Five Steps to Business Start-Up

Forty years of working 25 teaching on the side, and here is my best advice for business start-up - precipitated by this note in an email:

On Oct 10, 2012, at 3:46 PM, Robert  wrote:

...

Being privy to what goes on and being at meetings about dealing with retailers  has shown beyond the slightest doubt that volume is not the way to go when starting a business! It more or less confirms everything you say about competing on design, working with specialty retailers on high end products, and working on frequency when ordering. It's all so clear why you say that now.

Robert

1. Find your customers.  Customers are defined as “ready, willing and able.”  If you do not have the names of people who have indicated they are ready, willing and able to buy your product or service, then you do not have customers.  What you have, if not customers, is at best a hypothesis as to customers.  Any hypothesis needs to be tested.  Keep testing the hypotheses until you have customers.

If you spend any time or money working on a business before you have customers, then you are wasting your time and money, and are likely to join the vast majority who fail at business.  You may have a few years of activity, but ultimately your activity will yield a net loss.  Find your customers first.

2. Develop your product of service.  This is done in close coordination with the customers mentioned above.  It cannot be done without customers.  If you develop something without close and open discussions with your customers, you will join the nearly seven million USA patent holders who never made a product, let alone a profit, and the countless other who fail for lack of customer input.  N.B.:  Compete on design.  Never compete on price.  If you try to compete on price, your business will fail.

3. Find the best supplier in the world for your product of service.  There is excess production capacity for anything you might conceive of.  Never buy your own means of production.  What is valuable is customers, not factories.

4. Obtain enough orders from customers to cover the suppliers minimum production run, in a workable amount of time, profitably, or redesign your product in ever closer coordination with the customers, until you are able to obtain enough orders from customers to cover the suppliers minimum production run, in a workable amount of time, profitably.  Once you have enough orders from customers to cover the suppliers minimum production run, in a workable amount of time, profitably, then you import absolute minimum quantities, never pursuing volume importations:

a. manage finance better

i. smaller more frequent shipments are easier to finance.

ii.  Currency fluctuations are more easily addressed

b. manage risk better

i. a minimum order delayed is manageable

ii loss or damage is more easily managed.

5.  After begin receiving money from customers in payment for goods  you have sold to them, you can address the inconsequential issues of licensing, legal structure, location, business cards, etc.

Feel free to forward this by email to three of your friends.

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