Many people find themselves in a position where they have decided that they want to be their own boss. Our team thinks that is amazing and wants to help you not make the mistakes we made when starting our first company. Below are 11 questions we wish we would have asked ourselves before starting our first venture and a deeper analysis of what these questions mean. We also added our tips on what we recommend you do. If you have more questions feel free to reach out to our team at www.findenmarketing.com. Starting at #1 of starting your own company:
Are you doing it solo or bringing on a team? And if so, how are you going to break up equity and revenue?
This should be the first question you ask yourself when considering starting your own company. Entrepreneurship is challenging and one of the loneliest professions out there. Your everyday life will be getting rejected, grinding long hours, and continuously caring more about your business than anyone else you talk to. Co-founders can help lift some of these burdens and make it where you now have teammates instead of playing the game alone.
We recommend bringing on a team of like-minded entrepreneurs that complement your weaknesses (which we will discuss later in the article). The last big perk of a team is that it divides up the company’s liabilities, leading to less stress and less startup capital needed from you directly. Like with every pro, there is usually a con; Bringing on more people to your venture will mean less ownership of your company, so make sure you bring the right people into your business. Most successful founders recommend creating two documents when starting a venture with multiple partners.
These are 1) articles of incorporation and 2) Partner agreement; these documents help cement the foundation of what is expected of each partner and goes deeper into what each partner will do/has access to. For more information on the articles of incorporation, I recommend this link: Articles of Incorporation. The last thing that we recommend you do is create a vesting period for shares in your company. A vesting period is essentially the amount of time someone has to stick with a company to receive their equity share. It might not sound important since your team is rocking and ready to go, but things happen and if one member leaves halfway through without a vesting period, they could be entitled to their entire stake in the company. For more information on any of this, we recommend getting in contact with your business lawyer.
Founders Tip: Evaluate your life and how much time you have available to put into the business. Many entrepreneurs work 60-80 hour weeks to keep their company afloat initially and add members to help break up those hours if you don’t think you can manage that.
2. Who is your target customer, and how are you going to attract them?
This may be the most critical question you will have to ask yourself. Too many entrepreneurs join the game, thinking, “if I provide the service, people will come to me,” and that is definitely not the case. Consumers don’t care if your product will change the way other people live and if you aren’t directly telling them that it will change their life they most likely won’t care.
Example: Bubble wrap was invented in 1957 and the founder thought that it would be fantastic for a wallpaper and marketed it as just that. It wasn’t until a year later (of unsuccessful business) that one of their customers approached them and talked about how they had been using it to protect their valuables during a move and that nothing was broken because of it. This got the founder thinking and he decided to pivot his target customer from home designers to home buyers bringing bubble wrap to the powerhouse it is today.
The top companies spend millions of dollars a year trying to find the perfect target markets for their products; some do it successfully like Slim Jim others not so successful like Sears. Finding your target market as a small business doesn’t have to cost you an arm and a leg if you know where to look. The internet can be a wonderful place where you can find anything you need.
For example, our client Crud Cloth is an outdoor shower alternative focused on helping adventurers get out without the fear of getting dirty and the aftermath that goes with it. When researching their target market, we did three things: researched their competitors and who they were targeting, researched who was currently using the product, and examined who could benefit from knowing this product existed. Our research found three distinct target markets for our product that allowed us to cater to our messaging to these specific groups.
Attracting new customers can be done in thousands of different ways. Effective marketing varies depending on who you want to target, but our team recommends authentic social media postings, effective targeted ads, and target market-related sponsorships for easy go-to’s. If you’d like to get a more in-depth analysis of this, please contact our team and give you a free market analysis.
Founders Tip: Word of mouth (WOM) is the most potent form of marketing and can be spread like wildfire when taken and used on different platforms such as Google, Facebook, and Twitter. WOM, coupled with kick-butt marketing through the customer journey, will explode your success. Word of mouth is also important in your company adapting, listening to what your customers are saying and (if it makes sense) adapt your company accordingly IE just like the founder of bubble wrap.
