Most business owners will tell you that starting a business is both one of the most challenging and most rewarding ways to earn a living. Being a successful business owner requires a large amount of hard work and dedication, but also generally relies on a set of personal qualities and business practices that are common characteristics of successful entrepreneurs. These characteristics lie as much in a business’s founding principles as in its day-to-day operations and dictate every decision the entrepreneur makes. By following these guidelines, you can up your chances of founding a successful business or getting your existing business back on track.
Part 1 Focus and Mindset
Start a business that you’re passionate about and knowledgeable in. That knowledge can come from either prior work experience or a personal hobby that you’re ready to turn into a career. Even if a business idea seems highly profitable in theory, don’t start that business unless your heart is in it. While profit is important, it likely won’t keep you coming in early every day and driving growth.
- For example, imagine you have experience making coffee as a barista or waiter and want to turn your passion for good coffee into a small business. You would already know a good amount about the industry and be able to apply not only your knowledge but your passion to your work.
Start with a well-defined purpose. While the financial benefits of business ownership can be great, most successful business owners don’t start with money in mind. To get your business off the ground, you’ll need a clear purpose. This purpose should be something more intangible than money, like giving back to your community by creating jobs, solving a problem that you see in your daily life, or pursuing a passion. This doesn’t mean that you shouldn’t also strive for profitability, just that your primary goal should be the achievement of a greater purpose.
- For our coffee shop example, your purpose would be serving the perfect cup of coffee to every customer. Alternately, it could be to form a community in your coffee shop where people can meet and spend time with friends.
Understand your customer. Before you get started, take some time to do market research and get to know your customers and your industry. The U.S. Small Business Administration provides a great deal of information on which services and products are in demand. You will also want to think about who will be buying your product or using your service and learn the best way to appeal to this population.
- With the coffee shop, ask yourself: Am I trying to appeal to “coffee snobs” who don’t mind waiting five minutes for their pour-over? Or is my focus on the people who are on their way to work and want to grab a cup and run? Or both? Understanding the people you plan to serve can help you serve them better.
Find a first step instead of a destination. You should always start with a business model that can be up and running quickly on a low budget. Too many small businesses start with grandiose goals that will require a large amount of startup capital and investors. However, successful businesses will have a model that can be used on a smaller scale. This proves to potential investors that your idea is a valid way of making money, and increases your odds of ever getting investment money (if that’s what you’re looking for).
- For example, imagine that in our example, you want to start a large operation that sources, imports, roasts, and packages its own coffee beans that are then either sold or served to customers at its coffee shops. Rather than seeking huge contributions from investors to buy all of this equipment, you should start with a small coffee shop first, then maybe try sourcing and importing beans, and work up from there to build a brand.
Create a support network. One of the most important parts of successful business ownership is getting over your own ego and seeking help. Your biggest sources of advice are going to be your group of business associates and other professionals that share your goals. Surround yourself with knowledgeable and successful people and feed off of their ideas and enthusiasm.
- Also seek general small business tips online; the web is a goldmine of information. Just be sure your information is from a reliable source.
Find a mentor. A good mentor in this case is someone who has already run. A good example would be a family member or family friend that has been successful in business. This mentor can help you with anything from knowing how to manage your employees to properly filing your taxes. Because their knowledge comes from direct experience, they’re able to help you more personally than any other source could.
- While your mentor doesn’t have to have founded the same type of business you are starting, it would help. For example, another coffee shop founder would be the best source of information in our coffee shop example, but a restaurateur could also be of significant help.
Part 2 Efficient Operations
Focus only on your primary operations at first. That is, avoid being caught up in every business opportunity that comes your way. It’s better to be perfect at one thing than mediocre at five. This applies as much to making decisions to diversify your business as it does to deciding to take on additional projects for yourself outside of your primary business. Focusing on one thing will allow you to commit all of your resources there and be more productive in that endeavor.
- Continuing with our example, imagine that you see another coffee shop making money by selling customized coffee-related merchandise. This may make you want to jump into this market as well. However, doing so before establishing your primary objective, making coffee, would introduce significant risk, and may detract from your ability to focus on coffee quality.
Focus on cash flow, not profit. While making a profit should certainly be one of your goals, it should not be your main focus when you are starting out. Cash flow is far more important — many small businesses run out of money before they have even been around long enough to generate a profit, and must close their doors. Pay careful attention to your overhead costs and sales during the first years, and let profit take a backseat.
Keep detailed records. In order to be successful, you’ll have to make a habit of recording each and every expense and revenue that your company has, as well as every dollar that flows through it. By knowing where exactly your money is coming in and where it’s going, you’re more capable of recognizing financial difficulties before they arise. In addition, doing this will give you a better idea of where exactly you can make cuts to expenses or increases to revenues.
- For example, in our example, you would keep detailed records of how much coffee you bought and sold in a given month and what you paid for it. This could you help you identify if, for example, the price of coffee beans was steadily increasing and help you plan whether or not to raise your own prices or consider switching suppliers.
