Probably the best advice that I can give someone who’s planning on starting a business is to understand what business you’re in. A lot of times what will happen is an entrepreneur will start a business and they’ll think that they’ve got it all figured out. They think it’s the product or the service that they sell and that’s the business that they’re in. Their business is the solution that people are buying. People pay money for a solution and depending on how their experience with the product or service delivering the solution is will impact on how much they’re prepared to pay and more importantly, how much they’re prepared to disproportionately pay if it’s a great experience.
The simplest example would be someone looking to purchase an Apple iPhone versus a flip phone.
The iPhone might cost 700 times more, but it also gives the customer a better experience for what it is they’re looking to do, which could include communicating with their friends and their family, with the world around them, taking pictures and videos, sending text messages, etc.. The best advice that I can give someone who’s planning to start a business would be to understand the business that you’re in and the problem that you’re solving for your customers and then build your business around that. Products or services will change but fundamentally the solution that you’re providing to your customers should remain constant. The better the experience you deliver to your customers or your clients the better the margins will be.
Oftentimes entrepreneurs forget that the only reason people are paying them is to solve a problem. You can lose sight of that so easily and it’s so easy to focus on the product or the service that your business is delivering and you want to make it better and you want to improve it but the truth is people aren’t necessarily paying you for your product or service. They’re paying you for the solution that you’re going to provide to them. That can take a little bit of thought. You might know your product or your service well, but then you’ve got to be able to step back and understand what the solution is that is being delivered to customers and what they’re prepared to pay for.
Is your business able to deliver the solution through an experience that is far better than the rest of the competitors in the marketplace and are you can you command a better price for the same product or service that other competitors are delivering?
Another piece of advice is that as a business owner you need to understand how you make money. It may sound obvious: you buy a product for a $1.00, you sell it for $2.00 and you make $1.00 of profit. But it’s not usually that simple. After you’ve started a business and start adding staff and other adding costs your business can very quickly not make money. You’ve got to be able to figure out how your business makes money and then as you get going make sure that you develop some rules or some principles that keep your business on track as it grows. If not, the money you think you’re making very quickly disappears and gets moved over to other things that you may not have been thinking about. You need to know fundamentally what people are paying for when they use your business and then how your business makes money delivering that solution to them.
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