3. How much do you know about the market you are trying to enter?
Why should someone listen to you compared to the other five people that are approaching them? The introduction of Ecommerce has completely changed the way people shop in the US. It is no longer enough to offer a good product and call it a day because consumers have access to 300+ other products just like yours. The easiest way to enter a market is to learn everything there is to know about it and find where it is lacking.
For example, Carvana, an e-commerce car shopping website, realized that car buying was out of date, and most people didn’t enjoy the current way they were being sold. They took that information and created their company around solving the problems that their target market had including cutting salesmen, cutting haggling, and making car buying as easy as a few clicks. This made their company stand out and with the combination of word of mouth and efficient marketing people their company starting growing.
These sales exploded even further with the boom in online shopping due to the CoronaVirus. Founder of Carvana Ernest Garcia III had spent his life working in the used auto industry and knew everything there was to know about how to sell used cars. He also realized that the used car sales industry was out of date, and consumers didn’t enjoy their experience. This led him to think the pivotal thought every successful entrepreneur has believed is “how could I do this better,” thus, car vending machines and a completely haggle-free car sale were born.
The old saying of “knowledge is power” should be tattooed on any person interested in entrepreneurship and is by far one of the first things any successful person will tell you when asked, “how did you get where you are?”. Do a deep dive into the market you want to enter and if you aren’t an expert, FIND ONE.
Founders Tip: Create a list of your capabilities (what you can do) and base your business on that. Too many entrepreneurs try to bite off more than they can chew and state they can do 50+ different things for their clients leading to them getting overworked and not putting out a great product. Our team’s philosophy is to focus on one thing and do it the best we can, and once we have done that, we can grow to the next thing. This has given us the reputation we have and has brought us to the point where we are.
4. How much money do you have to put into the company?
The simple fact is that starting a company takes capital. Businesses have many small fees that most budding entrepreneurs don’t think about before getting started, including LLC fees, lawyer fees, branding expenses, website expenses, marketing endeavors, equipment, etc. These expenses add up quickly and have led many into debt right out of the gate. This usually leads to them having to move revenue away from growing the company and putting into saving themselves from bankruptcy.
The good news is that this can be avoided! Our team recommends starting your entrepreneurial journey by creating a list of every expense you think you will have in the first six months of operations, including equipment, office space, wages (if any), legal fees, etc. Once you have that magic number, save up until you get to that point and start your company. If the number is questionably high, you may also want to start looking for other forms of funding like Friends and Family, Business Loans, and Angel Investors. Though this funding is excellent most times, it comes at a price either by said investors taking part of your company or paying back your loan with interest, so we recommend staying pretty conservative with your budget in some areas.
For example, you may have to buy a $50 desk instead of the $2000 desk you have always dreamed of. When starting the three main places you should invest your capital is employment, product, and marketing. Your team is the most important asset you have other than yourself and should always be treated like a part of you and a part of your business. Happy employees usually turn into happy customers which leads to a growing business.
Quality of product is the second most important of the three and directly correlates with #1. Our team’s philosophy is to make the best product out there and people will notice and to this day I give it a large credit to why our company has been a success. Like preached above, word of mouth is the most important form of marketing and when you make a great product/service people want to talk about it. They tell their friends who tell their friends, and within a while you are now the talk of the town because you made something worth talking about.
Lastly the third item you should never skimp on is marketing. Top financial representatives say that a company should spend at least 10% of revenue attracting new customers in their early stage of operation. Marketing brings in new potential customers that otherwise would never see your product and if you couple that with the other two creates a brand loyal customer that cares about your product and wants to showcase it to the world.
Founders Tip: Create a list of every expense you could incur during your first six months in business. Compile that number and make sure you have that amount put away in case those expenses occur. For our team, that number was $5000, but it varies depending on locations and organization. We recommend using real numbers, so if a chair you like costs $234.95, then put $234.95. We then recommend adding 10% on top of your total number for unforeseen expenses.
