How to Start a Business, Your Guide to Financial Independence
Updated: Nov 7, 2023
Businesses have tremendous upside and potential to build a life for yourself that you never thought was possible. Embarking on your journey of starting a business is an exciting and monumental pursuit but also an opportunity to explore sides of yourself you've never seen before. I have helped many business owners in my career run their businesses and start new businesses, this has taught me some key insights into what the first steps to starting a business should be. This is, how to start a business, your guide to financial independence.
I have previously written about the steps to take prior to starting a business which you can see here https://www.themattjordanquest.com/post/5-steps-you-need-to-take-before-starting-a-business I would encourage you to check this out so that you can start your business with the best chance of success.
Identifying Your Business Model: The Blueprints
Starting your business requires you to make a choice between the business model that you want to run, each of which has its own advantages and disadvantages. In my opinion, there are 2 key business models to choose from:
The Service-Based Model
The Product-Based Model
The Service-Based Model
A service-based model revolves around expertise, convenience, and customization. This model involves exchanging your time for a service, think accountants, lawyers, gardeners, and painters. This type of model is as old as time and is a core foundation of our society. An exchange of services for money is a tried and true method and, if you already have the expertise, is relatively easy to get going.
Advantages
- Services typically don't cost a large amount of capital upfront to get going, you can offer your services freelance on websites like Fiverr.
- You can work as much or as little as you like, your revenue is a direct result of the hours you put in.
Disadvantages
- You most likely need expertise or qualifications to start selling your services.
- In order to scale, you need to invest more hours or hire others to invest their hours.
Overall the service-based model is great for those who would like to start something on the side within a field or industry they have current expertise. The service-based model does tend to struggle when trying to scale the business as you need more hours to exchange for more revenue. Be careful with a service-based business model that you aren't just building yourself a job.
The Product-Based Model
A product-based model revolves around developing some form of product that can then be sold or exchanged independently of your time. This type of model includes creating monetizable content, developing an online store, or selling any type of physical product. The beauty of this model is that it doesn't require expertise to start but the other side of that coin is that it can often require a fair bit of start-up capital depending on the business.
Advantages
- Products can sell independently of your time meaning you can make sales while you sleep.
- The model is scalable and the reach is potentially global.
- Typically no qualifications are needed.
Disadvantages
- You may need to invest more hours than the service model upfront to get the product off the ground.
- It is harder to gradually build on the side.
- The business may need more capital upfront.
Overall the product-based model is great for those who are willing to put in more work upfront to build something that can sell independently of their time. I have also included the content model here as creating Youtube videos or Blogs are effectively products that can be "sold" independently of your time. As it does require more work and potentially more capital upfront there is a higher risk of loss if the business is not successful.
Choosing the wrong business model may result in a business that does not suit the lifestyle you were looking for. As an example an accountant trades their hours for income each day and maybe that is not included in their ideal lifestyle so they may opt for a blog or youtube channel as their product so that they can have more freedom in their time (this is my story by the way).
Building a Minimum-Viable-Product: Getting Going
Your minimum viable product (MVP) is the product that is mostly complete that you begin to market. Getting stuck in a state of perfectionism to get the "perfect" product is what causes so many products to never launch. To remedy this, I would suggest getting an MVP developed and starting to get it out there. This will give you valuable feedback and insights about the product and its operation. Your MVP should focus on the core functionalities and ensure it captures the value that you are trying to bring to your audience.
The Parable of the Pottery Class
One of my favorite insights comes from David Bayles & Ted Orland's book, Art & Fear:
"The ceramics teacher announced on opening day that he was dividing the class into two groups. All those on the left side of the studio, he said, would be graded solely on the quantity of work they produced, all those on the right solely on its quality. His procedure was simple: on the final day of class he would bring in his bathroom scales and weigh the work of the "quantity" group: fifty pound of pots rated an "A," forty pounds a "B," and so on. Those being graded on "quality," however, needed to produce only one pot—albeit a perfect one—to get an "A."
Well, came grading time and a curious fact emerged: the works of highest quality were all produced by the group being graded for quantity. It seems that while the "quantity" group was busily churning out piles of work—and learning from their mistakes—the "quality" group had sat theorizing about perfection, and in the end had little more to show for their efforts than grandiose theories and a pile of dead clay."
I was fascinated when I first read this, but it began to click. The more you practice developing a product or skill, the more you can refine it based on feedback from yourself and others. this refinement process is far more valuable than any "perfect" theorizing you can do yourself.
Get a minimum viable product up and running and then you can refine future iterations until you get a product that's far superior to what you could have developed on the first try.
Strategic Thinking: Charting a Course for Success
Once you're up and running with a product that represents the core functionality of what you're trying to sell and you've made some initial sales or started providing your service to some initial customers it's time to get strategic. In the book "The E-Myth Revisited" author Michael E. Gerber explores some key misconceptions about small business.
The first concept is that someone who is good at a particular skill will necessarily make a good business owner. As a business owner, you have to detach yourself from the technical work of providing your landscaping service or working on your product and situate yourself as the business owner. Your role is to run the business not work in it. A balance of these 2 roles is essential for a successful business.
The second concept is to treat the business as a "franchise". This involves creating systems, documentation, and operation procedures that allow the processes to be replicated to ensure consistency and quality. By standardizing and documenting procedures you formalize a process, this is why McDonald's can make the same burger anywhere in the world and it will taste very close to the same.
Finally, the third key concept I wanted to talk about was business development. Gerber's approach to business development is systematic and involves innovating and orchestrating the business so that the business can operate independently of the owner. Remember, your job is a business owner not an employee within the business, your role is to work on the business not in the business.
Comments