Starting a winning business in 10 steps
You have an idea, you’re ready to go and then bam! Where do you start? Starting a business on the right footing is super critical to the long-term viability of your new venture. If you get it wrong, you could live to regret the rash decisions you made in the early days for decades to come. If you get it right, everything about running your business becomes so much easier. Based on research we have conducted and our own first hand experience, we have built a list of 10 simple steps to starting a successful business. We recommend you follow it carefully.
1. Research, research, research!
You have a shiny new idea and you’re ready to go; it’s the greatest thing since sliced bread and you can’t wait to start building it. So you jump in head first into creating a website and working on your product. Wrong! Before you spend any time on building out your product or service, you need to start with researching your idea. The process of researching your business is often overlooked due to the excitement of working on your idea, but without researching your business, you run the very real risk of working on something that absolutely nobody wants to buy.
Conducting research gives you an opportunity to see what else exists in the market (and in most cases something very similar already does), learn what your customers really need, and how you can ultimately deliver your product. Building up a solid foundation of knowledge allows you to create a clear strategy, talk confidentently to potential employees and investors and de-risk the business failing. The process of doing research is also a great litmus test for your interest in the business. If you’re not motivated enough to do detailed research on the business, you won’t be ready to actually start the business. If you can at least invest time in this process, you can be confident to go forward.
Ultimately, you want to ensure that what you are working has potential. Doing your research first allows you to come up with a clear plan at little to no cost. It’s like building a house. You don’t start by ordering the bricks, you start by getting an architecture design and getting a quote or estimate on your materials and costs. Then you decide if it’s the right house for you. By spending 10 hours on research now, you will save a 100 hours later on potentially the wrong idea.
2. Make sure you’re ready
Starting a business is not for the faint hearted. It takes drive, persistence, a huge amount of work and a little bit of luck to make work. Before you jump in, you need to ensure that you have fully considered what it means to your current lifestyle and to your family and friends. Things will change drastically once you start and you need to ensure that those around are aware of that to avoid any difficulties in your relationships.
For most business owners, especially in the early stages, the business can become all encompassing. You might find yourself working 70 hours a week. Due to this, you will need to drop things that you might currently enjoy. If you like to go to the gym every day, get dinner with friends every Thursday, Friday and Saturday night, and play football on the weekend, you are likely to have to drop some of these activities.
It’s also important you have a clear plan with family and friends. Talk to them, explain what is likely to happen, and get their support. If you have a partner, make sure they understand the potential ramifications, including loss of income if you plan on leaving your existing job to start something new. The more you communicate, the less likely the shock of change will be. Make sure you agree to a financial plan that works for you.
Finally, have a long hard think about how you feel about the business. Are you ready for the challenges? Is now the right time? Are you starting a business for the right reasons? Be rational and honest and speak to any mentors or advisors if you need more guidance. The best outcome for your business is that you are in the right headspace, with the right support network and with the right business idea. If those three things come together (and they often don’t) then you have a good chance of making it work.
3. Create a clear strategy and plan
Whilst starting a new business can be a rollercoaster ride with roundabouts and swings that you can’t predict, it’s important to create some plan amongst all the chaos. Creating a plan forces you to think about what’s most important and what activities you need to spend your limited resources on. A plan is also really important as a reference document with potential investors or employees. People want to know where the business is heading, and how exactly you plan to get it there before they commit as well.
The best way to come up with a strategy and plan is to think in quarterly increments and start with high-level activities for the long-term, and detailed activities for the current quarter. Thriday recommends using a model called OKR’s, or Objectives and Key Results. OKR’s are a great way to think about what are the key things you want to achieve and what tasks are required to do them. OKR’s force you to think about the specifics of what activities you will do, and in doing so, makes it easier for you to complete them.
If you have a team involved, it’s best to run a strategy and planning session in a group, ideally as part of a workshop. Everyone can get together and agree to the plan and in doing-so, you should get everyone's buy-in to achieving it. As an outcome of the session, document the plan and then review it on a bi-weekly basis so you can track progress and make sure everyone is working on the right things.
4. Test and learn
Imagine you knew exactly what your potential customers thought of your product or service. How good would that be? You would have a fairly good idea if your business was going to succeed or not. But how do you do that before you launch? Well, there is a way. It’s called ‘Test and Learn’. Test and Learn is the process of developing even a basic version of your product or service and getting it in front of customers for them to use. The theory being that no matter what you expect from customers (or what they tell you), until they start using your offering, you can’t really tell for sure. Getting customer feedback early will confirm if you’re heading in the right direction, or if there is anything you need to change about your business.
To start your Test and Learn phase, you need to figure out what you are trying to ultimately deliver and what you can feasibly create now. You want to create something that is as quick and cheap to begin with to start getting feedback - if your Test and Learn product is going to take more than 3 weeks to create then you’re probably doing it wrong. The first version you test is commonly known as a MVP, or Minimum Viable Product.
