Though a majority of people are interested in running their own businesses, many have no idea how to begin.
A recent survey of 1,600 adults by the University of Phoenix found that 63 percent of people under the age of 30 either owned their own business or desired to at some point.
For a lot of people, the advice of pro-entrepreneurial opinion leaders to just “jump in, make mistakes, and learn” doesn’t provide enough specifics on how to start. It also implies that business ownership is full of hidden perils.
To make this easier, instead of taking a blind, running jump into the unknown, take a gradual approach to starting your business—one that will present you with manageable challenges and impart valuable business experience.
That’s what these small and big businesses did.
From a Humble Tamale
Located a couple miles east of Dodger Stadium in Lincoln Heights, Mom’s Tamales is a thriving Mexican restaurant that has received rave reviews on radio and television (including one from “American Idol” host Ryan Seacrest). The place has become a real “foodies” destination.
In late 2000, Mom’s founder, Israel Briseño, had completed three years of community college. He was getting ready to find his first job when he realized that he wasn’t prepared: “I had not learned enough about anything to really say that I could do anything for a living,” he said.
Briseño actually wanted to be his own boss, but had no idea what to do. His parents had worked in the food industry and suggested he look in that direction. After a couple days of thinking it over, he decided on tamales.
In early 2001, he borrowed $200 from his mother and purchased the equipment and ingredients to make his first batch of tamales, which he sold from the trunk of his old Honda. His first couple of sales attempts weren’t too successful, but he kept going out, keeping his tamales and his face in front of people. That Christmas, he sold 500 tamales. (Tamales are a Mexican Christmas tradition.) By the following Christmas, the popularity of his tamales had grown to the point where he couldn’t keep up with the flood of orders and had to turn customers away.
Briseño opened the restaurant in 2005.
Takeaway: As far as start-up costs go, $200 is low. The bigger hurdle for some people may be the sales end—going out in public, talking to people, and peddling your wares.
Turning a Pastime into a Payday
Delia had done artistic things for much of her life, including oil and watercolor painting, various crafts, and particularly crocheting. If you know her, you’ve probably received a crocheted hat or scarf from her for the holidays. She finds it very relaxing and so she does it often.
She’d retired a few years ago and, after living on social security for a while, she realized it wasn’t going to be nearly enough. She wondered if she could supplement her income doing what she loved.
In the 1990s, she’d given crafts classes at local craft and hobby stores in Phoenix, Arizona. She’d also worked for years as a substitute teacher and cited those experiences when she made a proposal to the community programs director at one of the local colleges to teach a beginner’s crochet class. In September 2009, they added her class to the schedule.
The pay wasn’t much, but every dollar helped. In 2010, she wrote a short book of beginner’s crochet lessons, which she sold to her students. It took about eight hours to create and costs a few dollars a copy to duplicate, and she sells it for a 400% profit.
She got her book into the local libraries and used it to start getting bookings for classes at the local craft stores, where she’s found herself in demand again, providing another boost to the business of doing what she loves.
Takeaway: People can make extra money or a substantial living doing what they love. One way to expand that business is with a book. Like the “ultimate business card,” you can use your book to establish your authority and create more business.
No one woke up one morning and found themselves suddenly at the head of a thriving business.
Tiny Market Becomes Big Business
Nick Swinmurn graduated from UC Santa Barbara in 1995 with a degree in film studies. He had a few different jobs, including working for Autoweb, an early online car-buying service. That was 1997 and everyone was talking about the internet.
In 1998, he was in the mall searching in vain for a particular kind of Airwalk shoes when he got the idea for an online shoe store.
E-commerce was still in its infancy and he wasn’t sure it would work. So, he went to a local Bay Area shoe store and took pictures of various shoes. He told the owners that he was going to put them online and that if he made any sales, he would buy the shoes from them for full price.
He got some sales.
Swinmurn called his company Shoesite.com, but later changed it to Zappos.
By emphasizing the fact that shoes are a $40 billion-a-year business and that 5% of that came from catalog sales, Swinmurn was able attract interest in and funding for Zappos.
The company went through a long period during which they become wildly popular, but were barely profitable. Eventually, Zappos was purchased by Amazon.com.
Takeaway: It’s sometimes necessary to survey in order to verify if there really is a need or want for your product or service. In the case of Shoesite, it only required building a small website and the legwork of taking pictures and uploading them. Your business survey might even require less than that.
You don’t have to jump in all at once. Dip your toe in the water. Start cheaply and observe your results. Little steps, like the ones described above, involve risk but it’s manageable risk and it will provide you with valuable business experience with which to make your next move.
