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Business tips for entrepreneurs

1. Only one in twenty prospects will actually buy your product/service

For every twenty people who inquire about your product/service, only one will buy it. Most new entrepreneurs do not realize that and naively think everyone who knocks on their door is genuinely ready to purchase. After you have been in business for a few years you will be able to quickly filter out your prospects so you can spend your time on the most likely prospects ready to buy.

More than half of all prospects are not serious at all . Of the remaining half, half are unable to buy because of price or some other reason. That leaves only five left. Of those five most are simply dragging their feet. They may buy from you later down the road but do not have the urgent need to buy now. That leaves just 1 or 2 people who will buy from you now. I have found that 1 in 20 is fairly conservative. Some months it may be a little higher, but it can also be even lower ( though rarely ).

2. Charge by expecations

One price fits all is fine for large corporations that offer a highly evolved product to a large customer base. However, as an entrepreneur you are in perfect situation to provide tailored pricing depending on what your clients expect. You will quickly find out that the larger your client, the more they expect. The more a client expects, the more you can charge them for your services. With higher prices you can promise faster support and priority for new feature request and bug fixes for those clients that need it.

Typically the larger the company the larger the financial liability you will have for errors in your product/service. You also need to consider the time value of money for larger companies, where employee hourly rates are much higher than minimum wage. Smaller businesses tend to be more flexible and understanding of 'glitches'. However, be wary of those starting new businesses. They can be the most demanding and greatest nuisances due to their inexperience. Basically use your gut to determine the nuisance factor for a customer and charge accordingly .

Offer tiered service plans that can appeal to the budgets and expectations of all types of clients. Remember the larger your customer base, the faster your service can evolve. So it is in your best interest to not turn away any customer, no matter how small their budget it. With more people using your service, you will find yourself inundated with new feature requests and bug reports. This will make your service far more reliable and robust which in turn will let you sell your services to larger and larger companies.

3. The customer does not care about you

Contrary to your instinct, the customer could not care less how many mouths you have to feed when deciding whether to do business with you. Your personal situation is exactly that, your personal situation. The customer only cares about the product/service you are offering and nothing more. If the price they can afford is not enough to pay your bills, that is your problem, not theirs. Do not waste your time explaining why you need to charge the prices you do. It is not the prospects concern. If you can not find enough prospects to afford your pricing, then you need to modify your pricing , change your lifestyle, or find a different business to make a living from.

4. Be prepared to do 100 useless tasks every day

When running a business you will find yourself doing dozens of seemingly meaningless tasks every day. In fact each task will appear so meaningless that any average person would feel humiliated doing them. You will have an internal monologue persisting that questions which idiot would waste his time on such trivial tasks? What you have to understand are three things:

  1. You are not average joe. Average Joe would think you are an idiot for doing the things you do because they have no aspirations of building anything really big. They are content with mantaning status quo and incrementally improving their life at a rate just barely above 'inflation'.

  2. When you are not earning from your business the value of your time is zero! So it does not matter how much you could earn in your day job per hour. When you work for yourself your hourly rate is zero. So any task, no matter, how trivial, will increase the value of your time.

  3. What you are doing is laying down bricks to build walls. Each trivial task can be thought of as a brick. By itself , each brick has little value, but collectively they form a powerful wall . Once you build several walls, you can build a building. One you build several buildings you have a foundation for a city.

    With each wall you build, the bricks become stronger and more meaningful. The value of one trivial task today equals the value of a hundred trivial tasks a few years ago. You will focus your time on tasks that are based on established knowledge derived from laying many thousands of bricks earlier. This is referred to as conglomeration of your knowledge and experience. Ten years ago building bricks might mean proofreading your website , but now it could mean negotiating multi-million dollar contracts.

5. Make lists

You will need to get a small pocket notepad so you can keep track of all the things you need to do. As soon as you have an idea , jot it down in your list. When you finish the task, cross it off. When the whole page of tasks are crossed out then rip the page out! You can also use your list to set tasks for the future by writing them on a few pages ahead.

