8 Things You Forgot to Do When You Started Your Small Business
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Starting a business can be an exciting proposition — and it can an intimidating one, especially for a new entrepreneur who might not have the wisdom and know-how necessary for this kind of big, first-time undertaking.
Each new business is different, but each comes with a seemingly endless to-do list that often includes gathering market research, securing small business financing from a bank, finding a location, signing dozens of contracts and much more. It stands to reason that a fledgling business owner — or even a seasoned one — might overlook an item or two along the way.
Keep reading to find eight things you forgot to do when you started your business — and why they’re so important for your bottom line.
1. Prove your concept — rigorously
For many eager entrepreneurs, the first — and often only — step they take to validate their big ideas is asking those closest to them for their opinion. After all, their loved ones will surely have their best interests at heart, right?
Not so fast, said Simon Mahler, certified business mentor at SCORE, a nonprofit company dedicated to helping small businesses. “There are three common enemies in the death of business: One is friends, one is family and one is coworkers,” he said, explaining that you will most likely never get unbiased feedback from any of those people.
Instead of relying on yes-men and -women as a sounding board, Mahler has his mentees take their ideas on the road — literally. “They need to talk to 100 people, but they can’t talk to those 100 people in the community in which they live,” he says. “They need to drive.”
Mahler recommends you drive three hours from where you live and stop in a small town. Walk into the small businesses there, introduce yourself and explain your business idea, he said. Listen to the feedback. “You’re not allowed to offer criticism, you are allowed to only take in the abuse,” Mahler said. “Too many small business owners don’t do that at the beginning.”
Soon enough, a consensus should emerge as to whether you have an intriguing idea — or not. Once you’re back home with your idea thoroughly vetted, take the time to figure out whether that idea will work where you live.
For instance, if you’re thinking about opening a glass-blowing business because your town doesn’t have ones, ask yourself why it doesn’t:
- Have five glass-blowing businesses already opened and closed in your town?
- Will you have a customer base — in this case, most likely tourists — to support it?
- Is the glass-blowing industry lucrative and poised for growth?
These are the types of things is what you’ll want to research. Mahler recommends spending a day at the public library or surfing IBISWorld.com, an industry and market research site, to get answers to these burning questions.
2. Work with a mentor
Once you’ve done your research, get some advice from people in the know. This is when a mentor — someone with ample experience in and knowledge of your industry — can be invaluable. A good mentor will help identify holes in your business plan, offer advice for targeting potential investors or simply serve as a listening ear when the going gets tough.
Research also bears out the power of mentorship. According to one study, 70 percent of small businesses that were mentored last for at least five years, which is twice the rate of those that weren’t mentored.
But how do you even approach a potential mentor? When Mahler was ready to launch his own business, he contacted six entrepreneurs — the “biggest fish” in his industry, he said — and asked if they would be open to having a 10-minute conversation with him once a month to answer targeted questions.
“They blossomed into friendships,” said Mahler of his half-dozen mentors, adding that these monthly phone calls soon evolved into open-phone policies to call whenever he needed advice. “It really morphs into something, and you have amazing feedback coming back to you.”
If you’re unable to find a willing mentor in your industry, contact the nonprofit SCORE or one of the U.S. Small Business Administration’s Small Business Development Centers — each will help match you with a suitable mentor.
You might worry that a mentor could steal your business idea, especially given the experience and resources he or she has that you don’t. Although Mahler says that’s a valid concern, his experience has shown the opposite.
“You know what all of them told me? They’re not in it for finding the next big thing — they want to help others succeed. This is a social-collaborative generation,” said Mahler. “[His mentees say], ‘I had no idea these people were so willing to help. I never would have guessed that.’”
3. Clearly define your partnership
Companies can take many forms, and a business partnership can be a good way for a new entrepreneur to divvy up not only the workload, but also the risk of launching a small business. All too often, however, entrepreneurs don’t properly vet partners and spell out the terms and conditions in a way that both parties fully understand.
“You have to really interview people to find the right partner,” Mahler said. “I don’t think people take enough time to do that,” Mahler said, noting that one partner might be working 60 hours and assuming that the other should be doing that as well.
Also, don’t assume the percentage of invested funds dictates the percentage of return. Money is only part of the investment. If a new partner invests only 10 percent but brings along a patent for a product that will add millions to the bottom line, he or she should be compensated accordingly. You must think about these types of breakdowns carefully.
It’s also important you have clear goals and know how big — ideally — you’d like to see the company become. Mahler has seen cases in which a small business expands in a short amount of time, leaving several of the partners unable to answer the rigorous demands of their growing empire. Ultimately, they were forced to sell.
“Again, it just goes back to interviewing, making sure that everybody is all in this together,” Mahler said. Get everything you’ve discussed in writing to not only make expectations crystal clear, but to protect yourself in case the relationship sours for any reason — you’ll want to know exactly what you’re entitled to.
