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Many small business owners confuse creating a product with building a business – and many fail because they don’t understand this difference.
These two things may sound like the same thing, but they are very different. Successful business owners understand the difference between the two, so I want to share how they compare to one another.
Many businesses start with a great idea. Maybe it’s an idea for a new product, a different way of delivering a service, or taking an existing idea and applying it to a new type of customer. Some ideas for products are services are brand new, such as a new invention or completely new service. For example, the iPhone was a new cell phone and music player created by Apple, which was a product that hadn’t been successfully created in the past.
Other ideas are not new, but still fill an unmet need in the market. For example, the Samsung Galaxy was not a new invention since it came after the Apple iPhone, but it still filled an unmet need in the market. Samsung attempted to create a product that was better and cheaper than Apple’s iPhone. Both the iPhone and Galaxy are successful products made by successful companies, but the originations of those two products are very different.
The key point here is that no matter whether your product or service is a brand new one or an extension of an existing idea, a business idea won’t succeed unless you build a “real” company to develop, market, and sell it to a mass audience. It doesn’t mean that your product or service has to be as popular as the iPhone to be successful – although I’m sure most of you wouldn’t complain if it were – but it means that you have to do more than just create a good product to make your business thrive.
There are a number of reasons why this is true. First of all, one product or service typically isn’t enough to make a successful business. It typically takes a number of complementary products and services to fulfill customer needs. For example, even the iPhone isn’t effective as a standalone product. It succeeds not only because it is a great product, but also because customers can also download music, subscribe to photo sharing services, and buy additional storage space from Apple. The combination of these products is what makes Apple and the iPhone successful. And the iPhone is just one of many products and services that Apple provides to its customers.
Secondly, the economy and customer tastes change very quickly, which means that no one single product or service is likely to stay popular for long. This means that if you want your small business to succeed in the long-term, you need to constantly update your products and services to constantly meet the needs of your customers. If you rely too much on one product, it won’t be long before it becomes obsolete and you find your business in trouble.
A good example of this is the company GoPro, which makes wearable recording devices for athletes and other active individuals. The product was initially very successful and enabled the company to grow to nearly $1 billion in revenue. However, it relied too much on this one product and has since struggled to maintain its growth in the face of competition from smart phones and other cheaper recording devices. As a result, the company is now facing a decrease in market share and revenue. At the time of this recording, the company was actively trying to expand its product offerings to diversify and meet the changing customer tastes, but it is to be seen whether this strategy will work.
The third main reason why building a company is so much more important than creating a product is because it is difficult to get each customer. For every dollar and minute of time you spend acquiring a new customer, you want to maximize the revenue you realize from that customer. Having only one product limits your ability to sell more to your existing customers that you worked so hard to get.
Finally, building a company enables you to have a sort of well-oiled machine that continuously creates more demand for your products or services, allows the business to create enough product to meet demand, and grow in the long-term. A product by itself won’t last for long if you can’t build a company that constantly creates more and more demand for it and finds ways to deliver those products or services profitably.
So, the summary is that building a company is more sustainable for long-term growth. It allows you to be more nimble and more quickly adapt to changing customer needs. It also allows you to build a business that can last beyond the original owner, in the case that you may want to sell the company or pass it on to your children. A company that provides a single product or service can’t provide this level of growth potential and sustainability.
This is one of many things you can learn from a free trial of our small business training courses. Click here to register for a free trial to learn how a proven small business program can help you start and grow a successful business.
It’s no secret that most businesses fail. By most measures, somewhere upward of 80% of small businesses and startups fail in their first few years of operation. What is less clear is why and how those small businesses fail.
Most small business failures are long in the making rather than overnight catastrophes. Experienced entrepreneurs will recognize the causes of and reasons for failure and take proactive and reactive actions to remediate those risks. Less experienced small business owners, on the other hand, won’t realize what hit them, even after the failure occurs.
There are several key early warning signs that, when properly remediated, can proactively provide a small business owner guidance on how to avoid small business failure and instead achieve small business growth. Here are three of the most common ones: (more…)
We all hear the common refrain regarding small business and startup finances: cash is king. As existing and aspiring entrepreneurs, we hear this so often simply because money can be so scarce during the early stages of a startup, as well as phases of high growth later in the startup’s lifecycle.
