The top 9 lessons I wish I knew when I started my business

If I could get into my DeLorean and travel back in time to when I first started my business, here is what I would have told myself:

Lesson 1: Narrow your target market

Don’t try to do everything for everyone. You’ll end up doing a bunch of stuff you don’t enjoy doing and you’ll get stuck on a treadmill of having to learn new stuff for every client. Focus on a core of similar clients and you won’t have to start from scratch each time.

Lesson 2: Invest early

A free blog and email address work fine at the very beginning. Those services are a great way to get started easily. But free stuff has its limits and you’ll spend a ton of time back-filling to correct problems when those services break.

Lesson 3: Invest in the right things

You don’t need all those business cards if you’re going to focus on non-local/online clients. You invested in some really valuable information and systems but it happened later than it should have. Build your knowledge-base first.

Lesson 4: Take time off

Starting and growing a business takes time and effort. But too much time and effort will burn you out. Striking a balance between work and non-work will be toughest challenge you will face. Schedule both and stick to it.

Lesson 5: Trust your instincts

You know ahead of time when a customer is about to screw you or when you should pull the trigger on an idea. Those instincts may be hard to quantify but they are correct 99% of the time. Trust them. Follow them.

Lesson 6: Prepare for success

You’ll be more successful faster than you realize. But that success will hurt: You’ll be overwhelmed with work and your end-of-year tax bill will be higher than expected. Success is great but it comes at a price if you’re not ready for it.

Lesson 7: Differentiate early

Think very carefully about your point of difference and highlight it in everything you do. Take a week off and think about your point of difference full-time. The revenue you miss from that week will be more than made up for in the months and years to come as you outpace your competition.

Lesson 8: Persist

You’ll drop some projects or ideas or services or customers because there wasn’t a lot of movement there. However, a little persistence can make a big difference. It’s hard to know which ones to stick with and which ones to drop, but try sticking a little more than dropping.

Lesson 9: Create a simple sales funnel and work it like a rented mule

Keep it simple at first. Employ one or two easy-to-do marketing and sales tactics for each stage of your sales funnel and hammer home those things every day. Every single day. You can scale up later, you can get more complicated later, but a simple, consistent sales funnel at the beginning will win.

Weekly Sales Funnel Challenge: Target market

Every business has a target market, defined by the common points shared by a group of people most likely to buy from the business.

In this week’s challenge, I’d like you to write about your target market. Just make a list and answer some of the questions below, or do more of a “narrative”-type of descriptions.

Some of the things I’d like you to cover include: Who are they? Who are they NOT? What are they like? What problems do they have? How do they interact with your business? Who do they spend time with? Where and when do they spend time with other people? What do they do when they aren’t interacting with your business? What are their dreams and ambitions? What are some other ways that they can solve the problem they have (the one that you normally fulfill)?

If you serve multiple target markets, just choose one for this challenge.

A step-by-step way to find your most profitable customers (and transform your business)

In a previous blog post, I listed 99 ways to optimize your sales funnel and grow your business. One of those tips was to “Divide up your Customers into ‘most profitable’ and ‘least profitable’. Figure out what traits are common among the most profitable ones. Then increase your marketing to audiences with those traits.”

HERE’S HOW TO FIND YOUR MOST PROFITABLE CUSTOMERS

Step one: Identify a cross-section of customers. For example, list the last 25 people who have purchased something from you. Don’t choose the ones who have bought the most or the least. Rather, just choose the most recent ones. (You can choose more than 25 if you have the time, but you need to start somewhere and this is a good place to start).

Step two: Create a chart to measure the cost of doing business with each Customer:

  • The speed that each customer progressed through your sales funnel. Use timestamps on tweets, email, forms, etc. to figure out approximately how long they spend in your funnel. Get as accurate of a picture as you can, even if it means starting later in your sales funnel. For example, the first time I did this, the most accurate number I could get was the Lead date, not the date they became an Audience member… that’s good enough. Record their progress from as early as you can in your sales funnel until after you have delivered your product or service and received your money!
  • The effort required to turn them into a customer and then to deliver the product or service and get paid for it. In this case, it could be just a simple rating system of 1,2, or 3. The higher the number, the harder it was to turn them into a customer. For example, my easiest Customers were the ones who (when they were Prospects) posted a project, received a proposal from me, hired by with the click of a button, and pre-paid me. They would be “1”. Other Customers (when they were Prospects) required a lot of phone calls and up-front discussion before they would even consider bringing me on as a service provider. They would be a “3”. Remember: Record the full effort of the relationship. They may have been a great Customer but if you had to constantly bug them to pay you, the relationship will be less profitable.
  • The amount of financial investment required to turn them into a customer, deliver the product or service, and then complete the relationship. This one can be harder number to nail down since most of your investment is likely spread across several customers. But there might be some money spent on these Customers, including Paypal fees, parking meter costs, printing costs, etc. For example, most of my costs are spread but a local Prospect might have been converted to a Customer after I spent money to print a customized portfolio and then spent billable time, fuel, and parking costs to meet with them face-to-face.

