Four key elements for business success
Building Your Business – Four Key Elements that Lead to Success
A new study by the Ewing Marion Kauffman Foundation (July 2010) shows that “net job growth occurs in the U.S. economy only through startup firms.” So, when it comes to U.S. job growth, startup companies aren’t everything. They’re the only thing!
If you are in a startup or planning to start a new company, do you know what skills you need to succeed?
The answer is simple, but the execution can often be challenging. There are four major elements that every successful business needs to understand and effectively address: Marketing, Management, Manufacturing and Money, i.e. the 4Ms. Jim Holmes, a partner in Carson Capital, is presently writing a book on the 4Ms. We are strong proponents of these business principles and therefore, much credit goes to Jim in the crafting of this article.
1. The Market: Who will buy my products? Why will they buy my products?
I heard Alice Heiman once say, “If you don’t sell something, you don’t have a business.” What a great statement! But, before you can even begin to sell a product, you need to develop a clear picture of your potential market. All too often we see extensive technical and scientific details of the business opportunity, but comparatively, little is known about the market for the product or service. Ask yourself: “Who would buy this product? Why would they buy it? What would they pay for it?” Many times, market projections resemble the proverbial “hockey stick” (i.e. very aggressive sales projections) and little is actually known about who would buy the product. If you really understand your market, ask yourself this simple question, “Who would buy my very first product, and how would I sell it?” Answer that question honestly and many of your market issues might take on a clearer perspective.
2. The People: Without experienced people, no one will invest.
Investors invest in people 95 percent of the time. On occasion you may see someone investing in a new idea with “great” potential, but generally investors want to know that their money is managed by people who have done it before and can do it again. As you grow your business, you will need a wide variety of skills to successfully move your company toward a sustainable position. Don’t be afraid to admit that you need others to complement your team. If you don’t know who you need, talk to one of your advisors. Then, go find that key person, or mentor, or advisor and build your team with people who have experience in your industry. Norman Smith, Executive Director at C4CUBE, told clients at our Entrepreneurial Bootcamp, “The wrong people can make a great idea fail. The right people can make a mediocre idea succeed.”
3. The Product: Manufacturing a marketable solution.
Of the 4Ms, this one is normally the easiest but highly critical for the delivery of the long-term goals of the company. Often in an early-stage company, building the product can be cost effectively accomplished through numerous contract packages or outsourcing. This approach reduces the initial capital requirements for land, buildings and equipment and can provide valuable insight into marketability and cost profiles for the eventual end-user products. This is usually a good approach so that limited funds can be used to focus on establishing the market and creating sales.
4. The Money. Warning! There is good money and bad money. Learn the difference.
Money is something every business needs. From your business plan, you will forecast your financial needs. You need to hire people, rent space, buy equipment and cover expenses such as telephone, Internet, supplies, desks, chairs, etc. These all require capital. Without it, and without careful management, your business will not grow.
As tempting as it may be, don’t be fooled into readily taking the first dollar that comes along. The cost of money can be very expensive. Stop and consider what the investor is asking for when they offer money. Every time you take money from someone else, you lose a little more control of your company. Money is necessary … just consider the cost.
Here are a few guidelines on money:
* Bootstrap as much as you can, conserve your cash
* Plan ahead as it takes time to secure capital
* Seek mentoring and advice before you approach investors, and
* Carefully think through how much you are willing to give up for the money you want
There are funding sources that can offer capital, contacts and support to your startup. Remember, every investor is primarily concerned with: “How safe is my money, what return is expected, and when do I get a return?”
A business plan to assist in the development of your opportunity is essential. The exercise of preparing your business plan demonstrates that you have examined the essentials of management, marketing, manufacturing and money….the 4Ms.
Lastly, Cleveland Baker from the Small Business Administration accurately stated that, “Small business is always under construction.” Building your business is an ongoing process, and there are many events and classes to support your need for education. In fact, if you want to learn more, Jim Holmes is teaching the principles of the 4Ms over the next three months at free workshops every other Wednesday and C4CUBE will conduct its next Entrepreneurial Bootcamp on Sept. 11-12 at the business incubator facility in downtown Reno. If you are an entrepreneur and want to jumpstart your business, go to http://www.C4CUBE.com and register. The workshops are free! The bootcamp is low cost and a great investment!
Finally, learn the 4Ms and build your business.
We want you to succeed!
C4CUBE provides Nevada with a dynamic high-technology business incubator offering a nexus for startups, entrepreneurs, investors, and service providers with a focus at creating jobs, increasing fundable deal flows, and building new companies into sustainable business entities. Contact the organization at 622-9900.
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