Just to add some tangible data to this discussion, I thought I would take a look at some preliminary results from our ongoing survey of small business owners. In the study, we are polling several hundred small businesses and startups to learn more about their risks, costs, profits, success factors, and a number of other variables. (Take the brief survey here and earn a chance to win a $250 American Express gift card).
Of the several dozen responses we have received so far, we found that each and every one of them – in other words, 100% of the businesses in the study – cited “managing cashflow” as a big concern and challenge for them. We suspect that this challenge may be at least partially amplified by the fact that credit is tighter for small businesses now than it was before the financial crisis of 2008. To add insult to injury, the US Small Business Administration (SBA) is cutting back on their government-backed loans in recent years as well.
So we wanted to hear what readers of our blog think: what sources of cash have you used to support your business, if any? Take the poll below and view the summary of results from other entrepreneurs.
In the meantime, we’ll dive into each of these sources of financing in more detail in a blog next week. Stay tuned. We’ll also cover this topic in our free online Small Business Boot Camp training course, so register or learn more here if you haven’t already.
Entrepreneurs and small business owners are always looking for ways to increase their revenue. Whether your business is in the startup phase or if you’re an established business, this is probably something that you struggle with every day.
The good news is that you’re not alone. In our ongoing annual survey of small business owners, we found that a majority of entrepreneurs and small business owners struggle with how to identify sources of new revenue as part of their small business growth plans. In fact, in our preliminary analysis of the data we’ve received so far (we will be collecting data for the next several weeks, so you can take the survey here), concern about revenue growth is second only to concerns about cash flow.
With this in mind, we thought we would share some tips on how to quickly increase your revenue in the new year: (more…)
We’ve all heard the statistic that over 80% of small businesses fail in their first five years of existence. We’ve also heard the heroic success stories about entrepreneurs such as Mark Zuckerberg, Steve Jobs, Bill Gates, and others.
But we don’t hear much about how and why those entrepreneurs were so much more successful than the many failures that occur each year. Some might say it’s luck, but there are distinct differences between those that achieve consistent small business growth and those that fail.
Here are eight things that make entrepreneurs more successful than those that ultimately fail: (more…)
The holiday season is of course about giving and the holiday spirit. It’s a time of year when most are less concerned about themselves and more concerned about their families, the spirit of giving, and being thankful.
As we enter a new year, however, it is also a good time to reflect on the risks and rewards that we all experience as small business owners. Most entrepreneurs have a strong passion and belief in their businesses, but too few are reaping the rewards that they hope or expect to see. In fact, in our ongoing survey of small business owners, we find that most are not only concerned about having enough cash to sustain their businesses over time, but we also find that most are dissatisfied with the level of personal income they are making from their efforts.
This may not be surprising on the surface, but it is a bit concerning since most entrepreneurs start businesses to create wealth for themselves and their families. This is typically not the only reason for starting a new company, but it is an important one. Combine this desire with the level of risk that entrepreneurs face – whether it be risk of financial duress, legal issues, or the possibility of failure – and there is clearly a disconnect between what entrepreneurs should be earning and the pay they actually take home for themselves.
So what’s the right answer? Unfortunately, there is no single answer for all entrepreneurs since every small business is different, but here are four questions you should ask to determine the “right” amount to pay yourself: (more…)
Managing employees is a stressful part of managing a small business. In fact, our ongoing survey of small business owners reveals that hiring, firing, and managing employees is one of the hardest parts of managing your small business growth.
When you stop to think about it, though, it’s no surprise that employees can introduce a great deal of unpredictability and stress into a small business – especially those first few employees that are hired. After all, when an entrepreneur starts a business, he or she is typically the one that does it all. They perfect the way they want to see things done over time. Hiring employees, on the other hand, often means more inconsistency in how work is done, misaligned expectations and goals, and in some extreme cases, downright neglect and damage to the business as you are trying to manage small business growth.
With this backdrop in mind, it’s no wonder that so many entrepreneurs elect to remain on-man “solopreneur” shops without employees. While this may help alleviate some of the concerns outlined above, however, this approach is less likely to deliver long-term wealth and earnings when compared to companies that grow beyond their owner and founder. The good news is that there are other answers to help navigate these pitfalls.
