Many people think of building a business as an alternative to working 9-5. Others dream of growing and selling a large, successful business for millions of dollars, or creating a huge stream of passive income and retiring early.
Ok, let’s face the facts. Most businesses fail within the first few years. Even if you grow a successful business, it’s an extremely stressful process to scale it and keep it competitive in a changing market. Most entrepreneurs end up working 24×7, and many go without a salary for years. If you haven’t thought about what’s involved in running a multi-million-dollar business or being a CEO, check out The Hard Thing about Hard Things, where Horowitz shares some hard truths about business.
What if you can test out your business ideas on a small scale, do it while you still have a job (and hence short-term financial security), and not have to worry about managing a large team of people with fixed costs and salaries? That’s where a micro-business comes in.
A micro-business is basically a one that operates on a very small scale, typically with no more than 1-2 people. Today, technology has made it truly affordable to start, scale and manage a business without having a large team of employees.
In this article, we’re going to pull together the gems from a few great books, to help you think through (a) why you’re starting a business (and what type of business to start), (b) how to scope and launch it, and (c) how to innovate and refine your products without burning a hole in your pocket.
What type of business to start (and why)
Regardless of what type, size or nature of business you wish to build, most people want to eventually have the resources and freedom to do whatever they wish to do. Do you?
But, why slog for years to achieve success in your business and then retire, if you could structure it to give you the most freedom and start living the life you want asap? That’s the essence of Tim Ferriss’ famous book, The 4-Hour Workweek. Before you begin planning for your business, we recommend that you check out the book: consider the lifestyle you truly desire, and where your business fits in that picture. Start with the end in mind: figure out what’s your real goal for your business in terms of financials, desired impact, personal growth etc.
With that clarity, you now need to consider: what business should you build, to have the greatest chance of success? In The $100 Startup, Guillebeau identified 3 key foundations of successful micro-businesses, which he calls the Point of Convergence. The key is to direct your passion towards something that helps people, and leverage on related skills or strengths that you have.
Guillebeau also explains how to think about your customers and value-creation, how to spot money-making opportunities, and identify real needs and wants. You can check out our online summary preview for “The $100 Startup” here.
Launching your Business
Now that you have your big picture of why you are in business and the direction you’re headed, it’s time to get into the nuts and bolts of launching your business. We’ll briefly outline the key components of what’s involved; do check out our blog article, get our full summary, or visit www.100startup.com for more resources.
• Do up your One-page Business Plan (yes, there’s no need for a 100-page plan you’ll never use). Focus on taking action and “plan as you go”. Earlier, we touched on your end goal and desired niche, but now you’ll need to identify the specific marketable idea in great detail (read our article for an overview). The key is to start marketing and testing your product/service before you even manufacture it. Most business ideas aren’t as sound as you think, and you don’t want to spend a fortune before realizing it’s a flop!
• Your goal is to get to your first sale asap. From there, you can refine and regroup, to create a Killer Offer for your product/service, and test if it’s attractive enough for your target audience.
• When you know that your product/service and your offer/promotion actually works, then you’re reach for your launch. Manage your cashflows and aim to fund your business growth using your revenues asap, to avoid overspending.
Developing your product with minimal wastage
Developing a great product can take significant time and resources, especially if it’s a complex product. When Dropbox first started out, they tested their concept using a simple video, before they actually built the software. Yet, knowing there’s a demand for your product doesn’t mean it’s easy to build it, especially if your idea is something totally new in the market.
This is where the Lean Startup comes in. It offers a powerful process to develop and refine products/services with minimal wastage. Broadly, there are 3 phases in the innovation process: Vision, Steer, and Accelerate.
This is a very comprehensive innovation framework. When setting up your microbusiness, what you’d want to takeaway is this:
• Besides just having a grand vision, ask yourself: what are the critical assumptions that will make or break your vision, and address them upfront.
• As you find solutions to these issues, do it in bite-sized cycles. Break down the product or challenge into smaller bits of innovation that you can progressively improve using a Build-Measure-Learn feedback loop, accelerating the process as you go along.
That way, you avoid spending tons of time and money only to realize you need to redo it. Read up more in our online summary of “The Lean Startup”.
Growing and Exiting the Business
At the start of this process, we looked at your personal goals and where your business fits. Once you’ve successfully started a business, it’s generally easier to grow it. At this point, there are several paths you can take, depending on your personal and business goals:
• Improve profitability via small tweaks & grow at your own pace. You don’t need to grow a large organization to be “successful”. Consider the role that your business plays in your life–do you prefer a small “freedom business” (which you enjoy and can operate from anywhere in the world), or do you want to go all-in and build a full team. A business that brings in $500,000 annually (with you as the sole shareholder) can be as attractive as one that brings in $50mil (which you share with 5 other shareholders and comes with a large team and massive operations).
• Franchise/Clone yourself. If you do decide to scale, then The EMyth Revisited is an important resource. The main idea here is to treat your existing business as a franchise prototype, and systemize it to the point you can duplicate it without running everything yourself.
• Build to sell. The built-to-sell model is fundamentally different from the models mentioned in The 4-Hour workweek or The $100 Startup. If that’s what you have in mind, then you’d want to check out Beyond the Emyth (on how to build a saleable business) before you even get started.
Many books/articles promise shortcuts and sure-win formulas for building a profitable business. Our honest advice: do not expect to grow a huge business using only publicly-available materials. You can certainly get some great ideas to get started and shorten your learning curve. But, part of the job-description of being an entrepreneur is to stick it out and find the not-so-obvious answers. Starting with your Point of Convergence gives you the passion, skills and resources to survive the ride, so you have a higher chance of success.
So go on, take some concrete action to put these ideas to use. After all, starting a micro-business isn’t costly at all. Have some fun and challenge yourself to see how far you can go with $100, $500 or $1000.
Do check out our Business Startup Bundle, where we’ve included our pick of top 6 books that’d give you the right foundation to think of your new business!