5. What are your strengths and weaknesses? How will these weaknesses affect your business, and how can you fix them?
Every person has their strengths and weaknesses; unfortunately, entrepreneurship asks for perfection. Entrepreneurs must perform various tasks, including financial, organizational, marketing, branding, etc. If not done currently could mean fees, lost customers, and possibly the venture failing. Take a look at the capabilities list that we had you make in #3 and see where you strive and where you fall, ask yourself honest questions like “can I do marketing?” or “do I want to mess with the finances?” These questions should be telling if you need to bring on more people for your venture or if you can do it solo and hire out those positions.
In a perfect world, an entrepreneur can hold on to all of their equity and hire employees to fill their weaknesses, but this leads to high startup costs, and you will become a manager right out the gates rather than part of the team. When creating Finden Marketing, I realized that I was missing many of the strengths that I knew my business needed and because of that found a team that brought everything I wanted to the table. This has allowed us to grow our capabilities and offer more services to our customers rather than me working alone.
Founders Tip: Create a list of your strengths regarding entrepreneurship and another list of your weaknesses. This list should include all aspects of business, ranging from marketing, logistics, financial, management, operational, manufacturing, etc. Whatever happens from start to finish of a product, you will be in charge of at the beginning if you decide to go through this on your own.
6. Who are your competitors in your area?
Who is currently doing what you want to do with your target demographic? That should be one of the first questions that pop into your head before starting your company. If your target market is already satisfied or the market is oversaturated, your product won’t stand a chance (unless you provide a unique value proposition). For example, our agency is located in Duluth, Minnesota, right on Lake Superior’s shores, and because of this location has popped up as a tourist destination for many midwesterners. Because of these drive-in people, our economy flipped from industrial to more tourist-friendly attractions. With it, breweries have popped up left and right, leading to a whopping thirteen breweries supplying a population of around 80,000 people.
The market has become saturated (or overfilled) with the competition, leading to its almost impossible brewery in Duluth. This is the same with any business and can be seen repeatedly with any commodity like coffee, restaurants, or gym. You should do a simple google search and find “(your industry) near me” if you are a service, or “(type of product) near me” if you are a product. Step two of this is to go back to question #3 on this list and do your research on every one of these companies so you can know your market effectively and, most importantly, find the pain points of their customers.
Founders Tip: Create a list of every competitor in your area; write what they do, what they don’t do, and what you like about them. Use this list to create your offerings and services based on what people aren’t doing or what you think you can do better.
7. Is your product special or different from what is already out there?
After asking yourself about who else sells your product and learning everything there is to know about them, you should have a pretty good understanding of what your market offers and if and how you can enter the said market. A big thing to remember is that people don’t buy products. They buy experiences or experience makers. Mcdonalds isn’t a global empire because it sold mediocre burgers. They became Mcdonalds because they created an experience and one you could achieve in any of their stores. The question you should ask yourself is, “how can my product provide value to the customer that the other products aren’t?” Once you have the answer to that, then you are ready to start a robust business!
Founders Tip:
- Talk with your friends and family about your idea and get their thoughts.
- Figure out what they don’t like about the current offerings and see if you can do your business solving one or more of said problems.
- Repeat this process until you find something that you think can create an experience.
8. How much will you charge for your services or product, and how can you back up those prices?
This may seem like an obvious question since you are starting a business to make a profit (we hope), but it’s something that you need to think about early. It’s one thing saying, “I’m going to charge $50,000 for my services,” but if your market can’t afford that cost, you won’t be in business for too long. Prices for your business feed your business’s growth, so you shouldn’t have your prices barely covering your expenses. On the other hand, you don’t want to charge a ridiculous amount either because people will find someone who can do it for cheaper. We recommend doing research on your market and looking into what your competitors are chraging. After getting a ballpark of what they charge, follow this chart to see if you can cut or raise your price.
