Entrepreneurial Infancy

(27301)

Description:
1. Taking your business from an idea to a sustainable entity generating cash
2. $0-$1 million in sales revenues
3. 1-8 employees

Problem: You don’t know what you’re doing

Challenge: Making your first profitable sale

Opportunity: To reach a critical mass of customers

Skills:
1. Get going
2. Selling

Until your new business makes its first sale, it’s really nothing more than an unproven idea that you’re spending money on. You won’t know whether or not you can build a new business around until you get out in the marketplace and generate sales. Accordingly, the key priorities for any start-up should be:

1. Get your first product ready enough to sell (which generally means it won’t be perfect yet).
2. Sell it.
3. Once your product or service starts to sell, you can then start working to make it better.

Don’t worry about spending money on fancy logos, glossy brochures, leasing office space, hiring employees or even filing your business or tax forms just yet. All of that stuff can be put in place later on once you’ve established that you’ve got a viable product or service to offer. Selling is all that matters in Stage One, so get out into the marketplace and offer what you have. Worry about making your first sale, and then obsess over making additional sales until the small revenue stream turns into a bigger one. Once that happens, everything else can be sorted out.

You need to start to figure out your optimal selling strategy (OSS). In simple terms, your OSS is the best way your start-up business can acquire new customers. To determine your own OSS, find the answers to four questions:

1. Where are your customers?

When you first start out, you probably won’t have enough money to do much if any advertising at all, so you’ve got to figure out how to get lots of bang for your buck. You have to figure out where the people who are most likely to buy from you hang out. The best idea is generally to do what everybody else is already doing in your industry or niche. Look at how the established players currently generate new customers and clone that when you first get started. You’re far better off having a mediocre advertisement placed in the best location rather than an incredibly creative ad prospective customers never come across.

2. What product are you going to sell them first?

You probably already have a product in mind, but you don’t yet know whether or not it will sell in the marketplace. Therefore, put aside your preferences and focus on what prospective customers actually want. To do this:

Find out what products are already selling well in your marketplace or niche.

Look closely at whether or not the product you have in mind fits that trend.

If it does up, then get selling. If not, think a little more first.

If your first product idea does not match, see if you can come up with a “me-too version” of something that is already hot.

Integrate into your product features or benefits the originals are lacking

3. How much will you charge for it?

Generally speaking, you should start selling your product for about the same price your competitor is currently charging. They will more than likely have done some price testing and will be using the optimal selling price for your industry. You can test some higher pricing at a later stage, but it’s best to try that only after you have first sold at the going or industry standard price point. Once you’ve sold a few, you can then better evaluate how differences in pricing are likely to be received by the marketplace. If you’re selling at a pricing are likely to be received by the marketplace. If you’re selling at a price that considerably undercuts the established players, you’d better be prepared to explain why. Most people will assume you’re either cutting corners or providing an inferior product–both of which will be unsustainable over the long haul. Bear in mind also that you can always ramp up your sales by doing some back-end marketing of additional products once customers get used to buying from you.

4. How will you convince people to buy?

At any one time, there will be a great way and a not-so-smart way to attract new customers. Your job is to figure out which is which, and the only way to do that is to test different elements of the marketing mix and learn what works best. You’ll probably have some idea what features and benefits you’d like to emphasize and to do that.

Test your ideas. Create two or three variations of your marketing copy and test each. Finding the right copy can make a huge difference in your advertising response rate and ultimately your profitability. You should test two or three different pricing points and two completely different copy platforms when you first out so you can figure out which media and which customer offers work best for you. Developing effective marketing copy is an art, so it may make sense to hire an experienced copywriter and let them handle this for you at first. Great copywriters know:

The difference between wants and needs.

The difference between features and benefits.

How to build a unique selling proposition (USP)

How to sell that USP.

How to set up effective sales effort.

Unless you’re experienced in these areas, you’ll probably be better off getting someone with know-how to put together your marketing campaign.

During the start-up phase, selling is your number one priority. In will necessarily consume 80 percent of your time and attention. To get through the process of creating your first big promotional campaign:

Make a list of all the features of your new product.

Male a second list of every possible benefit those features will provide.

Identify a rising trend that is just starting to be seen and felt in your target market.

