How to Start a Business
The first and most important question we should ask ourselves is:
Why do I want to start a business?
People are driven to entrepreneurship by very different motivations. Some want to earn more money. Some want independence and greater control over their lives, deciding for themselves when, how, and with whom they work. Others notice a problem that they believe has no adequate solution and decide to create one. Some people are interested in the process of building a company itself. Others simply cannot find a suitable job, so they create one for themselves. And of course, some are partly attracted by status: being able to call yourself an entrepreneur, business owner, founder, or CEO sounds appealing. Several of these motivations can exist at the same time.
What matters is understanding what actually drives us, because that will influence what kind of business makes sense for us.
What Kind of Business Fits Your Goal?
Four people can all say that they want to become entrepreneurs while wanting completely different lives:
One wants to make as much money as possible.
Another wants nobody telling them when they have to work.
A third wants to build a huge company as their life’s work.
A fourth simply wants to make a comfortable living doing something they are good at.
These goals require very different business models.
If You Want to Make More Money
This is particularly straightforward for people who already have a valuable professional skill. An electrician, accountant, programmer, consultant, mechanic, or other skilled professional might reasonably ask:
Why am I doing this work for someone else’s company when I could sell the same service directly to my own customers?
One of the basic principles of business is that the value created by a company must, over the long term, cover wages and every other operating cost while still leaving a profit. If someone performs valuable work for a company, then at least in theory they may be able to use the same skills in their own business.
An experienced professional often starts with several major advantages:
professional expertise
industry experience
existing connections
knowledge of the market
a rough understanding of pricing
perhaps even satisfied customers who already know their work
That is a significant advantage.
There are risks, of course. A larger and better-funded competitor — perhaps even the company you previously worked for — may temporarily offer prices that you cannot match simply to push you out of the market. A large company can survive a few unprofitable jobs much more easily than a new business can.
There are several ways to defend yourself against this: stronger customer relationships, better service, faster response times, specialization, or simply providing a customer experience that a larger competitor cannot easily reproduce.
There is another important difference. As an employee, you usually perform only one part of the overall process. Once you own the business, all the supporting tasks suddenly become your responsibility as well. Doing the actual professional work well is only one part of the job. You also need to find customers, prepare quotes, invoice them, purchase supplies, handle complaints, pay taxes, arrange insurance, schedule appointments, and maintain records. In the beginning, this can require considerably more work than performing the same technical job as an employee.
We should also account for the possibility that, at first, we will probably earn less rather than more and that smaller amount may require significantly more time and energy. Over the long term, however, persistence and consistency can take a business a very long way.
If You Want Independence
In this case, it is especially important to think about the type of life the business will create.
Many people leave employment because they want to decide for themselves:
when they work
how much they work
where they work
which customers they accept
who they work with
A business can easily create an even more restrictive lifestyle. A restaurant owner, for example, often works evenings, weekends, and holidays exactly when everyone else is enjoying their free time. An online consulting business or project-based service may offer far more flexibility. So an important question is:
How dependent is the business on my personal presence?
If freedom is the main goal, it makes sense to choose a business model that gradually becomes less dependent on a specific place, schedule, or daily operational involvement.
If You Want to Solve a Problem
This is the classic startup situation. You notice something that works badly and think, "This could be done better."
The solution could become a product, a service, an application, or even an entirely new business model.
There is a very common trap here. Just because we believe a problem is important does not mean other people are willing to pay to solve it. That is why testing the market is particularly important. One useful approach is to begin advertising the product or service before it even fully exists. If enough potential customers are genuinely willing to buy it, then developing it may make sense.
Quite often, however, the opposite happens. We need to be willing to accept that information rather than denying reality. Sometimes we simply have to admit: This idea did not work.
If You Want to Create Your Own Job
This can also be a perfectly workable goal. Someone can be excellent at what they do while still having difficulty finding a suitable job. They may also simply prefer working independently. A one-person business can be an excellent solution in that situation. Handyman services, cleaning, landscaping, tutoring, bookkeeping, photography, consulting, and many other services can work perfectly well this way. The success of a business should always be measured against the goal for which it was created. If someone earns a stable and comfortable living from a one-person business, there is no reason to start hiring employees and expanding purely because a bigger company sounds more impressive.