4. Get all your contracts, permits and licenses in order
Launching a small business almost always entails working with a slew of vendors and contractors to provide products and support. Make sure in all cases you have a complete contract that details the terms of the business relationship.
Depending on the type of company you start, you might also need to set up a business entity, such as a corporation or a limited liability company. Requirements for these vary by state, so be sure to read the fine print — the process might be more involved than you initially thought.
Other types of paperwork you might need to deal with could also include permits, licenses, trademarks, patents and lease agreements. Noncompliance can sometimes result in a fine or worse, and that’s not a headache a new business owner wants to deal with on top of all of the other demands of starting a new company. If you’re at all unsure about the paperwork you need to complete to get your business off the ground, contact an accountant or lawyer for guidance.
Check out our Small Business License Checklist.
5. Use guerilla marketing tactics
When you’re ready to open your business, marketing will be crucial to find and attract customers. In this social media age — when those customers seem just one Facebook like or retweet away — it can be tempting to forgo more traditional, low-tech advertising and publicity strategies, especially ones that require a bit of legwork. That is a mistake, Mahler said.
“There needs to be a healthy balance of different types of marketing,” he said. “In the middle is relational. So many people just miss that completely — the whole idea of a relationship,” Mahler said.
What Mahler encourages small businesses to do is to employ guerilla marketing tactics. For instance, if you’re starting a new burger joint in town, posting a photo of a juicy patty melt on Instagram will get only you so far. Customers need to experience the buttery bun and ooey, gooey cheese first-hand.
“I am taking my burgers to the biggest businesses in my community and supplying lunch for that operation,” Mahler said. “So many people are just sitting behind a desk.”
Mahler used a similar tactic for a barbershop’s grand opening, helping the business reap plenty of rewards. The barbershop offered free haircuts to anyone playing little league one weekend. “Now he’s got a line of people who come and see him all the time,” Mahler said. “You’ve got to constantly be thinking out of the box.”
Not only do innovative strategies like these create buzz, they give your potential customers a chance to try out your product risk-free and tell friends and family about it, Mahler said. And that’s called word of mouth, which is one of the most powerful types of marketing.
6. Give back to the community
Another marketing strategy is community service. This doesn’t just bolster a company’s image, it can also greatly impact the bottom line.
Mahler recently put this idea to the test while working with an entrepreneur who invested her life savings in a salon business and was struggling to turn a profit. He suggested something radical: She should close down her shop on the slowest day of the week to offer free beauty services to women at a nearby shelter.
“It turned into this massive story,” Mahler said. “These women would come in and get everything done so they could feel good about themselves when they’re applying for jobs … she partnered with a dentist who would fix their teeth.”
It was so successful that it became a recurring event and the business owner was able to open three additional locations, simply because she gave back to her community. “That stuff goes far, and too many people don’t do that,” Mahler said.
Of course, your approach doesn’t have to be quite so dramatic. Consider hosting a monthly or quarterly volunteer day with your employees or, if you own a restaurant, team up with a local shelter or food pantry to donate unused food items.
7. Keep customers coming back
A business owner’s job isn’t done once the customer walks through the door. Many small businesses live and die by return customers. Not only is customer retention cheaper than customer acquisition, but according to research Bain & Company conducted, a 5 percent increase in customer retention produces more than a 25 percent increase in profit.
This means it’s imperative for a business owner to foster goodwill and loyalty among patrons from the get-go. What’s the easiest way to do just that? With a thank-you card, Mahler said.
“So many people just rely on email, but when you get something tangible in the mail and it’s not ‘I’m trying to sell you’ or ‘I’m asking for a survey’ but is hand-written and simply says ‘thank you;’ boy, that goes far,’” said Mahler.
Another avenue business owners sometimes often overlook for customer retention is the Yelp review, which many restaurants just ignore, Mahler said. Instead, you should be proactive and reach out to those who leave reviews, especially negative ones. “Welcome them back in and then have them leave another review that says, ‘I went back a second time — it was phenomenal. I’m coming back a third,’” he said.
Don’t forget about incentives, too. Everyone loves a bargain — a customer loyalty or punch card is sure to bring customers back if a free sandwich, cookie or coffee is part of the deal, Mahler said.
8. Always innovate
Sure, you just launched your business yesterday, but it’s never too early to look toward the future. In a 2015 Deloitte Innovation Survey, 96 percent of respondents said innovation was among their top five strategic priorities. An innovative mindset is not only key for a long-term growth, it differentiates a business from its competitors as it expands.
Just imagine if Apple decided to stick to only computers and never venture into the mobile phone market. “You should absolutely [innovate],” Mahler said. There are lots of ways to approach it, from asking your customers what they want to quizzing employees regarding holes they see in the business. Whatever approach you take, just do it. You’ll thank yourself later.