About to start a new business? You’ve no doubt found the many resources—and heard all the unsolicited advice—available to entrepreneurs. If you’re looking for information that will help you with the nuts and bolts of starting a business, it’s out there.
But as you might have noticed, business books and websites too often focus on platitudes and things you already know. For example, one of the most common bits of advice I’ve read is, “Do something you are passionate about.” This makes me chuckle. Yes, of course you have to be passionate about and engaged by your business idea. But realistically, passion only gets you so far. The toughest part of starting a business is, in fact, starting—going from your passion to the reality of running a business that fulfills your passion.
I wouldn’t necessarily call myself a business expert, financial guru or marketing mogul. But I’ve gained a lot of experience over the past 12 years, having built three companies from the ground up, including Traffik Brand Communications, and another marketing firm that ranked on the 2004 PROFIT HOT 50 list of Canada’s Emerging Growth Companies. Along the winding road to success I have discovered some simple signposts that the business books rarely referenced. These signposts helped me take my first steps in the journey from passionate dream to business reality. Some of the signposts have been borrowed and some have been newly erected as I continue to learn and grow my businesses. Any one of these, however, can get you off the couch today and a little bit closer to running a successful business.
Pick the brains of smart people—including the competition
When I was starting my current marketing company after selling my last one, the first place I went to better understand the opportunity in the market was potential clients, and, most importantly, competitors. The discussions I had with people who’ve been in the industry for 15 to 20 years helped me understand the direction in which I should take the company, and where the true needs in the market are today and looking into the future. Why would my potential competition meet with me? I’ve found there is a respect that comes from a shared passion with people who are already working in your space. They also usually like to know who their new competitors are, as it’s always better to know the people in your industry, especially if you can be “friendly” competitors (it’s possible!). If you don’t have a reputation in the industry, the owners of your potential competition might not meet with you; if that’s the case, find people at different levels of the company.
Calling up the competition is not an easy thing to do. Moreover, it can’t be done in one phone call. It can be tough and uncomfortable—that’s what makes it a breakthrough practice. If you do set up a meeting, be open and show integrity. Remember, the reason you are going to speak with them is not to steal their ideas but to let their experience help shape your ideas. Do not ask intimate questions about how they run their business; ask them questions about the direction of the industry and client landscape versus cost and overhead structure. I am a huge believer in using outside engagement to help fertilize ideas and businesses. The best people to engage are the ones who have proven experience and success in the market in which you’ll compete.
Find a client who is willing to pay for your services before you build the business
This simple piece of advice is one of the most fundamental guideposts to move from passion to reality. Ironically, it is also the one I get challenged on the most.
As entrepreneurs, we believe in our ideas, and that our businesses are going to succeed. However, the true reality check is to find a client who actually needs what your business is going to deliver. Not just someone who says they think you have a good idea, but actually asks you the tough questions and believes in how you are going to help their business: a true client, willing to pay for your service or product. Then, have them tell you why they need your service or product and how much they would spend on a service or product like yours. I did this with my last two ventures. With my current company, I went so far as to find a client, meet with them about the services we were going to provide, identify their needs, build a program proposal, and have them sign off on a budget estimate—all this before I even had an office, an employee or any support from a financial institution! I repeated this in a bit of a different format for my other firm, a customer-acquisitions company called Direct Momentum, in which I worked with a potentially large client for two months determining the needs and business model that would support both our visions—all before I built the business.
I know this sounds challenging, but it’s worth it. It will make everything else in your business easier and more functional. Bank financing is much easier when you have a client validating your business (and even easier if you have a signed client estimate that proves money will come in, like I did). Most importantly, it will be easier to attract new clients. New clients will always go where current clients see value and success.
Save money in every way you can
Been saving your pennies for startup capital? Good. You need to give yourself enough runway to get the business off the ground with the resources it requires.
In order to do that, here’s what I recommend. Create a financial plan with your ideal model for the business, including startup, people, technology costs and business development costs. Then have a look at your non-crucial operating costs, and see if you can cut them in half. Seriously.