Below are five things that will help you more effectively manage the various nuances of hiring and managing employees: (more…)
NBC’s TV show Shark Tank is one of the more popular shows about small businesses and startups. It’s nice to finally see this and other reality shows about businesses and entrepreneurs gaining mainstream acceptance.
Aside from providing great entertainment value, Shark Tank offers some good small business ideas for small business owners and aspiring entrepreneurs. Parts of the show may seem overly scripted or unrealistic at times, but it offers some good lessons for those about to embark on their entrepreneurial journeys.
We as entrepreneurs often think and talk about ways to achieve our small business growth goals through creative products and services, effective marketing tactics, and other creative endeavors. However, we often don’t spend enough time or effort determining how we’ll build our operations to scale for the growth that we expect to see.
Building your small business operations in a scalable way is a critical component of building a successful business – and a big risk for those that don’t address it. In fact, while many often assume that running out of cash is a key risk factor for entrepreneurial ventures, it is inefficient, inconsistent, and non-scalable operations that are more likely to cause you to burn through cash faster than you otherwise would. (more…)
Launching a new startup is typically more about visionary ideas, developing new products, and penetrating new markets than it is about technology to run your new startup. For many entrepreneurs, however, small business software can help jumpstart a company and take it to another level.
The good thing about small business software in today’s market is that it isn’t as cost prohibitive as it once was. In past years, it didn’t make sense for entrepreneurs to worry about technology until their businesses were much larger, but this is no longer the case with technology becoming so pervasive in today’s world. Some of the most successful small business owners are the ones that can figure out the best ways to leverage technology to give themselves a leg up on their competition.
Obtaining enough funds to finance their businesses is one of the biggest concerns and fears for many entrepreneurs and small business owners. In fact, in our recent survey of small business owners planning to attend our upcoming online Small Business Boot Camp, 100% stated that “running out of cash” was one of their biggest concerns and fears – hands-down the top response in the survey.
Small business loans are becoming increasingly hard to come by, so it’s no wonder that financing is on the top of everyone’s minds. A weak economy, reluctant banks, and even the US Small Business Administration scaling back on government-backed small business loans are all contributing factors to these challenges.
The good news is that it is easier than ever to create a startup without excessive capital needs. The internet, technology, and new ways of thinking are all making it easier for entrepreneurs to start a business without breaking the bank.
Starting and managing a successful small business can feel a lot like the Hunger Games movies and books. It seems that, like in the movie, the odds are ever in your favor – in other words, not in your favor since most small businesses fail within the first two years of operation.
Having just seen the most recent Mockingjay movie installment of the franchise, it occurred to me that there are plenty of small business lessons to be learned from the movie. Everything from the gruesome battles to the ridiculously stacked odds closely parallel the life of a small business owner, and there are plenty of lessons to be drawn from those parallels.
Below are just a few of the key lessons from the movie and storyline that can be applied to help us achieve small business success: (more…)
I’m a huge fan of the Mad Men series on AMC. Not only is the series intriguing in its 1960s time setting, well-written storylines, and well-developed characters, but it also provides a look back at what many consider the golden years of marketing and advertising.
Back in the ‘60s, technology was changing with the advent of TV, so marketers had a number of marketing avenues to choose from in reaching mass markets. TV, radio, print, and direct mail were all common mechanisms used to communicate with the growing middle class of the ‘60s. The advertising infrastructure back in this time supported big corporations that could afford to invest in the broad reach of mass media but, unfortunately, offered very little in the way of small business marketing. It sounds very different from today’s fragmented and highly changing world of marketing, doesn’t it?
Despite the contrast between today’s marketing and that of 50 years ago, there are some universal lessons that transcend time and are more relevant than ever. Here are three things Mad Men can teach us about small business marketing: (more…)
Many entrepreneurs feel as though their survival hinges on landing a small business loan, whether it be an SBA loan or one from some other source. After all, most mainstream media and academics tend to claim that “running out of cash” is one of the leading causes of small business failure – if not the single biggest reason.
However, our hands-on experience with and research of small businesses suggest that cash is not the reason most businesses fail. Instead, cashflow issues are typically symptoms of deeper root causes. Much like person dies because their heart stops beating or they stop breathing, those are merely symptoms caused by some other disease or problem.
