Back in 2007 as I was struggling to figure out how to make dinner for myself, I had the most brilliant idea: There should be a meal delivery service that would send you all of the ingredients to make an exciting recipe for dinner. After quite a bit of Google research, I spent the next few months pulling together a carefully crafted business plan, polling friends for a winning name (“Table for Two” was the frontrunner), and dreaming about this big business I was just steps away from creating.
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That 50-page business plan is still filed away on a hard drive somewhere.
Now sure, there are some very practical aspects of a business plan that can help you think through key questions as you’re starting your business. But this doesn’t need to be in the form of a structured 50-page business plan that looks more like a term paper than anything you could actually use. Of course there are the basic questions that revolve around what you sell, who you sell it to, and how you put money in the bank but what really matters when you are starting a business?
To keep you from making your own “Table for Two” mistake, I caught up with 4 successful small business owners for tips on how they tackled answering some key questions when just starting out.
1. How much money do you need and how will you spend it?
There’s no one right way to create a budget for your business. What is important though is actually creating a budget—because costs can spiral out of control quickly. There are two main ways to get started with a budget: from a “top down” or “bottom up” approach.
If you start with a “top down” approach, start with a set amount you have saved and are willing to spend on a business and allocate it to different things you will need (such as a website, photography, initial products, etc.). Let’s say you have $5,000 to get started, so break down that $5,000 into what you could reasonably spend on each of the things you need.
With the “bottom up” approach, you work the opposite way. For example: Jillian Bremer of Sweet & Spark wasn’t really sure how much money she would need to launch her jewelry business, so she opted for this approach. So she focused on what she was good at (her actual product), what she knew her customer valued (free shipping), and things she couldn’t do herself (creative and website development). For the items she couldn’t do herself, she started interviewing different freelancers to get a cost estimates, and built her budget from there. That gave her a realistic expectation about how much money she would need in order to get her business off the ground. Make sense?
2. How are you going to make money?
Money may not be your sole purpose for starting a business, but it’s what ends up causing the most stress for small business owners. Knowing how you are going to make money (so you can do little things like pay yourself) should be a top priority to figure out initially. To do this, it’s best to start with a few basics: the price, your costs, and how much you can reasonably sell.
When starting Sweet & Spark, Jillian came up with her average product cost and average product price. From there, she was able to plug in how many items she’d need to sell in order to start making money. Once she had a clear picture of pricing and costs, she was able to easily see it was going to be really important for her to sell not just through her website, but through wholesale and marketplaces. That way she’d be able to support herself and her growing business.
3. Will people actually pay for what you’re offering?
It pays to understand your customers and target market. One key element of understanding your customers is knowing what that they will actually pay for your product or service.
K-Kane jewelry designer Katherine Kane designed her initial piece of jewelry when she was searching for a monogrammed pendant but couldn’t find anything reflective of her personal style. She sketched out her ideal monogram, traced it onto copper sheet metal, cut it out, and began wearing the necklace. As she wore it, people started to take notice. Her friends would ask to buy their own necklaces and when she would walk into boutiques, owners would ask where it was from.
Seeing this as a sign that people would actually pay for a product she could create, she decided to turn her idea into a business, which now three years later, can count celebrities like Taylor Swift as customers.
4. How will you start finding customers?
“If you build it, they will come” only worked for Kevin Costner in Field of Dreams. When you’re just starting a business, the truth of the matter is just because you built it, doesn’t mean they will come. Figuring out how to find customers can quickly burn through your starting budget, so go in with a clear plan as to how you’ll find these first customers cost effectively.
When launching furniture company Copper & Walnut, Lauren Overholster initially met with a PR and marketing agency who wanted to help make a big splash by hosting a media event. Realizing quickly that the idea was too expensive for her initial budget, she had to find her own budget friendly way to reach customers. She created her own launch plan to get as many friends and family to a casual cocktail party where she would have her prototype furniture on display. Once she had people testing out the actual pieces, it was easy for her to grab her initial few customers—and that got the business rolling.
5. What’s the vision for who you are and what you do?
Once you know what you will be selling, make sure you stay true to your vision of who you are and what you do. This isn’t to say you shouldn’t be flexible, but don’t lose sight of the big things.
When starting Copper & Walnut, Lauren almost made that mistake while she was designing her first pieces of furniture. When her first chair prototype arrived she absolutely hated how it felt. “I had built this mission statement around comfort and quality and I was so busy sticking to the margins of my business plan that I was short-changing my own product.” Instead of making due with a sub par product or throwing her budget out the door in favor of creating a more expensive product, Lauren re-allocated her budget so she could re-work the chair to reflect the company she had intended to create. That was the right decision because now when people sit in her chairs, they can literally feel the quality, which is what her brand is built on.
6. Can you start small?
When it feels like everyone around you is experiencing overnight success, it can feel like you need to adopt a “go big or go home” mentality around starting your business. What is generally missing from those overnight success stories is the years of hard work that went into taking a business from idea to reality.
Julie Montagu is a prime example of starting small, working hard, and eventually growing to something big. She’s a yoga instructor and certified health counselor (you may have seen on Bravo’s Ladies of London) and has a booming business—she sells out her 80 person yoga classes multiple times per week!
But her business is far from an overnight success. Just like so many other business owners, she started small in order to perfect her craft and drum up a demand for her amazing yoga classes (I’ve been – her classes are absolutely amazing).
To start, she hit the streets posting fliers around her neighborhood in London, while pushing her baby in a stroller. She would rent church halls for the space to teach classes while hoping people would show up so she could break even. Eventually her hustle and devotion paid off. Through word of mouth and a loyal client base, she was able to move to larger studios and become an in-demand instructor. Now she has a booming business that includes yoga DVD’s, online nutrition courses, and three book deals (and counting)!
Hopefully these tips will help on your journey to business success!