be able to pay for an expert every time you have a problem. Learning or building a new system often feels like you're taking one step forward and two steps back. You want things to work the first time, but they don’t. Then, just when you think you've got it all figured out, you figure out that you figured it out wrong and have to do it again.
I find I have to step back and remind myself that, 'Everyone else who ever started a business has figured this out. We'll figure it out, too.' If you're the type of person who expects everything to work just right, then think twice before starting a company. Otherwise, go for it, but remember not to blow a fuse every time things don't go your way.
11. Have the hard conversations with your partners
It's normal for people who start businesses together to be excited about all that is possible; yet, there are countless stories of partnerships imploding over disagreements. Much of the time, fights are about the money. Think through areas where conflicts could arise in the business, and how you will handle them. Our lawyer provided a framework for considering the biggest issues, like firing or buying out a partner. We also spoke to other people who run businesses with similar dynamics (industry, numbers of owners, etc.) to learn about issues they'd encountered over the years. For any issue related to pay, we keep the numbers transparent, and document decisions. Finally, and most importantly, we intentionally created an environment where conflicts are acceptable, where team members can air disagreements, and we set rules as to how issues would be resolved.