Over time, businesses have changed. And what used to work in the past might not do well in the present.
I understand everyone has different motivations for starting a business. However, we should always ask ourselves if we have real, valid, and well-founded reasons for setting up a business before we start the onerous process of doing so.
That is a question you must respond to for yourself.
But I will share with you what I believe to be the most important guideline or motivation for establishing a business.
And this is it:
Start a business when you have eager customers or a hungry crowd that is desperately in need of your good or service.
This indicates that you have found a target market that is prepared to purchase your good or pay for your service now rather than later.
Although you might not agree with me, business is what it is.
Business is tough. It demands everything you have.
And you need to be very strategic when you’re just getting started with few resources. Sell only what consumers will currently pay for.
In this type of capitalism, you sell something before you buy it. In other words, you can only offer a product to clients if and when they demonstrate commitment via payment then you can go and create or purchase it.
Don’t invest a lot of money on what people have not showed interest in to buy. First market/promote it and only when they vote with their wallet will you order the product or create it.
Another method to describe this idea is as follows:
What do you think is the most crucial factor to consider when opening a fast food restaurant or diner, my mentor once asked us, his mentees?
Almost all of us responded;
- A classy structure,
- A fancy building
- Sweet and delectable cuisine that is inexpensive,
- Warm surroundings,
- A well secured structure VIP,
- Lots of dishes/menus, etc.
He responded that finding a location with a hungry crowd is crucial when opening a restaurant. That alone will ensure you generate a lot of sales, which will ultimately result in a prosperous business.
FYI, the other reasons given were also important but they won’t give you enough sales which won’t lead to a successful business.
Only in an area where we have a hungry crowd will you have reoccurring sales.
Anyways, enough of the explanation. Let’s look at the basic steps of starting a successful business by finding motivated buyers or a hungry crowd.
Here is how I will go about it.
1. Market first
Before you go and stock your warehouse or office with goods thinking that your customers will buy them, try to market it to them first.
Get samples from a friend, factory, or warehouse and take them to your target audience. If they buy, cool, you’re on your way to having a successful business. If they don’t buy, then you have instant feedback on what will not sell.
2. Make more research on why, how, where, and when your customers buy
When you first market a product and people buy, that doesn’t mean they would continue buying.
As a matter of fact, they might have bought earlier because they were shy or pitied you. Maybe they didn’t even want to disappoint you.
The next step you must take to determine if they are really a motivated buyer is to try to sell to them again.
If they buy the 2nd, 3rd, and 4th time, then they are a real customer that needs the product and have the capacity(money) to buy it.
These are the kind of people you can bank your business on.
If they don’t buy repeatedly, then they might not be really interested in the product or services. Also, they may not be able to afford it.
You can’t bank your business on this kind of customers.
It’s important to have repeated sales. That’s the right step to having a successful business.
3. Start small
Now that you have repeated buyers/customers don’t just go and put all your money into the business, instead do a small experiment.
In this experiment you start with a small amount of capital.
You take a portion of all your savings/investment capital – let’s say 30%, you put it into the business and try to sell. If you sell all or majority of your inventory, you can invest more money.
If you don’t sell all, don’t invest more money into buying new stock. Instead, work on your sales and marketing or find another business opportunity.
I know that there are exceptions to this rule, however, this rule will ensure that you don’t go broke in your business.
Also, you won’t get to a situation where you are very desperate to sell at a loss or lose all your money.
Maybe if you are a billionaire and you have all the money to iterate and keep going you can avoid this method completely.
The whole idea behind this method of starting a business is to avoid the sunk cost mistake where you spend a lot of money that you may never be able to recoup back and instead of you to stop and cut your loss, you just keep spending hoping to get things right.
Nothing is guaranteed in business, hence, I will suggest people cut their losses when situation warrants.
I did the same thing in my catfish business.
I cut my loss after investing million and the returns where in thousands due to several reasons.
Anyways, I hope you have learnt something today.
Feel free to comment or share your view point below.