Many of you are thinking about or are in the process of starting a business.  First, I have to say congratulations on doing something that most people don’t have the guts or the drive to do.

Second, I have to ask, have you done your homework?

I have seen many would-be entrepreneurs get burned for a simple reason.  They were so in love with their idea, they were blind to its real market potential.  I’ve been caught up in this trap myself.  Several years ago, I was so sure my idea was a hit, I launched a business without doing any of the things I’m about to tell you – and fell flat on my face.

Before you invest a lot of money into a business idea – or if you need to reevaluate the future of your existing business – do these two things first.  It will save you enormous amounts of time, money, and pain.

#1.  See if there is a market.

It’s very unlikely that your business idea involves something that has never existed before.  That means that people are already buying the product (or something that accomplishes the same goal) already.  The first thing you need to do is to see for yourself what (and how much of it) people are buying.

Considering an online business?  Search on relevant keywords for your product.  Are many (or all) of the top listings for sites that are selling that product or service?  Are there several PPC ads?  If you can’t find anyone selling in the market already, beware.  If there are many people competing, there is probably a business there.

Also, look at what people are buying.  Many big e-commerce sites allow you to get some idea of the popularity of the products they sell.  Go to Amazon, PayPal, eBay, affiliate networks like ClickBank, and other similar sites to see how well the products in your market are doing.  Lots of sales are good, low sales or no similar products are a warning sign that the market might be too small to make any money.

In the bricks and mortar world, visit competing stores and observe how much traffic they get and how much customers are buying to get a feel for the market.

#2.  Figure out if you can make money.

Once you’ve confirmed there is a market for your product, you need to figure out if you can make a profit.  You’ll need three numbers to do this.

• Your fixed costs.  These are expenses you have every month regardless of whether or not you sell anything, such as rent, payroll, advertising costs, etc.
• The cost to deliver the product.  This is your cost to buy a product if you are reselling it, or your cost to buy the materials and produce the final product if you are making something.  If it’s a service, this is your cost to deliver it to a customer.
• The price you can charge.

You’ll want to do some research when estimating these costs, but quick estimates are fine early in the process.  As you move forward, you will need to get more precise.

Now, calculate your breakeven volume.  This is the number of units you need to sell in a given period to cover your costs.
Calculate your gross margin by subtracting your cost to deliver the product from the price you can charge.  Then, divide your fixed costs by your gross margin.

The answer is the number of sales you have to make to break even.

For example, if I had $100 per month in fixed costs and sold a product for $10 that cost me $5 to buy, I would have to sell 20 units every month just to break even.

Is it realistic to think you could sell that many units?

Now, write down the amount of money you would like to make in profit.  Add your desired profit to your fixed costs and divide the result by your gross margin.  This is the number of sales you will have to make to earn your desired profit.
Is this realistic?

If the answer is “no,” – STOP.  Either find a way to charge more or spend less or find a different business idea.

If the answer is “yes,” you have an idea that has a fighting chance.

One of the many blogs that I myself like to visit is the Small Business Branding blog.

They are all about helping you understand and conceive your brand from all aspects of your business.

These two articles are just two of their recent entries that I think are worth a read!

The first discusses the importance of Incentives as a piece of your marketing. When used correctly they can help you to draw customers away from the competition- but they have to be done well!

The second entry gives you 5 tips that you need to follow in order to build a strong brand image in your customer’s mind. Starting with that first little piece of paper- your business card.

Another blog that I find worthwhile is Drew’s Marketing Minute.

Today’s entry is about a book by David Vinjamuri called Accidental Branding: How Ordinary People Build Extraordinary Brands. I myself can’t wait to read it!

Sex or Money? is another great entry by Drew talking about the different benefits that can trigger us to buy something. And hey, you have to admire the title! It may seem brash to some people, but you need to catch people’s attention on the web.

You can spend hours on any of these blogs, and I suggest that you do keep on top of your business education!

Happy Reading!

Profit - That ever elusive end goal we are all searching for.  I’m sure to many of you profit is simply what Wikipedia defines it as:

“Profit generally is the making of gain in business activity for the benefit of the owners of the business”.
Makes sense to the business side of my brain.

But I’d like to change that up a bit, and talk about profit as more than just positive income.  I think that any gain in life, personal and professional, can be a profit.  And when you understand how every gain in your life affects your entire being, you’ll understand the importance of learning to set goals and follow them through.

So get your journals out, turn the TV off, and don’t think about your emails piling up.

In order to really get what you want, you first need to define what is really important to you.  Decide now what profit means to YOU, and be as clear and exact as you can.  If you are unclear about what you are looking for in your career, or any area of your life, how can you expect to achieve it?  This is perhaps the most important thing you can ever do for not only your business, but yourself as well.  Talk to any successful person on the planet, and they will tell you that they knew, long before they achieved their success, what they wanted.

