This post originally appeared on the American Express OPEN Forum, a valuable resource base for articles and information applicable to both new and established businesses.
This article can serve as a road map to help you get on the right track to starting your business and removing some of the stresses of entrepreneurship. Give it a read and let us know what you think.
An entrepreneur’s life can be a real roller coaster. Having started a few businesses in my career, I thought it would be useful to highlight some of the hard-won experience I’ve learned throughout the process—the kind of advice I wish I’d known when I started my first, or even second, business.
1. Don’t underestimate a business plan
If you’re not seeking outside funding at the start, it’s tempting to forgo writing out a formal business plan. However, taking the time to write out your business plan, forecasts and marketing strategy is a particularly effective way to hone your vision. All planning should center around two essential questions: How is my business serving a particular need or pain point, and does this represent a major market opportunity?
In addition, don’t overlook the exit strategy at the beginning. Do you want your children to take over the company? Do you want to sell it? It’s critical to think about these questions from the start, as the building blocks of your company (such as legal structure) should vary depending on your preferred final outcome.
2. Don’t get stuck in the past
My husband and I launched our first online legal document filing service in 1997, and then re-entered the market with our second company in 2009. While our previous experience certainly gave us a leg up the second time around, we soon realized the market landscape had changed dramatically since our first company. We had to stop dwelling on previous competitors, customer needs and service expectations and write a brand new playbook.
The marketplace and your business plan are living entities; they’re continually in flux. Whether it’s your first company or fifth in a given market, you’ve got to keep asking: What do we need to do today?
3. Don’t hire friends
I form bonds quickly and make fast friends with people around me. While I generally consider this a positive trait, it has created some difficult situations when running a business. At times I have been reluctant to let employees go even though I know it’s not a good fit. If things aren’t working out between an employee and startup, it’s time to put feelings aside and trust that the person will find a better situation elsewhere.
Unfortunately, I’ve also learned that people can let you down, ranging from laziness to fraud. I still believe that faith in people is a good thing. However, blind faith can bring trouble.
4. Don’t dive in without a plan
Just like the business plan, it’s critical to think through any initiative you wish to launch. When you’re in the midst of startup fever, it’s easy to get wrapped up with every new idea. However, be careful of losing focus. Moving forward is critical for any startup, and constantly switching directions can impede this forward progress. With each new idea, step back and think how it fits into your company’s overall goal and vision, then create a plan for how to make it happen.
5. Don’t fall into a discount trap
At the beginning, too many young companies feel the pressure to heavily discount their prices in order to win business. While customer acquisition is important, attracting customers at unsustainable price levels will just result in a race to the bottom. After all, raising your prices on goods and certain services can be a tricky proposition. I’ve learned that you’re better off in the long run focusing on how to bring more value to customers, rather than simply slashing your prices.
6. Don’t be afraid to fail
Soccer coach Sven-Goran Eriksson once said, “The greatest barrier to success is the fear of failure.” An entrepreneur’s path is uncharted and sometimes a little bumpy. It’s easy to get stressed or downright panicked, but you cannot let fear prevent you from following your dreams. Think of it this way: the sooner you fail, the closer you are to discovering what works.
While you can’t guarantee the outcome of any new venture, you can stack the odds in your favor. These are six lessons I’ve learned over time and countless others are out there. If you’re open, you can gain wisdom from everything you try and gather insight from fellow entrepreneurs.