Posted by: Mark Sorenson | January 30, 2010

How to Start a Business (part 1)

A few months ago I wrote about the two pieces of advice a seasoned entrepreneur, named Greg Warnock, gave me about how to start a business. The first thing he told me was to get in a position where I could interact with customers. He said there is nothing that will give you better experience to be a entrepreneur than to talk to customers. I have thought about what that means and why it is important and wish to share some of those thoughts with you.

As an entrepreneur, your job is to identify and solve problems. And whose problems are you meant to identify and solve; why, your customers problems of course. That is why it would be great experience to closely interact with customers, regardless of whose customers they are, because it gives you a chance to really find out what problems they face that you could solve. Starting a business is all about adding value to the marketplace while capturing profits at the same time. You must have both of these elements for your business to survive. If you only focus on profits, you will soon lose your customers. If you only focus on adding value, you will soon be working for free.

As you rack your brain for a good business idea, it might be helpful to get some experience in sales. This will allow you to interact directly with customers in an industry and listen to what they have to say about what they want. As you do a needs audit, you may hear common complaints or suggestions which will help you identify a need in the marketplace. Then, you can evaluate to see if a business could truly be built around this need. This will not only help you identify who your customers are, but ensure you are trying to satisfy your customers needs, not your own.

Once you have figured out who your customers are, you must make sure your business will make money. This step is the one most entrepreneurs skip and consequently, the one that is most important. Before you spend any money starting a business, you must do research and due diligence to plan out your execution strategy. Include a thorough financial analysis to see exactly what your costs will be, what your break-even points will be, and when you will be profitable. Don’t start a business based on your assumptions or you will become part of the statistic of failed businesses.

If you can follow these two steps before you start your business, you will already be ahead of the game. Good Luck!

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