For companies that offer tangible products, the need for a production plan is not just important; it’s imperative. Even if you offer online products like software or training materials, following a clear and directive production plan will guide you from conception to completion. Essentially, a production plan is a medium-range planning strategy succeeding long-range planning.
The Small and Medium-sized Enterprise Toolkit defines a production plan as, “the authorization of your manufacturing department to produce the items at a rate consistent with your company’s overall corporate plan.”
The Purpose of a Plan
In order to maximize productivity, it’s essential that companies make use of an effective plan. Production plans are a crucial segment of your wider business plan and will enable you to outline a schedule of production while allowing you to keep checks on each step of a product’s journey.
Since the central purpose of a production plans is to determine the output of the manufacturing department at each stage of the production process, it would be best to involve your operations team in the creation of the plan.
Advantages of a Plan
The main advantage of an effective plan is to help your company realize its production objectives while reducing costs and increasing functionality in a range of areas, including:
- Minimizing labor expenses by enhancing the process flow and avoiding unproductive work time
- Minimizing inventory costs, reducing the need for safety stocks and unnecessary work-in-process inventories
- Optimizing the use of equipment and increasing capacity
- Improving the rate of product and service deliverables
Understand Important Factors
There are a few areas and activities that will have a direct impact on the production process and it’s important to be aware them. They include:
Understanding the current market conditions is essential to effective planning. You’ll need to make reliable estimations on projected sales figures and, although you may not have a definite set of figures to use, you can predict future sales by evaluating market trends and analysing historical sales data.
The inventory levels that feed the pipeline need to be distinguished. Ensure that you have a good inventory system and strategy in place in order to create an accurate plan.
Human Resources and Equipment
In business speak, “open time” is the period of time that is allowed between processes to ensure that orders run smoothly within your production line. A production plan can help you effectively manage your open time and avoid any potential delays.
According to the Business Development Bank of Canada, a point worth noting is that planning should help to maximize your operational capacity, but not go beyond it. Be sure not to plan for full capacity so that there is enough room available for unexpected changes.
Take Note of Each Step
The best way to determine each step in production is to map the processes in the order in which they occur and then note the average time it takes for the work to be completed. Once the process map is completed, you can analyse the time it takes to complete the whole process.
However, when there is duplicated work, it’s important to standardize the time and work involved. Make note of any comparable occurrences and use them as a baseline to distinguish future times and routings. You’ll notice a significant increase in the speed of your planning process.
Identify the Risk Factors
During the process mapping stage, you may come across “waste” or “excess items.” Evaluate these factors by looking at historical data that shows the time and materials involved, and various failures that were encountered.
If there are significant risks, you could conduct an FMEA (failure mode effect analysis) and then take the necessary action to minimize them.
Although this is more common in assembly businesses and manufacturing, you could take a similar approach to your business by using the FMEA template as a guide.
Internal and External Factors
There may be a number of internal reasons that could influence the level of demand for your company’s products: marketing, product design, customer service, price, and product quality.
Additionally, marketplace factors like industry competition, consumer perception, and consumer behavior could impact the accuracy of demand forecasts.
Managing Changes in Demand
Your company can address demand fluctuations through the following three basic production-planning strategies*:
Demand Chase Strategy
This strategy matches the demand (order) rate with the production rate through employee turnover as the order rate changes.
Level Production Strategy
This strategy helps maintain a steady workforce that works at a consistent production rate with the deficiencies and excesses absorbed by any of the below:
- Modifying inventory levels
- Permitting order backlogs (guaranteeing the customer that you will deliver the product at a later date)
- Adopting marketing activities
This strategy could include a combination of the following:
- Maintaining a steady workforce, but adopting variable hours: various shift patterns, flex-hours, or overtime
- Outsourcing work
- Modifying inventory levels
Monitor the Effectiveness of Your Production Plan
You can monitor the efficacy of your production plan through three key areas: systems and procedures, production planning, and production control. There are a few things within each area that you should consider in order to evaluate how effective your plan is.
Ask yourself the following questions within each one:
Systems and Procedures
- Is current documentation of the production plan, control systems, and procedures present? Have you communicated this to all persons involved?
- Does the planning and control plan contain a proper monitoring system that will maintain and update the master scheduling accounts?
- Is there a proper, sufficient system between sales forecasts, which can be detailed thoroughly so that they can be converted into specific production plans?
- Does control and production planning formulate a master production schedule with each time allocation and production assignment?
- Do the schedules allow for sufficient planning of inventory levels and purchases?
- Are there any indications of low employee productivity or wasted time? If so, are the numbers significant?
- Can the work in process or order status be determined efficiently?
