Basic Business Principles
We have all considered it and some of us are either naturally good at it or require a lot of research and development before we find the perfect business idea. A lot of people frown on the prospect of starting a business and usually put it in the same category as winning the lottery or finding a bag full of cash. These people are the same ones who don’t have a lot of ambition and would never be able to create a business with that train of thought, anyway. While a good dose of luck should never be wasted, it isn’t about luck when it comes to business. What it is about is a fine blend of knowledge, common sense, market research and the panache required to at least give it a shot.
Businesses Do Fail
There are many reasons why a business can fail. Numerous studies show that well over 70 percent will fail in the first year. Some of the world’s most successful entrepreneurs failed miserably many times before they finally learned the ropes and achieved lift off. Henry Ford failed several times before he won the title of industry leader. Another example is Walt Disney, who was fired from a newspaper because “he lacked imagination and had no good ideas” and went bankrupt several times. Even his proposed theme park was initially rejected by the city of Anaheim on the grounds that “it would only attract riffraff.” It would be wise to study some of these businessmen and learn from their mistakes before you make your own. I will tell you though that the most common reason for business failure is an extreme lack of research. Other reasons why businesses fail could include:
- Starting for the wrong reasons – i.e., just to make money
- Entering a market the owner has no idea about
- Insufficient capital – all businesses require input of some kind, whether it be monetary or otherwise
- Not following their business plan – business plans aren’t created just to tell the investors you know what you are doing. They are there to serve as a guide to help you through all the stages of your business
- Poor management
What Do People Want?
The basic principles behind a successful business are the following: having the ability to offer goods and/or services and to be able to ascertain what people are willing to pay for. There are a million other aspects to running and keeping a business afloat that are all learnable. The initial idea, however, is the hardest part. It’s the one you have no doubt found yourself pondering. Take some time to think about what people want and what people need and how you can give it to them. People will happily pay for something if it has some use to them. Have a look at this article by Paul Graham, written in 2005. He offers some insight into the fact that new entrepreneurs often consider what “they” want and not what “other” people want.
Have you heard the idea: “Take a guess what your startup costs will be, then multiply it by 10 and you will have a closer answer?” It is more than likely that starting a business will be expensive and that is usually the factor that causes the majority of people to give up. A lot of research will help you determine a more accurate answer, but we can return to one of the most basic principles of entrepreneurship for guidance:
How Can You Take Something that Costs Nothing and Sell for Something?
It is all about getting the most profit for your buck, but understandably this depends on which avenue you have chosen to pursue. Starting a business on the World Wide Web can cost you next to nothing with fewer risks when compared to that of a physical business. We all want to own large enterprises and grow empires, but unless you have a phenomenal idea and access to an adventurous investor, the only way to start up is by starting small. That way, even if your business does fail, you can learn from your mistakes and your house won’t be up for auction.