Limit expenses as much as possible. While this may seem obvious, just try to think of areas where you could generate the same effect by spending less money. Consider using pre-owned equipment, finding cheaper forms of advertising (for example, fliers rather than newspaper ads), or negotiating better payment terms with suppliers or customers to save a few dollars here and there. Try to maintain very low spending habits and only spent money when and where you absolutely have to.
- In our example, this could mean starting out with used coffee grinders (as long as they still functioned well) and trying to get as many supplies as possible from the same supplier (cups, lids, straws, etc.).
Consider supply chain efficiency. Your costs, and therefore your profits, depend on a successful supply chain organization. By fostering good relationships with your suppliers, organizing deliveries, and consistently providing customers with timely service, you can increase your profitability and reputation. Successful supply chain management can also help you eliminate any part of your business with wasted resources, like raw materials or labor.
- For example, our example coffee shop would want to be on good terms with its coffee bean supplier and have an organized supply chain structure for a number of reasons. This is especially crucial for ensuring that you never run out of coffee, but could also mean that you could get more consistent deliveries, try new types of coffee bean when they become available, or negotiate lower prices.
Method 1 Generating Extra Income
One of the most direct ways to increase your income is to talk to your boss about a pay raise. Though it can be a tricky conversation to have, if you feel you are doing a good job at work and have been putting in long hours, it may be time to ask for a pay bump. Consider how valuable your position at the company or business is, your relationship with your boss, and the skill set you provide for the company. If you have been working at the same company for over a year, have been doing a great job, and have received a good score on your performance reviews, you may have a good case for a raise.
- Before you ask for a raise, you should do some research on your company’s pay policies and make sure you have enough leverage to justify a raise. You should also make a list of your accomplishments, abilities, and outline your work history. This will give you objective information you can use during your conversation with your boss about a raise.
Do freelance work or part time work. If your pay check isn’t quite cutting it, consider increasing your income by doing freelance work outside of your day job. Take odd jobs for family or friends that will add funds to your bank account. Remember that every penny you earn is one more dollar towards your overall income.
- For example, you may have good driving skills and a clean driving record. You may want to consider taking up a part time driver position to supplement your income, working on weekends to drive new cars to dealerships or the drive clients around through a driver company.
Think about skills or abilities that you can channel into a viable side business. This could be a gardening or landscaping side business, or a freelance writing business. Try to maximize your skills and turn them into a unique business. Keep in mind running your own business will require a significant time and money investment, in addition to your current job.
- Starting your own business can be stressful and difficult to sustain, so you may want to retain your current job while you get your side business off the ground.
Method 2 Investing Your Money
Create sources of passive income. Passive sources income are investments that create income with little involvement and time from you. This could be royalties from publishing a book, a song, or a piece of art, profits from a business partnership where you are a silent investor, or income from rental properties.
- Consider investing in a rental property, preferably several multifamily units rather than one single family home. Though a rental property can be a large upfront investment, the potential income generated from this investment could be substantial. Ask a friend or business partner to invest with you in a rental property and create passive income to supplement your existing income.
Purchase stocks and bonds. A stock represents a stake in a company. When you own a share of a stock, you are a part owner in the company and have a claim on every asset and every penny in the company’s earnings. A bond is a financial IOU from a company or the government. Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects.
- When you buy a bond, you are loaning your money to the issuer, whether it’s a company or a government body, for a certain period of time. In return, you get interest on the loan, and you get the entire loan amount paid back either on a specific date (the bond’s maturity date) or a future date of the issuer’s choice. For example, if a bond is valued at $1,000, and pays 7% a year, it has an interest value of $70.
- You can invest in stocks and bonds by buying them individually or by buying them via a mutual fund. A mutual fund is a collection of stocks, bonds, or cash equivalents, or a mix of all three.
- Talk to a financial advisor about the right mix of stocks and bonds for your financial portfolio. When you are young and just starting to invest, you should put money in stocks. The long term potential growth of stocks will outweigh the risks. Over time, as you get older, you should scale back on your investment in stocks. Bonds are less volatile and they are good long term investments. Over time, as you get older, increase your investment in bonds.
- Be wary of investing in hard assets like real estate or gold. These are unstable and unpredictable assets that can be difficult to manage.
Penny stocks are publicly-traded stocks that have a very low price per share, usually under five dollars and sometimes less than a dollar. They are often issued by small, less established companies and can be purchased very cheaply. However, penny stocks can be risky investments because they are not traded on the major exchanges (NASDAQ or the NYSE) and it may be difficult to trade them once you purchase them.
- Penny stocks are good for short term gains and not as long term investments. Before you invest in a company, you should investigate them online to determine if they are worth the stock purchase. You can then open an account with an online brokerage service and start purchasing and trading penny stock.
- To make a profit with penny stocks, you will need to keep constant tabs on your stocks to make quick trades at the highest price. Be wary of “pump and dump” stocks, which are fraudulent stocks that are pumped up to a high stock price, enticing you to invest, only to take your money and leave you with a stock that has no real value.