Are you thinking about starting your own business — or have you already taken the leap? If so, congratulations! Business ownership is a hallmark of wealth. Take a look at the people whose financial positions you admire, and you’ll find that most of them own their own businesses. (Those few that don’t, very likely operate much like a business owner within their organizations: viewing their employer as a client, and consistently providing them with spectacular service.)
Here is a list of 8 tips I’ve compiled from my own experience starting new businesses, and from the experiences of other people I know who have become wealthy through business ownership.
If you haven’t gotten your business off the ground yet, these tips can help you avoid some of the classic mistakes new business owners make when they’re first starting out. If you’re already already up and running, they may help explain any challenges you’ve been facing, and guide you toward some critical changes that can get you moving in a more profitable direction.
1) Don’t try to sell to everyone
This is one of the first mistakes many new business owners make. The fact is, some customers are much easier to sell to than others. The 80/20 Rule applies to customers just as it does in other areas of your life: 20% of your clients will cause 80% of your problems. If you can weed those problematic clients out upfront, do it!
If you think a meeting is pointless, it probably is. Don’t network with random people just because you think you’re supposed to. Don’t feel like you have to say yes to everyone you meet. By being selective, you’ll save yourself many headaches and free up more time to focus on serving the best customers.
2) Get the cash flowing first
I talk about passive income a lot, and there’s a good reason why I do. When it comes to building wealth, cash flow is king. Many people start a business that not only takes all their available cash, but also all of their time. In effect, they’ve done nothing but buy themselves a new job.
Your business should put cash in your pocket. Before you “invest” money in it, be clear on how you’re going to pull that money back out again. These days, you can very easily start a lucrative online business for pocket change. That cash flow can then support any other business ventures you might wish to undertake.
(If you want to learn more about creating multiple streams of income, click here.)
3) Spend wisely … but DO spend
Just because you can get things started relatively cheaply, doesn’t mean you should remain tight fisted. If you want your business to grow, there are things worth paying for. Don’t let frugality get in the way of efficiency. Use skilled contractors who can do certain essential tasks more effectively than you can. Buy good equipment when it’s clear you’ll get your money’s worth.
It takes time to develop the wisdom to know what’s worth spending on, and what isn’t. If you’re just starting out, ask someone with more experience. If you can’t justify an expenditure to someone you respect, it’s probably a mistake. On the other hand, there are some situations where you’ll have a hard time not justifying spending the cash.
4) Be yourself
If you’re new to business, don’t pretend otherwise by faking your experience level. Trying to fool clients in this way will come back to haunt you. People can sense when someone is being less than honest, and those that do believe you will find out the truth at some point.
If you’re so desperate for business that you need to lie, you shouldn’t be starting your own business. If you can’t provide real value and charge fairly for it, then you’re not ready to open your business. Develop your skills a bit more first.
5) Respect the relationship
No matter how much legalese you put down on paper, a contract really comes down to a relationship between two people. If the relationship is destroyed, the contract won’t save you. The purpose of a contract is to clearly define everyone’s roles and commitments. But it’s the relationship, not the threat of legal action, which ultimately enforces those commitments.
In my experience, the most creative and lucrative business deals almost always stray from the paper contracts that represent them. That’s not to say that a contract is unnecessary, but it is secondary to the relationship—that’s the real “deal”. Keep your business relationships in good order and you won’t have to worry so much about what’s on paper.
6) Listen to your gut
You might think that logic is the underlying driver of business. Not true. Business deals depend on human beings, and we don’t have a logical system for accurately predicting human behavior, which removes logic as a tool. Intuition has to fill that gap, and is a critical part of the decision-making process in business.
It’s hard to say no to a deal that seems lucrative when my gut is warning me away from it. But I’ve discovered that I often see evidence later that my intuition was right all along. Since business depends on relationships, you must learn to read the other people involved in any deal you consider. If you get a bad feeling, walk away. If you get a good feeling, proceed.
7) Keep it friendly
In some settings, a certain degree of formality is appropriate. But I think it’s a mistake to be too formal, even when looking to establish new business relationships. Too much formality puts up walls, and walls must be torn down to create good business relationships. Many new business people think acting “businesslike” means being stiff and unnatural, which can create an awkward, uncomfortable environment and make it hard for people to do business with you.
If you demonstrate that you have a real personality and a good sense of humor, a connection is far more likely — and connection is what people are primarily looking for. Ultimately, you’ll enjoy your work much more if you attract the kinds of clients that want to work with you for who you are. So never be afraid to show your real self.
8) Remember why you’re in business
Here’s an easy trap to fall into: Thinking the purpose of a business is to make money. Wrong. The real purpose of a business — any business — is to create value. In the short run, you might be able to make money without doing so. In the long run, it’s unsustainable.
The better you understand the value you’re trying to provide, the better you’ll be able to define the clients you want. Remember, the world doesn’t need more products. But it always wants and needs genuine value creation. Creating value, and delivering it cost-effectively, is where you should direct your efforts. It takes significant effort to build a successful business, and mistakes are part of the process. Inevitably, especially in the early days, you are going to waste some amount of time, money, or resources trying to produce and deliver your value. That’s ok. Learn the lessons, maintain your vision, and stay the course. The rewards are so very, very worth it!
By Bob Proctor