With this in mind, I tend to believe that cashflow issues are not what small businesses should be most focused on, especially in the early startup stages. Startups landing millions of dollars of capital are often glamorized in popular media such as Shark Tank, but in general, small businesses are often better off without outside capital.
Here are three reasons why small business loans can be a bad idea:
The Small Business Administration is one of the first resources that come to mind for many small business owners looking for guidance or help. And for good reason, since the promise of government-backed loans and free advice sounds like a pretty good deal.
Having run multiple startups and grown them to become multi-million dollar entities, however, I can tell you that the guidance provided by the SBA just barely scratches the surface of what business owners and entrepreneurs need to know to be successful. To add insult to injury, most small businesses are denied SBA loans, and according to data published earlier this month, the SBA is continuing to cut back on their government-backed loans to small businesses. In other words, the SBA means well, but the resources they provide leave much to be desired.
So how are small business owners and aspiring entrepreneurs like us supposed to carry on? The good news is that there is a wealth of information and lessons to be learned from entrepreneurs that have actually been in the trenches and run their own businesses. Below are five things that the SBA was never able to teach me, but are critical lessons for any entrepreneur: (more…)
As small business owners and entrepreneurs, finding practical and real-world advice can be very challenging. Especially when it comes to effectively managing small business growth, good advice from experienced entrepreneurs can be hard to come by.
We just released a new white paper that attempts to provide guidance, tips, and lessons to small business owners and startups looking to take their businesses to another level. In this paper, we cover a number of important topics, including:
- What to expect when starting and growing a small business
- How to find advice that the Small Business Administration and most small business training courses typically don’t provide
- PItfalls and lessons from actual entrepreneurs
- The most effective small business marketing tactics to increase growth and revenue
- Other effective growth strategies
As the optimistic, positive-thinking entrepreneur types, we typically like to think about the upside of being small business owners. However, there are often struggles and landmines along the way – and plenty of small business failures – that often get overlooked in our culture of glorifying the seemingly “nothing but success” stories of the Mark Zuckerbergs and Bill Gates of the world.
What many don’t realize, though, is that most entrepreneurs struggle immensely at some point along the way. Even for those that are fortunate enough to become successful, the entire journey can be a long grind. Despite this fact, most popular business publications, training courses, and Small Business Administration recommendations don’t prepare entrepreneurs and small business owners for the difficult scenarios to expect.
Based on my own challenges and failures – combined with what I’ve seen countless other entrepreneurs struggle with – small business owners make a number of common mistakes along the way. I certainly have, having unintentionally run one of my companies into the ground, only to recover and grow the company to heights that I had never seen before.
Below are several things that I learned in my rise, fall, and rise again cycle as an entrepreneur: (more…)
There’s a lot of buzz around social media, search engine optimization (SEO) marketing, and other technology-based marketing service providers. While technology has certainly expanded both the ability to reach more customers and target more specific groups, many marketing consultants get too myopic in their view of how marketing should work.
When I founded one of my startups in 2005, we were one of the few companies doing SEO small business marketing for the professional services industry. Fast forward nine years later, and most companies have an idea of how SEO works. If they don’t, there are literally thousands of one-man SEO consulting companies out there that can help make at least a minor improvement in your results for relatively cheap. In addition, there is a much broader understanding of how SEO works, even though it is constantly changing. All of this means that more people are good at SEO than they were even just yesterday – and that includes your competitors. (more…)
When starting a small business, choosing the right level of focus can make or break your chances of success. On one hand, you want to focus on a relatively narrow market as a way to minimize your marketing costs and develop a strong customer following. On the other hand, too narrow of a focus can result in lost opportunity and revenue, which can be especially troubling for cash strapped small businesses operating on a shoestring budget without access to small business loans.
For example, let’s suppose that you are opening a retail clothing outlet. There are a myriad of different ways you could focus your business: you could focus on one target market, such as millennial women, baby boomer men, or children. Or, you could focus on one product line: outerwear, shoes, business attire, or casual clothing. Or, you could pursue a combination. The strategies you do and don’t pursue will have a big impact on how successful your company becomes.