For online businesses, your MVP could be a basic prototype that you can start sharing with friends and potential customers online. For a new restaurant, it could be cooking up a few recipes and offering them for free to passersby. The key thing is not trying to perfect what you offer, but to test what you plan on offering in the easiest, quickest & cheapest way. Some people struggle with this aspect, but many business owners have invested hundreds of thousands of dollars building the ‘perfect’ product to only find it’s not what customers need. By the team they realise this, they have run out of money and motivation to hit the drawing board again.
Once you have your MVP in front of customers, capture their feedback in a structured way and take your learnings and iterate on your first version. It’s important you ask and probe and collect feedback in various ways, either verbally, or written in surveys. Some people might feel comfortable telling you what they like and dislike, but others won’t. So giving them multiple channels to confirm their thoughts is important. From here you should have an even better idea of what your customers want and your strategy and roadmap might change.
5. Confirm your financial model
Even if you have a great product or service, it doesn’t necessarily mean you will have a successful business. If your cost of goods is too high, and your profit margin is too low, no matter how popular your product is you simply won’t be able to sustain the business - you will run out of money. This is why it’s super important to have a detailed financial model prepared and to monitor it as your business evolves.
To get started with your financial model you first need to have your strategy and plan locked down. By understanding what your product is, what your customers need and how you intend on providing your service, you can then begin to map out what expenses you will incur, what employees you require and what your pricing will be.
In the initial stages, you can just list out all your assumptions and expense categories. For example, if you’re a hairdresser opening your own salon, you would list down your rent, property fit-out, equipment, cleaning materials, staff costs and utilities. You can then brainstorm within these categories what exact items you expect this be, so 6 chairs, 6 hair straighteners, 10 hair dryers, power, heating etc.
Once you have this, you can put some estimates against these items and then start to validate. This just requires research. Speak to other hairdressers to see how much they spend. Look at product catalogues to get an estimate of your equipment. Look at real estate sites, or speak to some agents, to get an estimate on leasing costs in your target areas. Plug in these numbers as you go. Try to be conservative with your estimates as there are always unexpected costs that arise.
Now that you have some of your costs down, I would then start thinking about your team. In this example, you might decide that you plan to hire three full-time hairdressers to begin with. Look at job sites to get a sense of salary ranges and add this to your budget as well. If you want to hire the very best talent, you might decide to offer a higher salary than normal. If you plan to advertise the role, or use a recruiter, remember to include these costs in your budget.
Great, now what about your income? This can get a little tricky and will require some assumptions. Often at this stage, you might not know exactly what you expect to charge. However, write down your thoughts and start to map it out. In the case of a hairdresser, you might charge $50 for a basic cut, $100 for a cut and blowdry, and $200 for a cut and colour. List these out and then do a forecast of how many you expect to do in a given week or month. If you’ve worked in the industry, you might already have a good idea of what this is.
Once you do this, we recommend determining what your ‘break even’ point is. This is how many sales you need to make to cover your costs. Knowing this is important as it helps you understand the bare minimum you need to sell in order to survive. Have your ‘break even’ mapped out, as well as your actual forecast. So you might estimate that you need 50 hairdressing appointments at an average of $125 to break even, but you expect 100 appointments based on expected demand and foot traffic for your location.
Pull all of this into a financial model (generally a spreadsheet) and break it out over a month-by-month forecast. Include any key assumptions, sources (if you have references for any of your forecasts) and include some summary notes. Anyone should be able to understand it if they pick it up. It’s great to have a financial model for your own purposes, but it’s also essential for any investors. The financial model should also be treated as a living document and it should be reviewed and updated periodically as new information comes to light, or actual numbers are confirmed.
6. Build a team
One of the key requirements of being a business owner is finding and keeping talent. It’s also often one of the hardest things for a business owner to do well. The employment market is tough, and with many big companies paying significant salaries it can be hard to find the right people to join your new business, but you need to work out a way to make it happen.
As part of your financial model, you would have prepared a list of roles and salaries, now it’s time to add some further detail to this. Come up with a detailed hiring plan, including target dates, job descriptions and target candidates. You should also invest time in thinking through what type of people you want to hire, what type of company culture do you want, and what leadership principles do you expect from your team.
Once you have this thought through, we recommend you start looking for applicants within your network first. Ask your family and friends to see if they know anyone who might be available. Having a personal connection can often be the thing that can get a good candidate over the line. You should also advertise the roles online. We recommend LinkedIn, Seek and the free Australian Government portal, jobsearch.gov.au.
From here, shortlist your candidates, conduct phone interviews and then a face-to-face interview. We recommend getting your candidates to do a take home task that is very similar to what they would be required to do if they joined the business. It’s a great test to see if motivationally they really want the job and are happy to do it, but also it gives you a sense of the quality of their work.
7. Register your business and open a bank account
Registering and opening a bank account can be a surprisingly tricky experience. There are different business structures to consider, and the big banks make it extremely difficult to understand exactly what you are getting for the fees you pay (we think that might be intentional).
