10 Rules For Every Would-be Entrepreneur

1. Limit your downside

The reality is, most startups fail, and they do so pretty quickly. Find a way to try your new business idea without, quite literally, giving up your day job. If your new business idea fails, you're not out on the street after exhausting your savings, and keeping your existing income intact allows you to pursue your idea for longer, perhaps indefinitely. That extra time may well give you a long enough runway to get your idea off the ground. The "do or die" approach is terrible advice. Even Bill Gates took two attempts to get it right (Microsoft was his second startup) so don't go broke and divorced because you spent all your resources on your first try.

2. Choose your business partner very carefully

Business partnerships are harder to make work than marriages. Most marriages today end in divorce, and it's still hard to find a married couple that's really happy.

Choose a partner who has a proven track record of success. They may have started other companies and "failed", but those may have been a terrific learning experience, which they bring to the new venture. By "success" I mean, did they really make happen what they said they did? They might have been the only successful sales guy in a company that went under, or created a profitable company before a franchise operator overwhelmed them in their area. A "track record is success" is not a stuffed resume.  A good soldier is a good soldier, even if they were on the "losing side" in a war.

Here are some questions you need answer about your candidate partner:

  • Do they have previous specific, hard-to-acquire skills relating to their contribution in your venture?
  • Do they show up on time for meetings? 
  • Do they follow up on their small promises? 
  • Do you know what their credit score is, or do they have any credit issues? (Paying bills and following through on promises are excellent indicators of how they will meet their responsibilities to you and your new venture).
  • Can they go the distance, meaning can they work hard for as long as it takes, or do they get disheartened or distracted easily?
  • Do they have a drug or alcohol problem? It doesn't matter that they're the brightest spark in town. If they're popping Oxycodone every day, they will let you down. I guarantee it. There's a prescription drug epidemic in this country, and it permeates every stratum of business life. Agree to get both of you drug tested independently, unless you know for absolutely sure there isn't a problem.
  • How do they treat wait staff in a restaurant? This is my favorite indicator of how they will treat a person (you included) in business, when that person is in a vulnerable position.
  • How do they cope in a crisis? Do they get angry and difficult to be with when faced with a situation that cannot be helped, like getting stuck in traffic? This is an indicator of how gracefully they handle situations outside of their control, something which happens a lot in business.

Co-founding a startup with a business partner may increase your chances of success because of their experience and track record, but it always increases your risk of failure, because you take all their issues on board in addition to your own. The risks are very real, but the benefits are theoretical. Make sure the theoretical benefits far outweigh the risks you are taking on.

Business partners' personal interests, too, are rarely perfectly aligned. For example, your would-be partner may be in a far better financial position to take risks that you are, putting strain on the collaborative decision-making process. Business partner differences destroy many startups before they ever get off the ground.

Partner up only after a lot of careful consideration. It's a decision you will not be able to reverse easily once you've made it. It might be the single most pivotal decision you make in your business.

3. Fail early

Every enthusiastic entrepreneur — especially those of us who are considering our first startup — is convinced their idea is a sure bet, but a startup is, by definition, an experiment: You have a hypothesis that if you do this and this and that, you will have the basis of a profitable, sustainable business. The thing is, sometimes an idea is just not meant to happen. It might be too early or too late; anything can happen. And there is always time pressure, so try as many variations of your hypothesis as you can in the time you have. Success may emerge from an unexpected variation of your original idea. So, get through as many variations as you can, and move on from each "failed" iteration right away, because time is your enemy in a startup, whereas it might be your friend in an ongoing, profitable company.

There's a catch, though. Many a would-be entrepreneur gave up when they were just around the corner from success. You can know that happens when you see competitors breaking through right after you threw in the towel. In fact, sometimes it can help when competitors give up and leave more of the market on the table for you. You just have to be sure there will finally be a market worth pursuing. You need to determine the answer to that question as soon as you can. It might take four months; it might take four years. Know when to walk away, and not throw good money after bad.

4. Explain your value proposition in one sentence

You might be surprised at how many established business owners can't do this. That might be OK for a while in a profitable company with great momentum, but in a startup, you absolutely must be able to articulate your USP (Unique Selling Point) crisply and clearly. It might be "for the same price, cleans glass faster than the leading brand", but not "is a great glass cleaner". It might be "tax preparation services for Chinese speakers in LA" but not "excellent services for business owners". An effective USP for you will encapsulate a compelling reason for going with your solution versus someone else's. It will narrow the focus of your market: in-home cooking services for the elderly in Brooklyn.