- Are actual levels of production significantly different to planned schedules?
- Are order shipments in accordance with the schedule?
- Are important records (production control and reports) maintained in order to cover potential and present production loads?
Production plans are not cast in stone. It’s important to remember that workplace changes are a daily occurrence, so you must alter your plan in response to those changes.
When such changes occur, make it a point to communicate all details of the revised plan with all departments involved. After all, the production plan is everyone’s road map to producing a successful, final product.
*Source: Dilworth, James B. Production and Operations Management: Manufacturing and Services. Fifth Edition. McGraw-Hill, Inc. 1993
Lean start-up is a phrase that’s been around for a few years now in entrepreneurial and business circles, but is it just a new buzzword for an old concept or is it something new that your business can benefit from?
A Microcosmic Example
It was a cloudless 98-degree August day when 8-year-old Debbie Ann set up her lemonade stand on the corner.
With a supply of 5-ounce plastic tumblers and an old cooler full of melting ice cubes underneath a small folding table, she served cup after cup of instant lemonade for $0.25 each.
Roughly half of the people who pulled over for a drink said something to her about iced tea.
The following Sunday, the banner on the table read “Lemonade or Iced Tea 25¢.” That day, she sold twice as much tea as lemonade. More than half of her customers mentioned they’d gladly pay more for a bigger glass.
The Sunday after, Debbie Ann was on the corner again, this time with 20-ounce tumblers. The banner now read, “Big Iced Tea $1.00.” She could barely keep up with the traffic. Before the day was half-over, her mother had to go buy more ice and cups.
On the next street over, 12-year-old David was working on his “Be Cool Hat,” a baseball cap lined with blue ice packets that you put in the freezer overnight and wear on hot days to keep you cool.
He’d worked on the hat for several years, making the packets thinner and smaller, optimizing the comfort and cooling range. No one, except his family, knew about it. He managed to convince his rich uncle to fund a production run of the hats, which he had manufactured in China.
David also used some of the money to run ads in the local newspaper and got a couple of sales. He took the hats to the local flea market and sold one or two. There was very little interest. People said it was too heavy and uncomfortable. He discovered that the general audience for baseball caps was actually pretty small. He even refunded one of his sales when the customer complained that the hat gave him a headache.
David sank years of his life and a couple thousand dollars of someone else’s money into what he realized too late was a failed product.
David approached his start-up the way many entrepreneurs have: going forward with what they believe is a good idea and developing it in “stealth mode,” without feedback from potential customers or even ascertaining if their idea is attractive to any audience. They invest money in production and promotion, but the product, when finally launched, fails to gain traction.
On the other hand, Debbie Ann approached her business as a lean start-up would: taking her idea of “cold drink on a hot day” directly to the streets. In doing so, she found customers and listened to them. From their feedback, she was able to pivot slightly in her product offering. By continuing to listen to them, she was able to deliver exactly what they wanted and found success.
Lean Start-Up Methodology
Entrepreneur and author Eric Reis proposed the lean start-up philosophy in 2008. He had been involved in two start-ups that ultimately failed.
In both cases, he realized that the main reason was a failure to accurately understand their customers’ needs and wants. Both start-ups began “working forward from the technology instead of working backward from the business results you’re trying to achieve,” Reis said in the Xconomy.com blog.
Like any entrepreneurial endeavor, the lean start-up begins with a product idea. Rather than formulating a business plan to obtain funding so that you can begin building a team, developing and launching your product (as conventional start-ups have been doing since time immemorial), the lean start-up puts a “minimum valuable product” (MVP) into the hands of customers, known as “early adopters,” in order to obtain as much feedback as possible.
This feedback is called “validated learning” and its purpose is to find out as early and with as little effort and funding, if you’re producing a product or service that people actually want. That’s the “results you’re trying to achieve” that Reis referred to. It’s validated because it comes directly from customers rather than from anyone’s assumptions.
Lean start-up methodology is scientific in that it begins with a hypothesis about a product or service that a particular audience wants and then, by putting an MVP out there, proceeds to discover if that hypothesis is correct … or not.
By listening to early adopter feedback, the lean start-up can optimize its offering to be more of what’s needed and wanted. However, when the hypothesis proves to be weak, a lean start-up may still collect feedback and discover a new need or want. In such a scenario, the lean start-up may decide to “pivot” from their initial hypothesis to a new one, and provide an MVP that conforms to that newly-discovered need.
This entire cycle is summed up in the lean start-up concept, “Build-Measure-Learn,” which emphasizes the speed of developing a MVP, measuring customer response to the MVP, and learning from the “experiment” whether to proceed with the product or pivot to something else.
