Business is in my blood. I grew up listening to many dinnertime discussions between my father and grandfather about running their businesses. I heard about the issues, challenges and successes they faced every day and learned more about running a business through those discussions than I did in school. I believe this gave me one leg up over other businesses when it came to getting started; I understood early on what it takes and I was ready when it finally happened to me.
I want to get down to basics first — just how do you start a business?
What are the 5 essentials of starting a business?
It seems that it’s never a “right” time to start a business, you often have to take a leap of faith for those first baby steps. And, this year’s economic turbulence might provide just the right incubator for a strong idea. If you are thinking about jumping, here are some key points in starting your own business:
1. Find your passion
I believe that having a passion is the first step toward building your own business. Start with both a zeal to be your own boss and an idea that you are excited about.
I came up with the idea for my first business, PayCycle, in the late 1990s when I was still working at Intuit. I had a fire and passion in me that kept me going and attracted excellent people to participate and share the rewards of making my dream happen. Eight years later, PayCycle now has 60K+ small businesses as customers. Even with that success, the dream is never complete, it just changes
2. Believe in yourself and your idea
If you have a tendency toward entrepreneurship already, the next step is to build on an idea that has staying power. It’s important to do your homework first. That means acquiring:
- Quantitative data about the market for your product or service
- Competitive information on the companies already out there
- Qualitative data from potential customers
There are hundreds of sites and research resources available to get the information you need to help build your case. With a conviction for an idea, plus the data to back you up, you will have a powerful case to present to potential backers, employees and customers.
3. Be resourceful
Once you’ve done your homework on the viability of your idea, then it’s time to figure out your financing. Unless you are independently wealthy with a cash reserve for business ventures, you will need to raise money. There are hundreds of approaches.
My grandparents used money from their back pocket—whatever was in the bank went into the business. My Dad has done the same while supplementing with small loans when needed. I have used some of my reserves but mostly have relied on professional investors, such as Venture Capitalists. Many people rely on credit cards to either fuel their start-ups or pay their day-to-day living expenses while they use savings to fund the business.
There are pros and cons to all of these approaches. Some business owners mortgage their homes. It’s not a practice I used, but it has worked for many. Others use credit cards to launch. Taking a second mortgage offers lower interest rates compared to credit cards. Otherwise, using credit cards protects your investment in your home.
4. Share the Risk
For my first venture, PayCycle, I minimized the risk of the new venture by joining up with my co-founder, Martin Gates. I also had been socking away money for just this time. We started the business in my house, as we developed the business plan and ironed out the details of the product. Once we had a prototype, we brought in other people (both backers and possible employees).
It was a cautious way to start up, but it worked out in the end.
5. Listen to your customer
In the early stages of launching a business, although it’s important to have passion for your ideas, it’s equally important to listen to the market and tweak when necessary.
For example, while working at Intuit, I became an expert in payroll and saw a distinct need in the market for specialized payroll services. The original idea for PayCycle was to manage payroll needs surrounding household employees. Today, after moving in the direction of the market needs and really listening to our customers, PayCycle is a leader in providing on-demand payroll for small businesses and small business accounting professionals.
At both PayCycle and BILL, we prototyped an automated solution while performing the tasks manually behind the scenes. That way we were able to get early feedback from customers on what was valuable and wasn’t. Some of our best, most unique features came from listening to the customers using our prototyped solution. There is nothing like real customer data to make decisions.
Thanks for taking the time to read “Business 101.” For more information on BILL, learn more about our accounts payable automation solution.