Once you have figured out what matters to you, you then write out what needs to be done in order for you to achieve those goals.  Every contact you must meet, every action you must take – even figuring out “bumps in the road”; all of that should be thought through before you begin you journey!  Think of this as a long road trip – you need to figure out where you want to go and how to get there before you pack the car up!  Otherwise you will end up “driving” aimlessly around the big picture.

Once you sit down and envision what you want to achieve, you begin to move quickly towards you goals.  Just taking that first step leads to unstoppable momentum, so you better be ready to start achieving!

Every day you should at least do a little something that will lead toward your goals.  This will create habit, making you feel the need to do something everyday.  Of course the opposite is true.  If you take one day off, then it will be that much easier to take the next day off, then the next and so on.  So make today the day to start….and don’t ever stop!

As you being to cross goals off your list, don’t forget to reflect about what you have accomplished in the past.  Think about all the times you set out to do something – a new sport, new job, college- and think about all the ways you were able to achieve those past goals.  Besides giving you more confidence in yourself, these past goals may also help you to get past those sticky spots.  Then expand this to think about what you can do in the next year, 5 years, 10 years that would have huge impacts on your profits.   This may sound like the last step, but with goals, you should always be reevaluating what you want and how to get it!  Life is full of changes and curve balls, and our priorities are always shifting.  So don’t just sit down one time and plan your life out.  Do this often.  Set dates on your calendar to “check-in” with yourself.

And I can’t stress enough that this process is all about progress, NOT perfection.  You’re not going to achieve every goal right away.  But you can’t get frustrated.  The key here is to always be moving forward- especially if you feel like you’re moving backwards.  As long as you are getting out there and staying true to yourself, there can’t really be any mistakes in life.  It just may be that the path has changed a little bit –but that doesn’t’ mean that you won’t get to the end!  As I mentioned in a previous entry, failing only give us the opportunity to start again, but with a lot more insight!

We all know that a recommendation from a third party is much more effective at generating business than any advertising. So, what are you doing to get those recommendations and referrals and turn them into new customers?

Super-marketer Dan Kennedy has coined a simple mnemonic device called the “EAR formula.”

EAR stands for Earn, Ask, and Reward.

Before you can ask for a referral, you need to earn the right to do so. You earn that right by delivering superior value and quality to your customers.

Believe it or not, too many businesses don’t ask for referrals. Common sense tells us that the best way to get more referrals is to ask for more referrals, so you need to make it a practice starting now.

The final part of the formula is to reward your customers for helping you build your business. The most common reward is some sort of discount on a future purchase or gift in exchange for the referral. But, I would encourage you to be a little more creative in your approach. The reward really can be anything that has value to the customer.

One problem with many referral programs I see is that they make the exchange very explicit upfront – “get your friends to buy and you’ll get something.” This approach can create the perception that you’re buying your customer’s address book like it was any other list. This is especially true if you aren’t doing a great job at earning the right to ask for a referral in the first place.

If you want to provide discounts or gifts in exchange for referrals, then consider “surprising” your customer with an unexpected gift or discount after they’ve made a referral. You could also host periodic “customer appreciation” events. Ideally, these events would be related in some way to your business but should never be overtly commercial.

A referral program works best when you are asking all of your customers for referrals, not relying on a small handful of your “best” customers to do all the referring. If all of your referrals are coming from a very small number of people…

What happens if something goes wrong with that customer?

What happens if that customer moves away or changes jobs?

Certainly, you won’t get referrals from all of your customers no matter how much you deserve them, ask for them, or reward people for making them. But, the more customers you actively solicit for those referrals, the more you will get, and the less impact the loss of any one customer and their referrals will have on your business.

If you don’t have a referral program, sit down now and create one. This doesn’t have to be complicated. Start by simply making it a point to ask every customer (assuming you’ve earned it) if they could refer someone to you. It could be as simple as saying something like:

“I’m glad to see you’re happy with our service. May I ask you to tell at least one of your friends about us?”

Since I like to practice what I preach…

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To your success,

The Art of the Start…

I recently received this clip from a friend of mine…

http://blog.guykawasaki.com/2006/06/the_art_of_the_.html

Guy Kawasaki spent years working for Apple as a product evangelist, and is currently a successful venture capitalist.  He makes a living out of getting start ups off the ground, and has a lot of great advice and tips for entrepreneurs at all stages.  It’s basically a synopsis of his book The Art of the Start.

At the very least, he’s a great speaker, and this is a very funny and intelligent speech to watch!

Enjoy!