The Basics of Starting a Business When You Don’t Know Where the Hell to Begin
“Start small, make some mistakes. It won’t be catastrophic.”
Screengrab from 'Wolf of Wall Street'
Nobody is born a business genius. Half of all small businesses fail within the first five years, according to a study by the US Bureau of Labor Statistics. Failure is baked into capitalism, and it’s the only way to go from someone who has no idea what the hell you’re doing to someone who does.
Sean Parker, whose name is a synonym for wild internet success, started his career with the all-out failure of a cybersecurity business called Crosswalk. After that vision crumbled, he and his co-founder Shawn Fanning went on to create Napster, which famously collapsed under the weight of countless lawsuits from music labels. In the years between Napster and Facebook, he was homeless for months. According to a profile in Vanity Fair, things were so bad his girlfriend suggested he get a job at Starbucks. By all accounts he was a brilliant hacker with an incredible eye for identifying ideas that were important to the development of the internet. But when he started out he had no fucking clue how business worked. Now he’s worth 2.7 billion dollars.
When you have no idea where the hell to begin, the idea of starting a business can be daunting. There are legal documents to file, investors to seduce, office space to rent, and countless solutions to concoct for problems no one else has ever faced. But before all that can happen, we asked some certified business experts where to begin when you’re starting a business and have no idea what the hell to do. They gave us a few simple questions to ask yourself before you start.
- Do people actually want your idea?
- If so, can you reach them?
- How can you learn from your customers?
- How are you using your resources?
- Are you the right person for the job?
When you’re picking an idea and giving this business thing a shot, the experts we spoke to recommend starting a small, simple operation with a built-in market. Jeff Durham, a business professor and professional mentor at Butler University, usually has students in his entrepreneurship courses design and sell school merchandise, like stickers and scarves. It sounds boring, but it’s perfect for figuring out if this stuff works for one simple reason: the entire market for this product is right outside the walls of the classroom.
“The easiest are the ones where you can start from home or a garage and don’t require lot of start-up capital for equipment,” Durham told VICE. These are service type businesses like going around cleaning people’s bathrooms, or online business, like selling crafts.
The most important rule of business is that there has to be a market for it, a.k.a. people actually want what it is you're selling, and need to actually exist. The easiest way to find out if you have that is to make as convincing a prototype of your product, service, or business plan as possible and ask as many people as possible for their opinions.
“A mistake a lot of aspiring entrepreneurs make is that they focus inwardly—they define themselves by what they want to do; by the product they want to make, or the service they want to provide,” Tom Schryver, Executive Director of Cornell University’s Center for Regional Economic Advancement, told VICE. The way to avoid this pitfall is by focusing on market research, figuring out what exactly it is the field your trying to break into could use, and learning it. Beyond that, who and what you research depends on the size, scale, and type of business you’re putting together.
Cliff Holekamp, director of Washington University St. Louis’s entrepreneurship program, says a good place to start is to, “have a deep understanding of who your target customer is, where they get information from, and what influences them. This helps narrowly target your approach so you’re not spending a bunch of money growing awareness of your product or service for people who aren’t going to buy, no matter how familiar they are with you.”
After you know what to sell and who to sell to, you have to figure out how to make it and get it to potential customers. This is where you take stock of your resources and figure out how to organize them into a business plan. You’ve got to have cash for the basic costs of business like legal support, insurance, and accounting. “They are just the price of being in business and doing it right. Don’t even launch your business without first having saved, or raised, enough capital to do your legal and accounting professionally,” says Holekamp.
But there are countless other types of resources at your disposal. One is your network: the people who want to see you succeed and are in a position to help you, especially if dealing with you will also be profitable for them. The area you’re based in is part of your network. Schryver recommends college towns for their high rates of education, low costs of living, and proximity to large alumni communities. Your team is one of your most important resources, which is why it’s important to be cautious when going into business with friends.
If all this sounds like a bit much, then you may want to ask yourself if you actually want to be an entrepreneur. “It’s fun to talk about being an entrepreneur, but it gets hard,” Craig Markovitz, a Carnegie Mellon University professor of Entrepreneurship, told VICE. Successful entrepreneurs, in his experience, are persistent, observant, and engaging. They listen actively to their potential partners, employees, customers, and backers. They’re good networkers. “But when push comes to shove, it gets scarier. People are reluctant to take that step.”
Thankfully, there are resources to turn to. Cities, states, and even federal government organizations offer free mentorships, affordable space, incubator programs, and more cash in the form of grants and subsidized loans. It’s good for them if you succeed, so take advantage of their help. Western Pennsylvania, for instance, gave Markovitz an economic development package for a company he co-founded selling high-end medical equipment. After 13 years, the company sold for $275 million.
Of course, the most important resource, according to Schryver, is the founder’s access to time. Time to develop the idea into a business model; time to validate that business model; time to execute it. For these reasons, it can be so difficult for minorities and people from low-income backgrounds to get their foot in the door as entrepreneurs. “Folks work one or more jobs to make ends meet, and there’s little time left over and even less cash (startup capital) leftover either,” he says. “The idea of a ‘side project,’ which is where many successful entrepreneurs begin, is an impossible dream.” Groups like the Minority Business Development Agency and Chloe Capital are working to carve out resources for minorities and women, but it’s important to be on the hunt for those grants and local resources. Asking for help is part of the job.
In the end, you can read all you want about making a business, but the only way to know shit about it is to do it. “Start small, make some mistakes,” says Markovitz “It won’t be catastrophic.”
Sign up for our newsletter to get the best of VICE delivered to your inbox daily.