10 Ways You May Waste Money When Starting a Business

Here’s just a short list of the misguided (and even ridiculous) business start-up advice I’ve read recently:

• Create an instant-impact message that describes the chief benefit of your business. Put it on business cards and brochures.
• Hand out hundreds of those business cards and brochures at business functions and meetings.
• Find a great office space and fill it with furniture.
• Take a field trip to discover how your product or service will satisfy people’s desires.
• Protect your “great ideas” by registering your business name, logo, and slogan.
• Create a paper trail — tracking all meeting dates, attendees, and discussions.
• Consult a lawyer and get his or her advice on how to set up the right legal structure for your business.
• Check with your municipality to make sure they permit you to operate a venture like yours out of your home.
• Buy business insurance and “talk to an accountant or attorney” to make sure you’re not missing anything.
• Get a toll-free phone number (to give the impression that your business is much bigger than it really is).

If you do these things before you find out whether your product can sell… your business is practically guaranteed to fail.

Entrepreneurship is based on selling. You test the market with a product you think will sell well. If it does, you keep selling. If it doesn’t, you try something else.

This approach lent its name to my most recent bestseller, Ready, Fire, Aim. The main point of the book is that to start and grow a small business, you must have a pragmatic, action-oriented mentality. Rather than spend too much time and money refining theoretical ideas, you develop a prototype quickly and then see if the market will buy it.

As I said in the book, for every business that fails because of poor planning there are a dozen that never get off the ground because of too much planning.

The Ready, Fire, Aim approach obviously doesn’t apply to surgical procedures and rocket science. But it will be very useful for 90 percent of the new-business ideas you are likely to come up with.

Want to start a business selling diamond-studded collars for kitty cats? Fine. There are two ways to go about that:

• You can spend most of your time and money designing and manufacturing a line of such collars — and only after that is done, start to think about how you can sell them.
• You can make a single collar, go down to your local flea market or neighborhood pet shop, and see if you can find a customer for it.

Most people start businesses the first way. That’s why most businesses fail.

But with the Ready, Fire, Aim approach, you devote 80 percent of your initial resources to discovering an efficient way to sell the product. Once you have done that, you have found the key to successfully market it. With that key in your pocket, you don’t have to worry about all the other problems that will arise in the natural course of business. You won’t have to worry, because you will be able to create the one thing that can solve almost every business problem: cash flow.

Here, in a nutshell, is what I mean by Ready, Fire, Aim…

Ready: Get your product idea ready. Make it good enough to sell. Don’t worry about making it perfect. There will be time enough for that later.

Fire: Start selling it. Sell it every way you can. Test different offers. Test different ad copy. Test different media. Keep testing until you discover something that works. This is what we refer to as your Optimum Selling Strategy (OSS).

Aim: Expand your customer base by focusing on your OSS. As your customer base grows, develop business procedures to accommodate that growth. Hire the best people you can to manage your business. Discover, through “back-end” marketing tests, other products and services that your customers will buy. Use those discoveries to refine and perfect a fast-selling line. As this back-end business flushes cash into your company, invest a good deal of that cash into front-end marketing.

Ready, Fire, Aim doesn’t mean you are willing to be sloppy. Nor does it mean you are willing to sell second-rate products to your customers. On the contrary, Ready, Fire, Aim is the only truly practical way to find out what your market really wants from you.

And for a small business, Ready, Fire, Aim is the best way to get from good to great.

Think of it this way: When we say we have “a great new product idea,” what do we really mean? When I say that, I mean I have a strong feeling that the product will sell well — that it will be a big, commercial success.

But the truth is, I have only a hunch about how well my idea will do. Experience has taught me that my hunches are often right… but not always. If I spend too much time and energy on a business based on conjecture, what happens if my assumptions don’t pan out?

What happens is that I’m left with nothing — no money or materials or energy — to start over again. The essence of entrepreneurship is the ability to try and fail and then try again. You can’t do that if you blow your wad the first time you try.

So nowadays when I get the feeling that I have a great idea, I figure out how I can test that idea as quickly and as cheaply as possible.

Once I know the idea has “legs,” I can roll out a sales program. And once a successful sales program is underway, I can refine and improve the product. The truth is, I can never perfect a product in isolation. I used to think I could, but, once again, experience has taught me the arrogance of that kind of thinking.

To get from good to great, you need the help of superstar employees and, most of all, feedback from your customers. The best customer feedback comes not from surveys or focus groups but from marketing results. Find out what your customers want by selling things to them. This gets you back into the Ready, Fire, Aim loop.

If I had to pick one thing — one characteristic or quality of my work that is most responsible for the success I’ve had launching businesses — I’d have to say it was this Ready, Fire, Aim mentality. It’s something I believe in strongly. That’s why I wince when I read the start-up advice of so many “experts” who advocate feel-good busywork over selling.

Again, here’s my advice for starting a business:

1. As soon as possible, get the product ready to test.

2. Test it as aggressively and creatively as you can. Spend 80 percent of your initial resources discovering the most cost-effective way to make the first sale (your Optimum Selling Strategy).

3. Refine and adjust your sales process as market conditions change. At the same time, gradually develop business procedures to service your customers and improve your products according to their buying preferences.

[Ed Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]