There are indications that the lean start-up methodology has been adapted for use by large, thriving businesses to pilot new initiatives and even by offices of the U.S. Government, such as Data.gov and the Department of Health and Human Services, as Reis describes in his blog, Startup Lessons Learned.
Not Everyone Agrees
Despite the seemingly sensible approach of a lean start-up, it has its critics, some of whom insist that not all early adopters have an interest in helping improve a product, but just wanted a finished product to begin with. (This is particularly true of software products.)
Yet, even Reis does not insist that lean start-up methodology should be swallowed whole, but should be the subject of validated learning by the user, in much the same way early adopters give feedback on an MVP.
The entire process and how to implement it is described in Reis’ book, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.
Besides a lot of money, just what is the difference between someone worth $50,000 and someone worth $10 million? With so many diverse millionaires in the world today, it’s easy to see that being rich is not primarily related to geographical location, ethnicity, education, or even family wealth.
T. Harv Eker, author of Secrets of the Millionaire Mind, says “you can have all the knowledge and skills in the world, but if your ‘blueprint’ isn’t set for success, you’re financially doomed.”
So what’s this special blueprint that sets wealthy people up for success? It’s written in the way they behave and in the habits they keep.
In particular, wealthy people have a different outlook and strategy when it comes to managing their income and cash flow—and that makes them even richer. Changing your habits is the first step toward being financially wise, stable, and capable of growth.
Here’s how the super-rich do it:
1. Put off instant gratification for a bigger payoff later.
Remember the Marshmallow Test of the 1960s? If not, here’s a brief overview: Psychologist Dr. Walter Mischel designed a test for preschool-aged children where they were put in a room alone and given one marshmallow. The children were told that they could eat their marshmallow immediately, or wait for the examiner to re-enter the room and give them a second marshmallow.
To four-year-olds, it was the ultimate test of patience, foresight, and the ability to delay gratification. Of the children able to wait for another marshmallow, Mischel said they were “more able to sustain effort and deal with frustration” as adults. Furthermore, these children went on to be physically healthier and score higher on State Achievement Tests.
2. Be frugal, even if you don’t have to.
“Learn how to live within your means and how to delay gratification; these are the habits that you need to maintain on the way up, so you can keep your millions when you get there,” says Adrian Cartwood, author of How to Make 7 Million in 7 Years.
Reports show that the preferred car of millionaires is a Ford. That’s probably not what most people imagine as their vehicle when they daydream about being rich, but it’s true nevertheless. Cadillacs and Lincolns are rated second and third, respectively. The reason for this is pretty simple: as an investment, vehicles have a poor return. Many wealthy people would rather invest their money into their own business or into a specific financial plan than spend it on a vehicle that will eventually need to be replaced.
Carlos Slim, CEO of Mexico’s telecom giant Telmex, is a great example of frugality in wealth. Worth $49.3 billion, Slim lives in a fairly modest 6-bedroom house in Mexico City, three miles from his birthplace. His children shared bedrooms growing up, and though he does own a Mercedes, he drives it himself.
3. Seek self-employment or start your own business.
If there’s one thing you can’t control when you are an employee, it’s your income and that’s something you really need to have control of in order to make and have plenty of money. The majority of millionaires in the United States are manager-owners of businesses, in charge of creating their own incomes.
Take Sir Richard Branson, for example. With startup capital of just £300 pounds, he first started a student magazine, then a mail-order record company, then Virgin Records, and eventually an entire empire of tourism, telecommunications, finance, and media companies. Today he’s worth almost $5 billion.
4. Seek education when necessary.
“Many world-class performers have little formal education, and have amassed their wealth through the acquisition and subsequent sale of specific knowledge,” Steve Siebold, author of How Rich People Think.
Earning a college degree, a university degree, or even a high school diploma isn’t a necessary prerequisite to becoming incredibly wealthy. In fact, on the Forbes 400 list, college dropouts outnumber PhDs 63 to 21. Richard Branson, Simon Cowell, Shawn Carter, and many more top earners joined the working world before completing high school. Even Bill Gates dropped out of college.
Despite these numbers, education is a big deal; it just depends on what kind of education you’re getting. Entrepreneurs have to find training programs, mentorships, and on-the-job support that will help the business succeed and grow. They’ll need to learn technical skills, sales techniques, and how to complete any number of integral tasks to bring money in and keep it coming.
