I’d like to begin this post with a story.
A friend of mine had started up an education center for children specializing in “Cognitive Education”, which employs psychology in order to educate children more effectively and raise their intelligence levels. I even attended the launch party. He was very optimistic about his new venture and I had the best hopes for him.
A year later, I happened to drive past the education center, and was shocked to see the front of the building plastered with signs offering 75% discounts on tuition. I called my friend up and asked after the business, and he told me that it was a disaster. So few people had signed up for his curriculum that he now had to offer regular tuitions at 75% discounts. He was very bitter, and blamed his misfortune on people not recognizing the importance of cognitive skills, bad publicity, and not valuing education. Unfortunately, that was not the source of his problems.
I realized that this was a classic case of not having a cohesive business strategy. He looked at what he knew and thought that if he offered it, people would come and buy. But his business vision blinded him to other factors. First off, he was in a bad location—a run-down area of town, in fact. Also, he tapped the wrong audience. The locals cared more about making ends meet than they did maximizing their children’s intellectual growth. He could’ve approached high-end neighborhoods and offered private coaching, instead. Also, his marketing left much to be desired, relying instead on signs and posters instead of reaching out to the community.
This disconnect between what my friend was offering, where he was offering it, and whether his customers actually needed/wanted it were easily predictable had he taken a moment to plan out his strategy in depth. But he and many entrepreneurs like him just take the plunge and hope things “work out” instead of strategizing first.
Here’s how my friend should have done it:
Compare and Contrast
Few businesses are ever truly original. Do some research and check if anyone has ever tried your kind of business before. If they failed, what did they do wrong? Are you making any of the same mistakes that they did? If they succeeded, what did they do right? What can you emulate, and what can you spin and make into your own unique idea?
Take off the Rose-tinted Glasses
If nobody has ever done your kind of business before, be honest and ask yourself if it was because maybe the idea didn’t work. Would people be better off if they bought into your business? Would they even want to buy into your business? When my friend started up his education center, he didn’t think about his local customer’s priorities. He assumed that everyone would want to give their kids a better education, no matter the cost. Unfortunately, they proved him wrong.
Don’t Make Your Customers Come To You
I don’t know why my friend chose his location the way he did — maybe the rent was cheap. Whatever the reason, he was as far from his best potential customers as could be, and in an area that they would not want to venture into. So he was automatically cutting out his best customers from the get-go. What he should’ve done was move to a location much closer to his customers. That probably would’ve involved higher rent, but you have to balance that against the amount of business those customers would probably give you. Private tutoring, as I mentioned earlier, takes the “go to your customers” theme even further and eliminates rent entirely.
Reach Out
When you’re tied down to a single location, it can be tempting to just put up a sign, sit back, and wait for customers to drive in. But that’s not the way business works. You have to reach out to them, tap them on the shoulder, and invite them in. You do this by building a solid marketing plan, one that accounts for your location and the local norms. Is your community primarily ethnic? Maybe you should tailor your ads for that culture.
Yes, you have to spend time and money on marketing, but it doesn’t have to be a lot. It just has to be effective. Again, look at your competitors and see what works for them. Don’t be afraid to change the plan if things aren’t working out, but always have a plan. Always stay focused. If you can, do some cross-channel marketing and use the different media to promote each other. But remember that cross-channel marketing has to be planned ahead and coordinated in order to work.
Recruit Top Talent
Few businesses are lone operators, and even those need to interact in some way with vendors, suppliers, and contractors. You should never “settle” when it comes to hiring people, especially at the start of your business, where every customer interaction, every product, and every sales call counts. If you can, get people who are passionate about what you’re trying to do. If not, then at least get conscientious workers who will consistently give you their best effort.
Get a Mentor
Starting a business can be very intimidating, and you may feel so overwhelmed by it all that it’s difficult to know the best course of action. There’s no shame in asking for help when you’re at a loss. There are many organizations that will lend a helping hand to entrepreneurs in the form of mentorship programs—some of them provided by the government itself (notably in the U.S. and Canada). Other independent organizations offer these services for a small fee, and there are also “incubation” programs where venture capitalists provide facilities, advice, and contacts in order to help a promising business grow. Who knows? Ten years down the line, you may end up being a mentor yourself!
« All I Needed to Know about Business I Learned in High School | Budapest Hungary Trip »