Ask: “Which of these product benefits could tie in with and piggyback on that trend?”

Develop a few unique selling propositions (USPs) based on the applicable benefits.

Talk to experienced industry people and potential customers. Find out which of your potential USPs has the strongest appeal.

For your best USP, create “Big Idea”–a main idea you can use to sell your product.

For each Big Idea you come up with, create at least one and ideally more headlines that express a “Big Promise”–something specific that will happen if people if people buy what you have to offer. For an example of how all this comes together:

Business: Sell a public speaking course.

USP: Only course based on Confucius’s teachings.

Big Idea: Speaking well increases earning power.

Big Promise: Turn a $35,000 income into $175,000.

Proof: Ten people who have done exactly that.

Work with a copywriter and make a list of claims for your product along with proof for each of those claims.

Create at least two versions of your advertisement using two different copy approaches, and test these ads to see which works best.

Take the version that works best and make that the basis for your start-up sales and marketing efforts.

As you roll out your advertising, start the process again so you can keep refreshing and updating your selling as you move onwards and upwards.

As mentioned, selling will take up 80 percent of your time in Stage One. The other 20 percent should be spent on these types of activities:

Find a mentor: someone who has been through the same experience and who can give you firsthand guidance and help. Ask questions, listen to the answers, make the best decisions you can and then take personal responsibility for them.

Form a team of your best (and perhaps only) executive employees: and pass along to everything you learn. In the early stages, everyone will need to be a generalist, but assure them that specific job functions will be assigned once the business ramps up. In the meantime, though, everyone will need to think and act like a marketer. Get them interested and engaged in making your business enterprise sustainable.

Set written revenue and profit targets: and get all your core employees up to speed with what the numbers mean. These are the people you’ll be depending on for help, so give them all the information you have available.

Don’t waste any time or money on corporate marketing at this stage: focus intensively on selling your product. This will involve direct marketing where you can see the results immediately and with a clear line of sight.

Forget about fancy offices, nice furnishings, state-of-the-art logos or any of that stuff-they can all come later if you manage to keep the doors open long enough. These factors are irrelevant. Instead, focus on creating happy customers.

Listen only to those people who you know for a fact done things you admire: and actively seek out their advice and help. Forget about start-up consultants or experts. They’ve probably never ever started own businesses.

Don’t for a minute think you know more than the market: because that kind of hubris always leads to a big fall. Never forget that customers are the final judges of what you offer has value. Test your ideas and see what works before committing resources.

Learn everything you can about sales and marketing: make this your spare time obsession. Read books about it, take courses and speak to industry experts. Give yourself a world-class grounding in sales and marketing. Not only will this be helpful at present, but it will also stand you in good stead should you start another new business in the future.

Keep tinkering until you’ve established your optimum selling strategy(OSS): the best combination of media, pricing and positioning. In all likelihood, your OSS
will be similar to that of your major competitors, but one element should be unique to you. You’ll probably do best in determining your OSS if you use direct marketing vehicles rather than customer surveys or focus groups. Base your marketing on what people do, not what they say they would do in a hypothetical situation. Figure out how to use the media of your choice to do direct marketing. There’s always a way with a little creative thinking.

Give all your marketing one main goal: to bring in whatever number of qualified customers you need to provide enough cash flow to fund ongoing business growth. Nothing else matters in Stage One.

Remember that the key to staying in business is to achieve a critical mass of customers. You need to know how much you can spend on marketing to acquire a new customer so you can then do well from the lifetime value of that customer. Obviously, the less you can charge for your lead product, the easier it is for people to become your customers. The balancing act comes in bringing in as many customers as possible before you run of cash.

Getting a business (or new product) started is like moving a stopped train. In takes lots of energy to break it free from its stationary physics, buy once it is put into motion it accelerates with relative ease. Keep this metaphor in mind when you begin your entrepreneurial venture. I have had the good fortune to be involved with hundreds, literally hundreds, of mew products and business start-ups. And every single one of them took effort–usually more effort than anticipated–to get rolling. But once in motion, things get easier. It’s critical to devote most of your time and effort in the beginning to selling the product. When you ignore that and spend too much time fooling around with fun things, the business doesn’t go anywhere.

–Michael Masterson