With women entrepreneurs in India gaining momentum, here are some helpful tips for our readers on what to do before starting a business.
By Unmana Datta
Since I started consulting for small businesses in August this year, I’ve talked to or worked with a couple of dozen start-up and small-business owners, and quite a few of them were women entrepreneurs. Based on their experiences – and my own – here are 8 steps a would-be entrepreneur should follow before you leave your job to start a new business.
There are many reasons why you might want to start a business: it’s a field you’re passionate about, you want more flexibility or freedom, or you want to make money. Be honest with yourself and figure out your primary objective, and how much you’re willing to compromise on the other factors.
For example, if you’re a blogger who’s hoping to make some money off your blog that you’re already spending time on, that might be a very different position from starting a blog because you want to make money.
Remember to figure in opportunity costs when you define financial objectives: how much are you earning or would earn in a job versus if you become an entrepreneur? If you don’t start the business, what could you do with the time?
As Guy Kawasaki wrote in his book for start-up founders, The Art Of The Start, estimating total market size is of little value. What you need to know is how much of the market you can capture. The way to estimate this is through a bottom-up model that is based on how much marketing and sales effort you can put in and how many customers you hope to achieve as a result of those efforts.
…estimating total market size is of little value. What you need to know is how much of the market you can capture.
Here’s an example of why top-down models are virtually useless. Say I want to sell a specific brand of tea online. I find out there are 70 lakh households in my city. Assuming at least one member in each household drinks tea, I might say that’s my potential market size. But this fails to take into account factors like a) how many people are interested in buying my specific tea brand at the price I’m charging, b) how many of these will actually buy tea online, c) can I efficiently deliver tea to all areas of the city or will the delivery costs be too high for certain areas, and so on.
As Paul Graham says, you only have a viable business idea if your product (or service) is something you or someone you know would want to buy. Not something that you think your friends would want or that someone might want. You need to be absolutely sure you’re filling a genuine want.
The second step is to learn about the person who is your ideal target customer. If you want to build an online marketplace for used books, what kind of person do you see buying or selling on your site? Their age, sex, income, interests – you should know this person.
And not only metaphorically. Find someone who fits your target profile and talk to them. Learn about them, ask them what kind of used books (continuing with the example) they’re interested in and how much they’d be willing to pay for them. Would they be okay with online ordering? Would they want fast delivery or cheaper prices? What kind of return policy or other assurance would they need? You might find that this person isn’t your target customer after all – in which case you need to either tweak your business model or find a new target customer.
Now that you’ve got your target customer and your business model fleshed out, do a dry run. If you want to build a website to sell the saris woven in your home village, try selling to your friends and acquaintances first and get their feedback. Try out your profit margins and the amount of effort you have to make on each sale and extrapolate that – does the business still look viable?
If you still have a few months – or even weeks – before you start your business, start building your network now. This should consist of potential customers of course, but also people who might be of help in other ways – similar businesses you might want to learn from, influencers in the space (a mommy blogger if you’re selling children’s toys, for example), etc.
How do you do this? Go to industry events or start-up meetups. Get on Twitter and follow people who are tweeting about your industry. Look through discussion groups on LinkedIn or Quora to see if there’s anything you might want to participate in. Read blogs and leave comments. If you do all this, not only are you learning more about your industry and your market, but you might make valuable contacts who could help you once your business is up and running.
Find a handful of people you can turn to for advice on a regular basis – successful entrepreneurs or people experienced in working with entrepreneurs who can mentor you on the various aspects of running your own business. Your advisors should also have contacts you can tap when you need to – and they should be willing to help you do so.
Make a plan of everything you need to do in the first six months, and how you’re going to do it. This includes not just things like creating the product, marketing, hiring and setting pricing but also administrative stuff like registering the company, trademarking the company or product name, getting a bank account and so on. Don’t forget looking for funding, if you will need it. Estimate time for all of these things and create a plan of how you’re going to spend your time (and seed fund) in the next six months.
Make a plan of everything you need to do in the first six months, and how you’re going to do it.
Of course, you’re not going to be able to follow the plan perfectly. Your priorities will change, your time estimates might be all wrong, you might decide to shelve something altogether. But creating the plan is essential, both because you have to make sure you understand the enormity of what you’re taking on and so that you don’t spend your first few days of being an entrepreneur just wondering where to start.
We’re entrepreneurs because we have a rosy view of the future, because we expect things to work out – otherwise there’d be no point in taking such a risk. But you also have to expect that some things won’t work out as you expect; that there’ll be unexpected hurdles and setbacks. Build yourself some buffer into your plans, and don’t get discouraged if things proceed slower than you expected. Give yourself enough time – realistically – to make a go of it.
And remember, success takes time and a lot of hard work. We’re in this for the long haul.
*Photo credit: Sanja Gjenero.