If You Want to Build a Large Company
This requires a very different way of thinking. If your goal is eventually to employ hundreds or thousands of people, it makes sense to look from the beginning for a business model that is:
repeatable
standardized
delegable
capable of operating in multiple locations
sustainable at higher volume
relatively independent of one individual’s unique abilities
Even in the early stages, it is useful to consider whether other people will eventually be able to learn and reproduce what you are doing. This is exactly why processes and delegation become increasingly important later.
If Status Is What Attracts You
Status by itself is a particularly poor reason to start a business. The titles “Founder,” “CEO,” and “Business Owner” may look impressive from the outside, but they create no business value by themselves. A business works because it has paying customers, sufficient margins, well-designed processes, and the ability to consistently generate more revenue than it costs to operate. If someone is mainly motivated by being able to call themselves an entrepreneur, they can easily start making poor decisions. They may spend money on things that look impressive from the outside while contributing very little to the actual business:
an expensive office
an impressive website
a premium company car
an unnecessarily large team
inflated job titles
expensive branding
events and appearances that produce no business
Meanwhile, the far less glamorous activities that actually build a company may receive less attention: customer acquisition, sales, cost control, complaint handling, invoicing, process improvement, and a large amount of repetitive daily work. Status can certainly be a pleasant side effect of building a successful business. As a primary goal, however, it can push people toward trying to look like successful entrepreneurs before they have actually built successful businesses. If someone realizes that prestige is the main reason they want to start a company, they should seriously reconsider the idea. Starting a business requires too much money, time, effort, and risk to do it purely for an impressive title.
Is There Anyone Willing to Pay for It?
Once we understand why we want to start a business and roughly what kind of business fits our goals, we arrive at the second fundamental question:
Who is going to pay for this?
Countless businesses fail at this stage. Someone has what they believe is a fantastic idea. They register a company, design a logo, build a website, buy equipment, order products and a few months later discover that people simply do not want to buy what they are selling. At the beginning, we should test one very simple assumption:
There is a group of people who have a problem or need, and they are willing to pay for what we offer.
To determine whether this is true, we need answers to questions such as:
Who is the customer?
What problem are we solving?
How important is that problem to them?
How do they currently solve it?
How much are they currently paying?
Who are our competitors?
Why would they choose us?
Are they actually willing to pay for it?
The last question is particularly important.
Suppose we ask ten friends:
“Would you use an app that automatically plans your meals every week?”
Eight of them might say:
“Sure. That sounds like a great idea.”
Then we build it, charge $15 per month, and none of them subscribe...
Try to Sell First
One of the most important jobs of a new business is to determine whether genuine demand exists while spending as little money as possible. Suppose we want to start a cleaning company. We do not need to immediately rent an office, hire five employees, and buy three brand-new vans. First, find one customer. Clean the first house. Then examine:
how long it took
how much cleaning material we used
what the travel cost was
how much the customer paid
whether the customer was satisfied
whether they would use the service again
If the model works the time and materials are covered, and the customer is satisfied then it makes sense to look for another customer. Meanwhile, we can continuously improve the service. Sometimes one real customer teaches us more than a hundred pages of business planning.
Know Your Numbers
The next important question is:
Are we actually making money?
Revenue alone tells us very little. A company can generate $100,000 in monthly sales while spending $110,000. That is simply a rapidly growing loss. We need to understand our costs:
materials
wages
employer payroll costs
rent
transportation
insurance
marketing
software
accounting
banking fees
equipment
taxes
every other operating expense
One of the most useful questions we can ask is:
What happens financially every time I sell exactly one unit?
If we sell something for $50 and every sale creates $45 in direct costs, then $5 remains to cover fixed costs and profit. If we lose $2 on every transaction, then selling more simply causes us to lose money faster. Before growing, we need to make sure the underlying business model works.