The human brain is notoriously bad when it comes to short-term memory. If you go to a party and are introduced to six people, chances are you will forgot all their names immeadiately. But if you write each name down you will remember them. The same goes with tasks for your business that need to get down. Often you will think of something that needs to be done but are not in a right position to do it immeadiately. So you jot it down and complete it when conditions are more conducive to completing it. If you do not write the task down you will surely forget about it just as easily as you forget the names of people you are introduced to. Redundancy is a good thing

6.Make these cliches your new religion

Get my point?

Avoid these cliches:

7. You are in the business of meeting a customer need

Too many businesses think their only focus is to build the best product/service. Kind of like, "Keep building it and they will keep coming ". While this may satisfy your ego, it is the opposite way real business works.

You are in the business of meeting your customer needs, not selling solutions to problems that do not exist. If your customer needs change , then you need to adapt your product/service to meet the new need. Otherwise you will quickly get caught by the obsolesence bug! So don't put the cart before the horse. First concentrate on identifying customer needs, then build solutions to satisfy those needs.

8. Watch out for the little guy with the big head

The most difficult prospective customer is the little guy with the big head. They demand all types of complexity and legal mumbo jumbo. Typically they are launching a new business and have no idea what to expect. Consequently they rely on their only source of experience, television!

On TV everything is done with a bang and lawyers are always involved. So the little prospective customers does his best to emulate that manner of doing business. They do not realize that TV is nearly always the exact opposite of the way the world really works.

Furthurmore, most are unaware that 90% of new businesses fail in the first five years. They are in a frame of mind that can only see great success ahead. You have to be careful not to offend this prospect by trying to put them in their place. My solution is to be firm and upfront with them to move their expectations closer to reality.

9. Build it and they will NOT come

This is one of most destructive myths that if you build it they will come. It simply does not work 90+% of the time. No surprise that 90% of businesses fail in the first five years! Always take an incremental approach to everything. Get your idea out there first to test the waters. Offer your product/service for free. If the fish do not bite something free, they surely will be nowhere around when it comes to spending their money!

10. Change your lifestyle so you can be the cheapest option

If you want to make your business bulletproof then you need to practice the highest level of frugality so that you can charge your customers the lowest price. This is essentially how Wal-Mart succeeded. Sam Walton practiced a frugal lifestyle and was able to beat all his competitors by selling at prices they could not believe. I encourage you to read his autobiography, 'Made in America'. For tips on how to live frugally, see my article here.

11. Make things as easy as possible for the client

Don't waste time writing up complex contracts with convoluted payment terms. Focus on the relationship you are developing with the client. If it is based on mutual trust then there is no need to worry about protecting yourself with legaleese. Make things simple for your client by having simple payment terms like one time online payment with their credit card.

12. Focus on the 80/20 solutions

Common sense would tell you a more expensive product is better than a cheaper one. In reality, the opposite can be true, i.e cheaper is better. There are several reasons why cheaper products are generally better. The first reason is due to the simple 80/20 rule.

Consider a 'perfect hi-end product' which has nearly every feature the most demanding customer needs. According to the 80/20 rule, 80% of the hi-end product's functionality can be achieved with just 20% of the cost of making the hi-end product. The most expensive part for the manufacturer is to produce the additional 20% of functionality beyond the 80% .

Why is this so? The reason has to do with economies of scale. 80% of prospective customers are satisfied with a product that has 80% of the features of the 'Perfect Product'. Therefore manufacturers are able to produce these products in mass and save enormously from volume discount and economy of scale. A robot welding a hundred identical car frames is a lot cheaper, faster and consistent than a human welding each custom car frame together by hand.

13. Don't let customers run you

If you go the extra mile to please your customers then they will just run you. This means they will increasingly bombard you with trivial requests because they think you are so eager to please them. Unfortunately, rarely will they compensate you adequately for the extra effort you put into pleasing them. Focus on your core duties and avoid letting customers run you by being overly obliging.

If you have nothing else to do or are fearful of losing your business/job, then sure you can do that. Just do not expect the returns to be proportional to the extra effort you are putting in. If you have high expectations for rewards, then over time this will lead to increased stress and frustration. To avoid this buildup I make it very clear to my customers that I will not be run.

14. Compete with yourself

Create multiple brands and flavors of your product and market each seperately. Try different approaches with each to see what works. Of course, keep your main focus on your primary brand. Customers place a high value on an established business. So use your self-competing brands to try more snazzy things.