To assist with this, Thriday has developed its business-in-a-box service. The concept is really simple. In one application flow, you can register your business with ASIC and obtain an ABN or ACN, open a Thriday bank account and also get business insurance. This means you can get trading in as little 5 minutes. Once you open a bank account with Thriday, you will also get to take advantage of Thriday’s automated banking and accounting functionality, so there is no reason to pay $50 a month for Xero; it’s all included and best of all it’s free on our starter package.
Once you open an account, Thriday will monitor your business spending, identifying opportunities to save money, and also give you valuable insights about how you compare to other small businesses in your industry and location. You can sign up for Thriday today.
8. Launch your business
It’s finally showtime! All the hard work you have done has come to this. You understand your customers, you know the market and you have a great product or service ready to release into the wild. You’re ready and it’s equal parts exciting and equal parts nerve-wracking. Your new ‘baby’; the idea you have been developing is now ready to be reviewed, scrutinised and even potentially rejected. But never fear, your hard work and preparation should hold you in good stead.
Put simply, getting your business launched successfully is crucial. First impressions count. If your first few customers through the door love the experience, you have a great chance of them telling 10 of their friends, and so on and so on. Once you have that initial momentum, your business can seem to go up and up. On the other hand, if your launch goes wrong, then it can be really hard to recover.
As they say, ‘if you fail to plan, you plan to fail’, so it’s important you have a solid launch plan. There should be a lot of preparation made to get everything right and this could mean really going above and beyond to make your customers happy.
For those launching a physical store, or dealing with customers in the real world, make sure you and the team have had suitable practice runs and training. For those starting a business online, test your site out thoroughly, and start slowly if you can. Limit the product, or number of customers you will support, so you have a chance to refine your processes. Over-promising in an attempt to market your product or service is often the underlying issue with customer satisfaction. Customers most often get frustrated when they feel they were being ‘sold’ to.
After launch, make sure you have a clear way you will be tracking performance. Sales and revenue are great metrics to track, but more importantly, you want to understand your customer satisfaction. That’s what’s going to get them back time and time again. Many businesses have failed even after making solid revenue in the honeymoon period after launch. This is because they have focused on sales instead of customer satisfaction. People might come once and spend, but if they were not happy, they won’t come again. Once you have collated the feedback, review it and work out what can be improved.
9. Market your product
Many business owners fall for the fatal flaw of believing the mantra ‘build it and they will come’. Unfortunately, this statement is very far from the truth. If customers don’t know you exist, or don’t feel positive about your brand or what you offer, then it’s obvious they won’t buy from you. It’s important that as part of launching your business, you think long and hard about how you are going to market your product or service.
To start with, in your research phase, you should start to form a view of what problem or opportunity your product or service really solves. By speaking to customers, and also studying any available industry or market reports, you can start to get a feel for what they like and dislike about their current situation and how you can help. During this stage, it’s important to start to build a profile up of what your typical customer acts like, sounds like and what their needs and wants are. This is typically called ‘customer personas’. Personas are essentially a high-level summary of your expected customer groups and are a great way to give focus to your marketing efforts.
Once you have personas, you can start to identify what marketing channels are commonly used by your potential customers. For example, if you are a tradie that specialises in home extensions, you might identify new parents as a potential persona. When parents have a new child, there might be a desire to extend their property and you want to position yourself as just the right person for the job. For your personas, you would identify things like:
- what websites do these parents use?
- What social media channels they engage with?
- What day-to-day activities do they have?
Based on this, it might make sense to pay for some ads on Facebook targeted at new parents, and to also display some flyers at the local babycare nursery.
Once you have a strategy, it’s a case of test and learn. You will never know for sure if your marketing strategy will work, but you can make an educated guess, and in the case of Google and Social Media advertising, they will even tell you how many potential customers you can reach and at what cost. Set some budget aside and test it out. If you can work out how much it costs to get one of your customers to call you up for a quote, and generally how much you make from an extension, you have a solid marketing plan and budget ready to go. If your initial attempts at marketing don’t pay off, don’t be put off, and continue trying new things. It can often take a few iterations to get it right. Even things like the headline you use, or the wording you put on your ad can have a huge impact. So mix them up and test them out as well.
10. Get support
Running a new business is extremely challenging. It can feel like everyday presents a new challenge to resolve, or a new task to complete. It can also be very lonely. Studies show that small business owners work significantly longer hours than the norm, take less leave, have less sleep, get paid less and are more stressed. Because of this, it’s very important you build up a strong support network around you. If you have a team around you, make sure you tell them how you are feeling, how things are going and what assistance you could do with. Some business owners think it’s important to always put on a strong front, but your employees don’t mind, if anything, sharing your difficulties can build up great team harmony.
We also recommend getting support and advice from people who sit outside of the business. Getting a fresh perspective is a great way to step out and look at your business from a different viewpoint. Quite often the best advice can come from advisors or mentors who know nothing about your business or industry.
In these discussions make sure to also talk about yourself, how you’re feeling and what is going on outside of your business. Business owners frequently get caught up in making their business their entire life. Business owners that define themselves based on the success of their business run the risk of feeling more stressed out if things aren’t running smoothly. Your business is important, but it’s not everything.
The Thriday team wishes you the best of luck starting your new business.