New businesses contribute significantly more to job creation. New jobs created by startups are also shown to be durable. Among the 3 million jobs created by startups in 2000, 78% of them still remained after 5 years. Even when they don’t succeed, the uplift in employment still remains steady. In the US, over 21 million have lost their jobs since March and the number is considered to be underreported and expected to rise. Now is the time for ambitious innovators to step and start new ventures to stimulate economic growth.
With easier access to loans and funding as well as a plethora of DIY technologies, starting a new business has never been easier. Many founders are self-taught businessmen, coders, and laborers. The business doesn’t even need to be a splashy tech firm. Freelancing and solopreneuring are also becoming increasingly popular. The US freelancers earned almost $1 trillion in 2019 and they are expected to represent a bigger pie of the overall workforce. They now make up 10 percent of the Australian workforce.
So if you are considering venturing out on your own, right now is the best time to do so. You will have a network of similarly ambitious aspiring entrepreneurs to give you the push and encouragement needed. Collected from guidance and lessons from many entrepreneurs who have tried, failed and succeeded, here are 5 core ingredients that help better set you up for success.
Being an entrepreneur means committing to a lifelong journey of learning. You have to know about how to set up every function and department needed to help you build, grow and scale. There are many resources for aspiring entrepreneurs that provide in-depth guidance on starting a new business – take advantage of them.
1. Detailed Profile of Target Customers
“Know your customers” is a common saying. We all conceptually understand that the better and more we know about our customers, the better we’d be able to tailor our offerings to their needs and thus expand the customer base. But exactly what entails knowing your customers?
People are inherently bad at articulating what they want or need. Thus, asking your customers what they’d like won’t help much and you need to know more than their demographics. Below are the four core levels of understanding required to really know who you are selling to.
- Demographics (age range, income level, geographies, education, etc.)
- Types of activities, places, and topics they enjoy (sporty, outdoors, discussing satirical politics, etc.)
- Motivation for buying the product type (‘I want to look good in front of my friends’)
- Factors they consider when comparing similar brands
Building a solid persona can make a huge difference. When you understand who they are and what emotions prompt them to take certain actions such as repeatedly purchasing your product, you will be able to accurately identify where you should place your marketing campaigns and what the most compelling messaging should be.
2. Smart Marketing
The cost per lead is much cheaper nowadays in the digital world. Moreover, it is data-driven and more targeted. Instead of placing an ad for tens of thousands of dollars to reach a broad range of people, some your target customers and some not, today you can target specific types of people based on their behaviors and preferences. You can invest where it matters.
Smart marketing is not just about narrowing down the scope of your audience and minimizing wasteful ad spend. It also includes messaging, campaigns, and sponsorships which all contribute to customer acquisition. You can test different versions of the ads and see which one gains the most traction using analytics and you can then implement the winner across all platforms to maximize the ROI on your marketing spend.
3. People Plan
Having the right people in your team early on is critical. The early-stage employees will help you build and scale at a rapid speed. Startup employees often have to wear multiple hats and cannot be bound by their roles. It’s always going to be all hands on deck. So choosing people who are willing to be nimble and scrappy is a priority for all business owners.
Many entrepreneurs realize later, to their surprise, that the people management aspect of the business presents a huge challenge. It’s never too late to think about what kind of culture you want to build and think through the types of people you want around long-term as your advisors. Investing in recruiting early is key to successful employee acquisition and retention, which will save the business hundreds of thousands of dollars down the line.
4. Financial Transparency
About 65% of entrepreneurs who’ve experienced failure blame financial mismanagement as the main reason for their misfortune. When you are strapped for cash, every dollar you spend needs to deliver larger value for you to make it beyond the 5-year mark. Set up a good bookkeeping system in the business and make sure that every business activity is documented in the system so you can have an accurate picture of how you’re spending your money and how much value each invested dollar is generating. While upskilling your knowledge on the matter will be helpful, it might be best if you find a licensed professional to advise.