Secrets of Starting Your Own Business
From the entrepreneur who started 12 successful ventures before turning 21...
You do not need a business school degree or a small fortune in seed money to start a successful business.
Cameron Johnson started his first profitable business, a small printing company, at age nine with $50 and a home computer. He made his first million while in high school, still too young to qualify for a small-business loan—or even a checking account, according to the first bank he approached.
Johnson left college after one semester to focus on a gift-card trading business (CertificateSwap.com) that he had started. He refused $10 million in venture capital for the business, because he would have had to give up too much of his stake. He ended up developing 12 successful businesses by age 21.
So how did he do it? Bottom Line/Personal asked Johnson, now 22, to share his secrets…
START-UP STRATEGIES
• Risk as little as possible. Investing a lot in a new business paradoxically can hurt its chances of success. If your business stretches you thin financially, you might make decisions based on your need to make next month’s loan payment, not on smart long-term thinking. If your financial life is on the line, you might keep digging yourself in deeper if problems develop, because you have too much riding on your business to admit failure.
Key question: “What is the least I could spend to launch this company?” at every step in the process. Your new company does not need the latest, greatest business equipment or a fancy office. Steer clear of franchises, which often charge high up-front franchise fees. Choose a business that can be done on a small scale, so larger, better-financed competitors do not have an unbeatable advantage.
Example: I started a company in high school that paid Internet users when they browsed sites containing our clients’ advertisements. My three-person operation was in direct competition with a company that had thousands of employees and $100 million in venture capital—yet my company was more profitable and lasted longer. The business idea worked just as well on a small scale as a large one.
• Test the waters. If possible, test out a business idea before making a serious commitment.
Example: I was one of the largest Beanie Baby dealers on the Internet during the Beanie Baby collecting craze. I started by buying my sister’s collection for $100 and selling it on eBay for $1,000. Because this initial experiment proved profitable, I contacted the manufacturers of Beanie Babies and their competitors to become an official retailer. I used the profit from selling my sister’s collection, plus profits from another business, to purchase items from the manufacturers. I then sold these items via a Web site I created.
• Find partners, rather than employees. Most entrepreneurs hire employees when their businesses require skills that they do not have. Employees are expensive, and it is very hard for young companies to hire the best, because they typically cannot match the high wages, job security and benefits that are offered by larger organizations.
Top people sometimes are willing to work for low wages when they are offered a piece of the company, and most people work harder when they are working for their own success.
Example: I rarely can afford to pay big salaries to top Web designers for my Internet companies—but I can get top designers to work without a salary if I give them part of the company.
Important: Keep at least 51% of your business so that you remain in control…have the partnership agreement drawn up by an attorney…make sure partners see eye to eye with you on the direction of the project…do not partner with anyone who strikes you as untrustworthy…and add only partners who have skills that complement, rather than duplicate, your own.
• Adapt or die. A business owner must never fall so in love with his ideas that he/she fails to see that they are not working—or that the market is changing around him. Continue to question the validity of your original plans. Keep a list of other strategies, products and opportunities worth exploring. Remain open to the possibility that refocusing, selling the business or shutting down might become your best option. My willingness to walk away from no-longer-profitable ideas is one reason that all of my businesses have made money for me.
Example: The Internet advertising company I started in high school earned $15,000 a day in revenue at its peak, but a slump in Internet ad rates soon undercut my profitability. Rather than cling to a sinking ship, I pocketed my profits and closed down the company.
• Get publicity. Traditional advertising is no longer a reliable way to reach customers. Radio ads are becoming less effective as listeners turn to ad-free satellite radio or iPods. Newspaper ads are becoming less effective as more people get their news on-line. TV ads are skipped by viewers using TiVos. Even Internet advertising is of limited value, because Web surfers have learned to ignore these ads.
Instead, use your ad budget to hire a publicist. He/she can get you and your company mentioned in the articles and news programs that people pay attention to, rather than the advertisements they ignore. This is particularly effective if your business idea is new or topical.
Example: Around the holidays one year, a public relations firm I hired got my gift-card Web site mentioned on the Today show and in Time, USA Today, The New York Times and dozens of other major news outlets hungry for gift-related stories around Christmas.
SECRETS OF SELLING
Salesmanship is perhaps the most vital business skill, but it is unfamiliar ground for many new entrepreneurs. Some of the valuable sales lessons I have learned…
• Stay in touch. Top salespeople contact their customers after the sale to make sure everything is going well. They send holiday and birthday cards for years. Remaining in touch encourages customers to come back and buy from you again—that is much cheaper and easier than finding new customers.
Past customers also are a powerful source of market research—if the people who once purchased your product are now interested in buying something different, you need to know.
You may need to offer your customers an incentive to provide their E-mail addresses or other contact information. A small gift or a coupon good for a discount on their next purchase usually does the trick. (Assure them that this contact information will not be sold.) Then send out surveys to find out exactly what the customer wants. Offer a coupon or payment for completing a survey.
• Sell yourself. Customers want to buy from people they like and trust. You are most of the way to a sale if you can mean it when you smile and sincerely listen to what the customer has to say.
• Find out what’s keeping a customer from buying. Your challenge is to identify and overcome whatever stands in the way of a potential customer making a purchase. Ask questions to help uncover these obstacles, such as “What are you looking for?” If you receive a noncommittal “I’ll think about it,” ask “What, specifically, do you need to think about?” or “What’s your hesitation?”
Example: A customer tells a car salesman that he needs to think about whether this is the vehicle for him. The salesman asks what is it about the car that makes him think that it might not be the car for him. The customer says it does not have a six-disc CD changer. The salesman offers to put one in at no extra charge and gets his sale.
If you have an Internet-only business, you can add a service that opens a pop-up window on a customer’s screen and asks, “What can I help you find?” much like a salesperson would do in real life.
Bottom Line/Personal interviewed Cameron Johnson, founder of more than a dozen profitable companies, including EasyFollowUps.com, a Web-based service that helps small businesses stay in contact with their customers, Roanoke, Virginia.
He is author of You Call the Shots: Succeed Your Way—and Live the Life You Want—with the 19 Essential Secrets of Entrepreneurship (Free Press). www.millionairesecrets.com
(Article originally published September 15, 2007)
Reprinted with the permission of:
Boardroom Inc. and Bottom Line Publications, Inc.
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