The most important realization for every entrepreneur is understanding “how business gets done”. Just as there are laws of physics and engineering principles, there are fundamentals at work in the business world too. Most of these fundamentals are rooted in very basic human behaviors.
Here are some principles that I see many entrepreneurs underestimate:
- Change is hard. Most humans are wired to maintain the status quo, and buying your product is a change and a risk if it doesn’t deliver the benefits you advertise. Your value proposition must be compelling and easy to understand, and the solution should be easy to implement. You need to know how you will reach customers and motivate their change. Don’t make them work to buy your product, or they probably won’t. Getting new customers can be expensive.
- You are always competing for resources. Often people think of competition as just their direct competitors, also known as companies that are trying to solve the same problem in a similar or different way. But you are also competing for every dollar an individual or business spends. Competing for their priority and time. It is important to know your customer’s priorities and what funds they have available to spend fixing them. Doing nothing or a cheap, easy fix are your most powerful competitors.
- Many influences are at work. Rarely does a business transaction involve just two parties: a buyer and a seller. More often, other stakeholders and influencers are present. These stakeholders can be investment committees, purchasing departments, regulators, managers, or simply friends and family. It is equally important to know who these stakeholders are and what power they have in the decision to buy your product. You need to be talking to them too.
- You must make money. To make money, you must know your numbers. You need to know what your product costs to make and how much you can sell it for. You must account for all your overhead, or non-product costs, such as facilities, insurance, marketing costs, accounting and legal fees and other necessary office staff. Take into consideration paying yourself a salary, to be sustainable you must get paid too. Know your return rates and if you offer warranties.
One of my favorite terms is “paranoid optimism” and it applies here. On one hand, you need to see success and believe you can achieve it. At the same time however, you need to be diligently gathering information, evaluating what might go wrong, looking for roadblocks, breaking them down, and adjusting your plans as you learn.
Ultimately, success or failure depends on your ability to “get business done”.
- Joanna Sutton, Entrepreneur in Residence
If you are looking to get your feet wet in the world of entrepreneurship, set up an appointment with Joanna or another one of our entrepreneurs in residence. They are always happy to help students begin their journey as an entrepreneur and provide guidance at all steps of the way. You can find all of our EIRs emails and backgrounds here.