I’ve been in business for nearly 20 years in Australia, mainly in B2C products and services. I launched five businesses that have each proven to be ‘successful’ in terms of turning a profit or achieving an attractive exit.
All of the ventures have at times been fun, challenging and exciting — and the learning curve never ends.
But every entrepreneur knows that it’s not always easy, and I’ve learnt some lessons the hard way. Here are the five key areas of business an entrepreneur should never overlook.
Every single business idea is hugely impacted by whether there’s a strong sales acumen behind it. Many (most) will live or die on whether this is in place.
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Even businesses you may not think of as ‘salesy’ will still be greatly impacted by this.
I think of ‘sales’ as being compared to effecting a change in some way. This could be obvious sales-type actions, such as a consumer opening their wallet, or a chief executive officer agreeing to an appointment.
But what about a librarian putting in place an initiative that encourages people to return their books on time? That’s still sales in my opinion — it’s using a method to effect change in behaviour to achieve a better outcome for the business.
2. Commercial viability
It sounds obvious but it’s dangerous to think that just because you’ve got a great product, service or idea — and yes, it could be amazing, ground-breaking even — that it will make money.
You’ve got to do the numbers, work backwards and model how the dollars out will exceed the dollars in. The business needs to do its job and support your product.
The product, marketing, supplier and processes are all super important, but it’s usually for nothing if you can’t find a way to engineer a profit out of the business.
The exception might be if another company, with different assets, sees a way to commercialise your business and partners or even buys into the venture. An example might be a larger competitor buying you up for your large user-base rather than a multiple of profit earnings.
3. Being the best in an industry
Standing out in any industry may attract opportunities that could suddenly help you transform into a profitable concern. If you are willing to play the long game, you may be able to turn a low-profit venture into something incredible.
If you are able to position your company as truly unique, top of its industry, and it doesn’t cost you too much in terms of time, effort, and money, it could be worth it. These types of business will attract interest.
This is a gamble and will invariably cost more and take longer than you initially think to get it to that stage. The best situation for pursuing this sort of plan is if the industry is something you’re passionate about and it’s actually fun and enjoyable. If you can afford the time, energy and money to invest into a passion like this then go for it.
Even the best products or services will be very unlikely to prosper without a considered and sustained marketing approach. Today’s marketplace is more crowded than ever and you need a push to stand out.
Actually, that’s a huge understatement. In my experience you need to put all your energy (or at the least, the majority) into getting the word out to clients, suppliers or investors. Especially at the start.
The old rule of thumb for B2C businesses is that 10% of the overheads should be on marketing. However, I think that’s a huge underestimation for most business, especially service-based industries with an online focus.
My businesses have typically spent about 30% of expenses on marketing in some shape or form. If this is more than you need and applies a bit of pressure on operations to catch up, then that’s not a bad thing either.
5. Refining incrementally and relentlessly
Breakthroughs are great but very rare. When you’re developing your business, it pays to look again and again at all levels of the process for ways to increase the efficiency even by a fraction.
From the first dollar spent on advertising for new business to the three-year follow up of a happy customer, dozens, and then eventually hundreds, of tiny refinements compound and add up to a substantial difference.
Work the percentages. Squeeze out a 0.2% saving here and a 0.5% increase in profit there. It adds up quickly.
For online businesses, in particular, this can be done relatively easily by doing things like A/B testing landing pages or conversion rates using free tools such as Google Optimise.