5. Invest your earnings wisely.
“Millionaires make wise investments. But not all wise investments are listed on the stock exchanges.”—Thomas J. Stanley, The Millionaire Mind
One of the most important investments a business owner can make is back into the business. It is crucial to a company’s growth and success. Millionaires surveyed by Legg Mason stated that they keep an average of 25 percent of their assets in cash. In order of popularity, the most common remaining investments made by the wealthy are equities, bonds, real estate, and non-traditional investments.
Embrace a New Attitude
Even if you haven’t reached a million dollars in income or savings, it’s good to emulate how the rich handle their money. Their wisdom and attitude toward money management can positively influence your financial decisions, and help you to achieve your own wealth and affluence.
Ask yourself a couple of questions: Can you put off the gratification of spending a paycheck for the larger, future payoff of putting together a successful business? Can you turn down a low offer and wait patiently for a higher one? Are you willing to reinvest your earnings into your own business? Can you learn what you need to run your business? Wealthy people can.
Jeff Bezos has just overtaken Warren Buffet as the world’s third-richest man. According to Bloomberg, the Amazon CEO is worth $65.05 billion, beating Buffet by a whopping $32 million and pushing him down to the fourth spot. Bezos’ net worth is now only beaten by Spanish business magnate Amancio Ortega at the second spot and Microsoft founder Bill Gates leading the billionaire index at $90 billion.
How did the founder of a small internet-based business that started in a home garage in Seattle, at a time when everyone was dubious about online businesses, get to be one of the richest men in the world? Bezos’ story is an inspiring one with great business principles and lessons that every entrepreneur should learn from. Below are a few lessons from Jeff Bezos that could help make your business a success.
Don’t Be Afraid to Try
This is probably one of the first and most important lessons you could learn from Bezos. He left his vice president role at a top investment firm, D.E. Shaw & Co., to start a new business in a market that still had a lot of uncertainties. This was a great risk; he was leaving all the financial security and power that came with his job to start a business that he knew very well could fail and leave him with nothing.
“If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table,” he said in an interview about the A9 research. Leaving the job was a risk, but there was a lot of opportunities in his business idea, and it outweighed the risk.
Bezos came up with what he calls a “regret minimization framework,” where he basically imagines himself at age 80 and the kind of regrets he would have. He says the one regret he knew he was not going to have was trying out his business idea, even if it would have failed. This made it an incredibly easy decision for him to make. He had to go forward with his business.
Bezos’ life was pretty secure by being at the top management spot in his previous company, but he had a vision he believed in. He had thought it over, and he believed it could work even when the situation at the time didn’t look optimal. He risked everything to make his vision a reality, and it worked extremely well for him.
“I knew that if I didn’t try this, I would regret it. And that would be inescapable,” he said in one of his earlier interviews with Time Magazine.
Focus on Customers
According to Jeff Bezos, “The most important single thing is to focus obsessively on the customer. Our goal is to be earth’s most customer-centric company.” This mentality has stuck with the company throughout its existence, and making customers the main priority was the reason for the company’s tremendous success.
Starting a web-based business was a smart move by Bezos, because it made studying and measuring consumer behavior easy. It helped track metrics that contribute to overall customer satisfaction. Amazon continuously evolves to create features that improve the user’s experience, and some of its earliest additions are changing the internet today.
For example, when Amazon added customer book reviews to their website and encouraged their customers to share their opinion, they received backlash from publishers. However, the customers took on the idea of reviews positively. Today reviews have become a vital part of any e-commerce business.
Start Small, Stay Hungry
Amazon started off selling one thing only: books. Starting with too many products or services at once can delay you from establishing a niche and making a name for yourself in the market. Keep a vision of growth, but start with only a few products you can grow from.
Books were Amazon’s proving ground, but Bezos already had his eyes on having an “everything store.” Because he focused on perfecting Amazon as an online bookstore, he learned what worked and what didn’t, and he improved their processes as the business grew. When more products were added, Amazon had already made a name for itself as an online store, and they set a precedent for providing the best service to customers.
The trick is to keep evolving. As Bezos said, “What is dangerous is not to evolve.” If you just stay in one place, you are limiting your company’s opportunities and potential. Find a way to expand into newer markets, whether it’s going international, adding new products or anything else that will help you grow.
Being the world’s third-richest man is by no means something to ignore, but Bezos’ character as a business person and his ability to inspire goes beyond just his pockets. He is a smart businessman who knows how to take a calculated risk. He believes that the risk is worth the reward, as evidenced by leaving a high paying job to start his own business in an uncertain market.
He supports proactivity within his company and even created an award that he calls, “Just Do It,” which recognizes employees who take initiative, regardless if they fail or succeed.
The savvy businessman is a true embodiment of sharp business acumen, ambition, innovation and thinking out of the box, which all have helped him create the online empire that Amazon is today.