Clearly, finding the right level of focus is important to achieving your small business goals and success. Here are four things to keep in mind when determining the right level of focus for your small business: (more…)
For most small businesses, email marketing and social media are key parts of their marketing strategies. However, with the proliferation of small business software options in the marketplace, choosing the software that best aligns with your business strategy can be a tricky proposition.
While certainly not the only two options available, Constant Contact and Marketo are two of the leading email and small business marketing automation systems commonly used by small business owners and startups. Both provide features that allow business owners and entrepreneurs better communicate with their customers and prospects digitally – all while driving more top-line revenue growth and profits. In fact, according to a recent report from Pardot, 84% of small businesses are already using or planning to use some sort of marketing automation software.
Both software packages are good options for many small businesses, but they also have their distinct differences, strengths and weaknesses, depending on your needs. Below are a few observations we have seen among small businesses that have used each solution: (more…)
Running a small business has its share of challenges. Developing a marketable product or service, finding a marketing niche, and creating demand are just a few of the challenges that small business owners face. However, a good small business marketing plan is a good first step in overcoming these small business challenges.
But what exactly does it mean to “create a good marketing plan”? Obviously, it needs to be effective and fit within the constraints of your budget. But beyond that, creating a marketing plan can be like navigating a no man’s land.
Here are just a few tips to help create tactics that can make for an effective marketing plan for your small business: (more…)
In this brief video, we outline three important components of small business growth:
- Developing a viable product or service
- Marketing and selling that product or service
- Scaling a company to meet demand for that product or service
Unfortunately, too many small businesses and entrepreneurs struggle with the #3 component. (more…)
The world is full of great ideas. In particular, entrepreneurs are especially good at generating ideas to address some of the world’s most complex problems. Breakthrough products such as Apple’s iPhone, Tesla’s electric car, and Facebook are all examples of things that wouldn’t exist if it weren’t for small business innovation.
Further, the TV show Shark Tank, popular business journals, and small business consultants all love to talk about innovation. After all, it’s more exciting to talk about new, creative ideas than it is to discuss the nuts and bolts of running a business. We can also see and touch innovation, much more so than the intangible grunt work of managing a business. In other words, innovation is sexy.
So, if we assume that this is all true, then how in the world can innovation be overrated? Here’s the dirty, two-part secret about innovation: (more…)
For most of us, starting a company is the epitome of the American Dream. By fusing our passions, visions, and identified opportunities in the marketplace, starting a small business is the culmination of years of hard work and dedication.
However, running a small business can also be gut wrenching and downright scary at times. Cashflow, economic turmoil, employee issues, and a host of other variables – often perceived to be outside of our control – all threaten to undermine the fun and rewards of starting a company. According to the US Small Business Administration (SBA) and other sources, most small businesses fail in their first one to two years of operation.
But having your eyes wide open to these various risks is the best way to overcome them. Below are five of the scariest aspects of running and managing a small business: (more…)
The many small business owners and entrepreneurs I’ve worked with over the years have different reasons for being in business. Some are looking for aggressive small business growth to enable an exit strategy in the not-too-distant future. Others want to create a lifestyle business, allowing them to work independently without the hassles of employees or overly complex operations. Still others want to create an asset that they can pass on to their kids or grandchildren.
Since there are a multitude of reasons why entrepreneurs start businesses (I’ve only listed a handful of them above), there is no one-size-fits all strategy for managing growth. Academics, self-proclaimed small business experts, and even the US Small Business Administration often prescribe generic solutions that aren’t good fits for all organizations. These ill-advised strategies can often create more harm than good, much like fitting a square peg into a round hole. (more…)
I’ve founded, managed, and consulted to small businesses in all shapes and sizes over the years. One common item that entrepreneurs struggle with is how to maintain the same drive and sense of urgency that the entrepreneur and business owner has. After all, we poured blood, sweat and tears into our businesses and risked it all to pursue that dream, so surely our employees will share our same sense of focus and discipline as our business becomes more successful, right?
Unfortunately, that’s usually not the case. To add insult to injury, most small business training courses and Small Business Administration workshops won’t cover this important topic. Here are a few reasons why it’s not common to see 100% alignment between you as the entrepreneur and your employees: (more…)