Practice your so-called elevator pitch whenever you can. Go to networking events as often as you can. Register on meetup.com to see where people are meeting in your area, and be ready to practice explaining your value proposition to others. You'll get better and better at it, and you'll meet people who can help you develop your business.

5. Always pick up the phone when it rings

Customer service is one of the easiest and cheapest ways to add value to what you bring to your customers and prospects, particularly in a startup, where you need every morsel of feedback you can get. Get religious about responding to customers, and you'll give yourself a leg-up on the competition because most startups neglect this critical function. People like to do business with people they like and with people who respect them.

It's not just about keeping existing customers satisfied. Treat every phonecall as it might be from that one prospect that can put your company on the map with a single deal. Make time for customers and prospects. Don't wait a day to reply to an inquiring email. Some leads cool quickly, so you must act while they are still hot. You don't have to give yourself a nervous breakdown worrying about it. All youneed to do is form a good habit of responding promptly. It's easy, and it's great for business.

6. Deliver bad news early

If you've discovered a problem your customer should know about, don't wait for them to find out later and then tell you. You tell them first. In decades of supporting customers the world over, I have never regretted telling my customer when there is a problem, and they never dinged me for doing it. Ever.

Even big companies get this horribly wrong. Like when Intel first didn't tell customers about a calculation problem with one of their chips, then tried to down-play it. Customers revolted, triggering a much more costly fix by Intel, because it's up to the customers to decide how bad it is, not you. It's up to the vendor (you) to deliver the news.

By all means, come up with a solution asap. It's nice to deliver a solution along with the problem, of course, but the first order of business is to be truthful with your customers.

Customer will trust you a lot more if you are first up with bad news when it needs to be shared. Be straight with them, also, about when a solution is expected. Never leave your customers in the dark.

While you're in startup mode, impeccable customer service will also take some pressure off any weaknesses in your solution. Customers will be very supportive of you and your business if keep them fully abreast of what is going on.

7. Get online

Even if you're not totally sure of the exact business you'll be in, consider adding a "placeholder" website to your marketing mix. Begin with a free website from Wix.com, moonfruit.com or hosting company like hostgator.com, bluesite.com, or godaddy.com. Search traffic is a product of time (and many other things), so having even a basic web presence won't hurt. Create a Google+ business page, and post tidbits relating your business there as time progresses. You can return a year from now and take care of the finer points. For the moment, all you need is a stake in the ground. Nab your domain names under a single account in godaddy.com or other registrar. Be disciplined about managing and owning your domains through that single registrar account going forward.

8. Forget about secrecy

Unless you're working on a clandestine pharmaceutical cure for death, it's far more important to get the word out to potential new customers a year from now, than it is to protect some business secret. The reality is, competitors have a tough time copying anything, they don't know WHY you do what you do, and can only copy where they think you might have been. I've never heard of a small company getting knocked off, but I know of many who missed opportunities because they stayed under the radar too long.

Get the word out. Tell everyone. Share your idea wherever you go, and sign up with networking organizations you feel might have something to offer and people you could benefit from talking with.

If your idea is so transient that it can easily be stolen and copied, it is unlikely it ever had a good chance for the long term, which brings me to the next point...

9. Make all decisions with the long term in mind

Think ten years.

It takes about a decade to create anything substantial. The first three years of your business, you'll be fumbling around a lot, making lots of mistakes and trying out many small ideas, but always visualize what ten years out looks like. Your mantra is: How does this decision affect my ten year plan?

Long term perseverance with a sober eye for reality will get you to where you want to be. Perseverance is always required because anything of true value takes many years to create, and a sober eye for reality is needed because if your idea fundamentally has no merit, it doesn't matter how long you persevere for.

When I started building websites full-time about eight years ago, a half dozen people I know set out with the same intention at the same point, each of them with university level degrees in relevant disciplines. Each of them gave up at some point in the subsequent few years, leaving me now to be the only one of the seven of us with eight full years of website development, sales and service experience. Not only did my skills improve vastly in that time, but I don't have any local competition now from people with the kind of experience I have. It's not the technical geniuses who win in the end; it's those who persevere. Just make sure there's a market for what you're doing.

10. Forget about magic bullets

There is the odd exception of overnight success, but you can count them on the fingers of your left hand, and still have enough fingers left to make a pretend gun with your hand. A business with real value takes time. There's just no way round it. Any entrepreneur who keeps that in mind, and works diligently day by day, will get there. Pace yourself for a journey of many steps, with scenic spots, detours and potholes along the way. Supposed short-cuts are more often an indication of a lesser business opportunity than of an easy fortune. It's your commitment, discipline, patience and work that will get you there.

I could think of another ten, but this list will serve you well.

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