Competition Gives You Useful Information
Many people search for a completely original business idea. Most of the time fhey fail. Existing competition can actually be a good sign. If there are twenty landscaping companies operating in an area, it suggests that people are willing to pay for landscaping services. If nobody else offers a particular product, perhaps we have discovered an incredible opportunity. There is another possibility: other people already tried it and discovered that there was not enough demand. So we should look at:
who the competitors are
what they charge
who their customers are
what customers like about them
what customers complain about
what we could do better
A competitive advantage is often surprisingly ordinary. We answer the phone faster. We arrive on time. We communicate better. We work more cleanly. Booking an appointment with us is easier. We prepare quotes faster. Sometimes that is enough.
The First Working System
Once we have customers, generate a profit, and begin receiving more work, a new problem appears:
We run out of time.
In the beginning, the owner usually does almost everything. They answer the emails. They talk to customers. They perform the actual work. They issue invoices. They place orders. They solve problems. At first, this can actually be an advantage because it allows us to understand every part of the business directly. Eventually, however, we ourselves become the limit on growth. If we can serve a maximum of 40 customers per week, it does not matter if demand exists for 100. At that point, we have three main options:
raise prices
improve the efficiency of our processes
give part of the work to other people
Usually, we will eventually need all three.
What Should We Delegate?
The simplest method is to start by examining where our time goes. For a few weeks, we might record how much time we spend on each task weekly:
administration: 10 hours
customer work: 20 hours
phone calls: 5 hours
invoicing: 3 hours
ordering: 4 hours
problem-solving: 8 hours
Then, for every task, we ask:
Do I personally need to do this?
Frequently repeated tasks that are easy to teach and easy to measure are usually good first candidates for delegation. For example:
data entry
packaging
appointment scheduling
standard customer service tasks
order preparation
simple administration
standardized professional work
Over the long term, the goal is for the owner to have fewer and fewer tasks that only they are capable of performing.
Build the Process Before Delegating
Before handing over a task, we first need to understand how we want it to be performed.
Suppose we operate a cleaning company. If every employee uses a completely different method, the results will also be unpredictable. We could establish a standard sequence such as:
bathrooms
bedrooms
living room
kitchen
vacuuming
mopping
final inspection
We can define it even more precisely:
which cleaning products to use;
in what order the work should be performed;
what must be checked
how the work should be documented
when the job is considered complete
This is commonly called an SOP, or Standard Operating Procedure. An SOP is essentially a documented method for performing the same task consistently. It becomes increasingly important when we can no longer personally supervise every employee’s work.
Don’t Be Afraid of Employees Learning Too Much
Many business owners eventually have the following thought:
What happens if I teach my employees everything, and then they leave and start their own company?
After all, perhaps that is exactly what we did ourselves. It is a real risk, and eliminating it completely is probably impossible. One of the best defenses is building a workplace that people do not want to leave. Compensation is only one part of that. Other factors may include:
performance bonuses
profit sharing
stock or equity at certain levels
opportunities for advancement
training
professional development
flexible scheduling
good managers
a predictable work environment
simple employee benefits
Sometimes surprisingly small things can have a significant effect. I once worked at a company with roughly 50–100 employees where free snacks, protein bars, muffins, soft drinks, and similar items were always available. It may have cost the company perhaps $10–15 per employee per week. Financially, that was insignificant. Employees loved it. On busier days, pizza or sandwiches would arrive for the entire team. These gestures helped create the sense that the company’s success was a shared achievement and that employees benefited from it as well. A motivated employee is generally more productive and less likely to be constantly looking for another job.
Delegate Decisions Too
A business can easily become stuck when the owner has delegated the work while every decision still has to go through them.
“Can I give this customer a discount?”
“Can I order this?”
“What should I reply?”
“Can I ask John to come in on Saturday?”
“Can I refund this customer?”
If twenty employees ask the owner three questions per day, the owner already has sixty decisions to make. Over time, decision-making authority also needs to be delegated. For example, a manager might be allowed to:
approve purchases up to $500
provide discounts of up to 10%
compensate an unhappy customer up to a certain amount
independently modify the weekly schedule
This allows employees and managers to clearly understand the limits of their authority.
How Do We Know Whether It Is Working?
As a company grows, we become less able to personally inspect every individual job.