For example, you don’t have to pay full price for chairs, desks, cubicles, boardroom tables or other office supplies. You’ll find pre-owned furniture in every company I have ever built. I bought furniture out of the newspaper for Direct Momentum from a company that was closing; it was all great stuff and it saved tons of money. When I started Traffik, I bought used furniture from a company that repossesses it from closed offices. I walked through the warehouse and picked out each individual desktop, and then found matching legs. In the same vein, instead of renting an expensive office in a fancy tower, I rented the top two floors of a house. This saved the company thousands of dollars and significantly increased our cash flow to spend on items we needed to help grow the business. Taking the time to reduce our costs on furniture, office space and hardware decreased our startup costs from a projected capital expenditure of $30,000 to less than $8,000.
This may seem like a small thing, but if you truly commit to it and look for money-saving opportunities in all the non-essential areas of the business, then you will free up cash to put against the important parts of the business: people, technology/infrastructure and new business development.
The point is simple: every dollar you have to start your business is precious, so make each one deliver back to the company.
Find a great banker, not a great bank
There is a fundamental difference between having a banking partner and having a banker who is your cheerleader and partner.
I have a good friend who owns a fashion importing business with revenue of $1.5 million. He has high-profile retail clients who pay within 30 days, sometimes 15, and a brand that is supported in the media almost everyday. His banking partner however, will not provide him with a $10,000 line of credit no matter what concession he makes. I have told him over and over to find a great banker, not a great bank! He had picked the bank based on its reputation—it’s one of the biggest three in Canada.
Obviously, finding an amazing banker is not a slam-dunk process; you’re not going to be able to walk into any old bank and find someone who will truly support and understand your business. It takes time, commitment and effort on your part. Invest the time to get to know some of the people at the bank, try to find an account manager who really understands you, and then invest a ton of time helping them comprehend your business. I’ve heard my peers say that they’ve tried, but the banker was not interested. To that I say: if they won’t take the time to understand your business, move along and find a new banker.
The benefits of a great banker are outstanding. Recently, I had to deposit a large sum of money in the bank so my promotions company could run special events over a weekend. I called my banker at 2 pm and told her I was on my way. Bad traffic meant I didn’t arrive until 4:45—15 minutes past closing. Not only was she still there waiting just for me, but she had kept other people there that needed to sign off on the deposit and had made arrangements to clear the funds immediately. This is the commitment and partnership you can get only from a banker, not a bank.
Surround yourself with people who are smarter than you.
This is a tough piece of advice to follow for most entrepreneurs, because we want to do it all. It took me a while to fully commit and be comfortable with the idea, but it is fundamental to success.
- Find a rock-star financial person to make sure you manage the company the right way from Day One—and find the money to pay this person well. (This is where the used desks come in.) There are many contractors who can help you create a financial foundation that will let you focus on the part of the business you are great at. My VP of finance has built financial metrics to allow the accounts teams to focus on building our clients’ businesses; they have the knowledge to make decisions but are not bogged down by financial administration. Moreover, he has helped me free up time and brain space to focus on business development, and has given me the knowledge and confidence to make better strategic decisions.
- Find a mentor or advisor who can help you focus your passion and provide direction. Running a company is lonely when you don’t have a partner, and you need someone with whom you can discuss the business to ensure its success. My mentor and I have had a relationship for more than 10 years. He can talk to me candidly, which has helped motivate, guide and challenge my ideas and vision for the company. Also, his experience and reputation have helped me build relationships with important people in the industry.
- Search for employees who can enlighten and inspire you. Look for people who have the same passion you have, but different skills; who will challenge the business; who have differing backgrounds to add value and unique opinions to the business. One way I have found the people to challenge me is by hiring up-and-coming talent. Young people have huge amounts of energy, passion and fire in their bellies. By providing young people with opportunities that most others believe they are too young for, and by allowing their skill sets, not their age, to dictate their role, they become empowered and passionate.
What you’ve just read aren’t steps to the perfect business plan. They’re functional guideposts that I hope will give you the runway you require to build your business. They’ve certainly helped me.
Mark Ferrier is president and CEO of Traffik Brand Communications Inc., a Toronto-based marketing firm dedicated to developing brand strategies for its growing roster of clients. For more information, please visit http://www.traffikgroup.com or email mark@traffikgroup.com.