Step three: Determine how much money you made off of each Customer. Just a simple, raw revenue number should work.

Step four: Compare. You now have two data sets – the cost of delivering and the return you received. Compare those two data sets. I’m sure there’s a formula for this kind of stuff but I prefer to just eyeball it. It’s not perfect but it’s close enough and we’re not trying to split the atom here. You should be able to rank your Customers from most profitable to least profitable, or (at the very least) just split them into two groups – more and less profitable.

Step five: Sort your Customers. Using the same list of Customers from above, create a chart of attributes that describe your Customers. For example:

  • Industry
  • Sub-industry
  • Products/Services
  • Number of employees
  • Annual revenue
  • Country of operation
  • Years in business
  • How they initially heard about you

There are lots of other attributes but these are the ones I’ve found to be most helpful.

Step six: Group your Customers. Now that you have all of this helpful information, it’s time to make some decisions. You’ve probably found that your most profitable Customers can be grouped together in one way while your least profitable Customers can be grouped together in a different way. (If you haven’t found that, go back to step five and add more attributes to your chart — try figuring out who your Customers’ Customers are, why they are in business, and how much competition there is in their industry).

Step seven: Re-shape your business. Now that you know what your most profitable Customers looks like, it’s time to start marketing strategically and aggressively to that group. Figure out where they spend their time, what messages they respond to the most, and what motivates them to buy. Look at other products and services they buy and the messages those products and services use to market to this group. Revise your brand to communicate directly with them. Shore up your services to deliver even more value to this specific group. Listen to people who are thought-leaders for this particular group.

AN EXAMPLE FROM MY BUSINESS

Several years ago I used this same method in my own business and found that although I was serving a variety of Customers, the most profitable (they were the easiest to get, the fastest to provide service, the lowest cost to serve, and they paid the most money) were in the financial and real estate industry, primarily small agents and brokers who had established practices but were trying to build a web presence. With that information, I focused my business and grew it dramatically. I also found that technology companies were quite profitable for me when I delivered specific types of content, so I invested in some relationships that would specifically generate more tech Customers. It was a delicate balance to work with both financial/real estate Customers AND tech Customers (since marketing to each industry is very, very different) but the awareness and effort of focusing on both has paid off.

NOW IT’S YOUR TURN

Working with numbers always seems daunting and I have no illusions that thousands of people will break open Microsoft Excel and start measuring this stuff. But for those of you who do invest a day or two of time, you’ll discover some seriously valuable information about your business that you can use to grow profitably.

Just read: ‘Bobby Flay Interview: How a Famous Foodie Got His Start’ at Wall Street Journal

I don’t usually watch a lot of TV — too many other things vie for my attention. But I have one big weakness: The Food Network channel. My wife and I love to try new foods and cook and entertain, so it’s a channel we both love to watch.

Recently, we noticed that Bobby Flay appeared in 3 1-hour shows on the Food Network — his own show, a special tour-of-Ireland show, and as an Iron Chef in Iron Chef America. This guy has a huge share of air time on the Food Network!

This article in the Wall Street Journal caught my attention — it describes Bobby Flay’s rise to fame from being a high school dropout to running a massive cooking empire. It’s sort of a rags-to-riches story, which is always enjoyable to read about.

But take note: Flay started gaining some success in his mid-20’s but he started cooking at 17. His really significant success came around age 26. And right now his success is truly peaking and he’s 46. So this is a rags-to-riches story but it’s not an overnight success story.

Bobby Flay Interview: How a Famous Foodie Got His Start – WSJ.com.

After you’ve read this article, think about your own business aspirations and goals. What is going well and where are you struggling? How long have you been in business? Are you working hard toward that “someday” success or are you impatiently wondering why you haven’t struck gold yet? This is a huge struggle for entrepreneurs because they place a big bet on their business and they want a big, fast pay-off. When that doesn’t happen, they can become discouraged.

If you want to be truly successful as an entrepreneur, take note of the hard-working, persistent Bobby Flay, and be sure to read my blog post: The entrepreneur’s silver bullet.

Just read: ‘Failing Toward Success at Google’ at Harvard Business Review

Innovating and succeeding is fun. Innovating and failing can also be fun (as long as you pick yourself up and keep going). I’m a big believer in innovating as much as you can (no matter what you do) to set yourself apart. Check out 5 innovative brands that I started and failed with. I have no regrets at all about these failures!).

In this article at Harvard Business Review, Rita McGrath lists several projects that Google has innovated and failed. She lists some of the reasons behind the failure, and she also talks about some success stories that got their start in Google, too.

Failing Toward Success at Google – Rita McGrath – Harvard Business Review.

After you’ve read this article, look around in your business for opportunities to innovate. And if you’re not sure where to start, check out a recent blog post listing my best advice on innovation.