That is why we need metrics.
These are commonly called KPIs or Key Performance Indicators.
A restaurant might track:
daily revenue
average order value
food cost
labor cost
preparation time
number of complaints
A plumbing company might track:
number of completed jobs
average revenue per job
number of callbacks
revenue per technician
average response time
customer reviews
If the number of complaints associated with one technician suddenly doubles, we have a signal that something deserves investigation. The owner does not need to personally inspect every single job.
Process First, People Second
When there is too much work, it is easy to think:
I need to hire someone else.
Before doing that, we should examine why the overload exists. Suppose someone spends four hours every day copying information from one system into another. We could hire an employee for $40,000 per year to do it. A simple software integration costing a few hundred or a few thousand dollars might eliminate the entire task. Before creating any new position, we should therefore ask:
Do we really need another person?
Can the process be simplified or automated?
Can the task itself be eliminated?
The cheapest work is work that nobody has to perform anymore.
When Does a Business Start to Scale?
We have now reached another stage. We have a functioning product or service. We have customers. We understand our costs. We have processes and SOPs. Some tasks are delegated. Now we can ask:
How can we serve far more customers without increasing our costs and the owner’s workload at the same rate?
That is scalability. If a barber can cut eight customers’ hair per day, then serving eighty customers will require roughly ten barbers. Labor requirements increase significantly along with revenue. Software is very different. Developing a program can be expensive, but the cost of serving one additional user is often very low. That is why software can scale much more aggressively. Traditional service businesses can also become increasingly efficient, however.
Economies of Scale
Suppose we pay $1,000 per month in various fixed costs. With ten customers, that equals $100 per customer. With one hundred customers, it equals $10. With one thousand customers, it equals $1.
In reality, new costs will appear as the business grows, but the basic principle still applies. A larger business may:
receive better purchasing prices
make better use of equipment
hire specialized employees
automate more processes
negotiate better contracts
distribute fixed costs across more customers
This is one of the foundations of economies of scale.
Specialization
In a two-person company, everyone does everything. In a company with one hundred employees, that would make very little sense. As the business grows, specialization begins to appear. One person handles sales. Another handles purchasing. Someone works in customer service. Someone manages accounting. Someone manages production or service delivery. Specialization can increase efficiency because people develop deeper expertise in smaller areas. Excessive specialization, however, can create too many handoff points. Handoffs create waiting, misunderstandings, and errors. The goal is to create a system with clear responsibilities while keeping the process from becoming unnecessarily complicated.
The Owner’s Job Keeps Changing
Something interesting happens as a business successfully grows. During the first year, the owner may personally perform 80% of the technical work. Later, they hire and train people. Then they increasingly organize the work of those employees. Later still, they hire managers who supervise the employees. The owner’s role gradually shifts toward areas such as:
strategy
financial planning
selecting leaders
entering new markets
investments
new products and services
business relationships
long-term development
In a well-built company, the owner gradually becomes less essential to daily operations.
One of the Best Tests
There is a very simple thought experiment for this.
What would happen if the owner stopped working for one month starting tomorrow?
If the business collapsed within two days, it is still extremely dependent on them. If it continued operating with some minor problems, then a certain degree of independence has already developed. If customers continue receiving the same level of service, employees know what to do, managers make the necessary decisions, and the financial results remain healthy, then a real operating system has been created. At that point, the owner’s time begins to become available for something else. And now they can start asking completely different questions:
Can we open a second location?
Can we enter another city?
Can we launch another service?
Can we automate the next process?
Can we operate the same system at ten times the current scale?
The journey of a business therefore looks roughly like this:
motivation → appropriate business model → validation of demand → first customers → profitable operation → processes → delegation → management system → scaling
Each stage creates a different problem.
At the beginning, we are trying to determine whether anyone is willing to pay for what we offer. Later, we need to figure out how to deliver it consistently and profitably. Then we need to figure out how other people can perform the same work. Finally, we need to figure out how the entire system can continue growing without every new customer creating the same amount of additional work for the owner.
Good luck!
But if you need some help, feel free to contact the OptimyBiz team.
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