To find your margins follow this chart:
1) sales price – total direct costs = direct costs margin.
2) direct costs margins / sales price x 100% = direct costs margin %
3) (fixed costs / direct cost margin %) / selling price = break-even volume
4) direct costs / unit + fixed costs / volume = break-even price
5) direct costs / unit + (fixed costs + desired profit) / volume = profit price
Things to note: Fixed costs do not fluctuate with sales volume like rent, depreciation, administrative employees, and so on. Break-even pricing is related to the break-even point, but instead of having the volume as the variable, selling price is the variable as follows:
After finding the profit price, ask yourself: Can I sell my products and services at this price and still be competitive? If the answer is no, then you have two alternatives: lower your direct costs, fixed costs, or desired profit, or consider not selling this product and focus your attention instead on products that have a better profit margin or less competition.
Founders Tip: When figuring out what to charge, take what people say they will pay with a grain of salt. Having someone say they will pay an amount and forking over the money are two very different things. Our team recommends having a preorder list where people can sign up at the price they say. Another critical point to note is that if you are going to raise the cost compared to your competitors, you must have the value to back that claim (consumers will find out pretty quick if your higher-priced item doesn’t match up to a lower-priced competitor and will go to the competitor 9 times out of 10.
9. Do you have a unique brand that will make you stand out?
A picture might say a thousand words, but a logo can tell a million. Our Chief Creative Office Benji Wedel goes more in-depth into this statement in an interview stating “Logo’s become the public image of a company and in a world where there are millions of companies across the world a differentiating logo can get people to talk about you and in the end use your product because in their time of need they think about you. This is especially important in services where there are a lot of competitors (auto, mechanics, yard maintenance, etc). Logo’s should tell a story about who the company is and what their values are.” To find more about what makes a logo valuable check out this link: BBC Link
Founders Tip: The logo is one of the most important aspects of a company. It becomes the company’s face and is the image people think of when the company is brought up. A bad logo brings people to think badly about a company. Before starting a business spend a few days showcasing different logo and name options to your friends and families and get their thoughts on all of them. Compile that information and make a decision based upon your findings.
REMEMBER: as your company changes and adapts so can your brand. Every major company has gone through transformations, some good (like Amazon), some not so good (like Microsoft Edge). This is normal for any growing business and very few companies haven’t updated their logo throughout time to keep up with growing trends and keeping present. If you have questions about your branding feel free to set up a free consultation with our branding team and we can give you our thoughts.
10. Do you have any clients or customers already interested in your services?
Starting a company (as you may know) is not an easy feat. From day one, you are fighting against the naysayers and the people that don’t believe in you, so having someone in your corner from the start can be quite the refreshing sentiment. This question shouldn’t be a make or break for your dreams of starting a company but should be considered before leaping faith.
Our team began after one client said he needed help with marketing, and because of his confidence in us and his word of mouth, we have grown quarter after quarter doubling in size every year. Getting those early adapters is pivotal to your success and creates early brand loyalty, hopefully letting others try your service or product. The best part about having a customer already on board is making revenue from day one rather than waiting until a customer finally signs up for business. Below is our recommendation on how to get yourself your first client even before starting your business.
Founders Tip: reach out to your social circle regarding your new company and see if they or anyone they know could use the service or product. Friends helping friends are some of the easiest ways to gain trust with potential clients, leading to converting clients.
11. Do you have your marketing and website covered?
Like we said earlier in the article, every entrepreneur should know their strengths and weaknesses. If marketing, branding, or website development isn’t your strong suit, set up a free marketing assessment with our team to get a marketing plan and get options. Marketing is one of the most important things a startup can invest in and can make or break a venture for them. Leading experts state that growing companies should invest at least 10% of their revenue into marketing, allowing them to enter new markets.
Founders Tip: Check out Finden Marketing to learn more about their services and how they can help get your business flying without having to pay an arm and a leg.
Andrew Weisz — Chief Executive Officer
Finden Marketing Group
