Note: I refer to ‘iona’ many times in this post. Iona was the designer fashion boutique I opened and ran in Madison, WI from 2013-2015. Let’s get started.
The questions I am most commonly asked today are:
1. Do you miss ‘iona’?
2. Would you open ‘iona’ again?
3. How did you start your own business?
My answers in order are:
1. No. I do miss the clients, and designers and staff. But No.
2. No Way
3. Do you want the long or short answer?
So let’s drill into question number 3. I am asked this question all of the time because presumably many of you are excited about starting your own business. You want to be your own boss, make tons of money and change the world. Therefore based on popular demand, ‘What to do before you start your own business’ will be the theme of this post, and I will list the 10 most important things. Take my advice and consider these things before you jump in and start setting up your entity and spending money.
Opening up my own boutique wasn’t my first entrepreneurial endeavor. Back in the early 2000’s I started and built my own telecommunications services company, which I sold in 2005. So I can offer you some advice from experience of some of the things I did right and many of the things I did wrong. I even did some of the things wrong twice. So here you go:
1. Solve a problem, Fill a Gap.
Is your business idea solving a problem or is it the great escape from the job you hate? Be honest. New ideas and even ‘me-too’ business models are fine to consider as long as they can solve some sort of problem, or fill a gap.
An example. I learned that Madison didn’t have any edgier, up- contemporary fashion available for purchase locally. While the retail model wasn’t a new one, I was filling a gap in the market through opening iona boutique.
2. Get a Mentor or an Advisory Group. Then Listen to them.
I had so many great mentors with both of my businesses. I was very lucky. They offered great advice, but I didn’t listen as often as I should have. One of my recent advisors gave me this advice: “Don’t do it”. I didn’t listen and I should have. He was right, and he was speaking from experience.
Build your advisory group with people in the industry, other entrepreneurs and from areas of specialization. Be super appreciative of them. Pay them, buy them dinner, or give them equity, and thank them often.
3. Do your Market Research.
Don’t cut corners, and don’t massage it to fit your preferred narrative. Study the industry trends, your target demographics and the competition. Understand your city, state and federal stats (and international if applicable). Go to the government websites, and pay for the appropriate industry publications. It’s worth it.
It does take a lot of time to gather your research. I probably spent 3 months researching before I even considered the next step. I should have been more wary of what the facts were telling me. I had a lukewarm story in a small market, and a challenging industry that is continuing to move online. I picked a very difficult path with my boutique, not impossible, but very difficult.
The retail industry has seriously crappy margins and net profits in general. I convinced myself I was in it to provide something special and didn’t care about making money (true), but the business would have needed to be run perfectly, with no margin for error to achieve those crappy margins (also true). I was not prepared to lose tons of money season over season because of weak sales and unanticipated heavy expenses (painfully true).
Don’t get paralyzed in research though. Be prepared to gather then make decisions and act.
4. Write a Business Plan.
Please don’t scoff at this old school rule. Do the work and include 3 versions: best, moderate and worst case.
Include your risks and mitigating steps. Know that one lawsuit could level your business. (Or one E Johnson St year long construction could freeze your new client acquisition and growth).
Don’t forget your start up Cap Ex and growth needs.
5. Include an Exit Strategy with all of your scenarios.
Make your plan of how to sell your successful business or transition out. Understand valuation models of your type of business. My first business had a good valuation model of 3x revenue or an 8x EBITDA. My second business basically couldn’t be given away, it was an unlikely acquisition candidate.
Alternatively, make your plan of how to get the heck out of your struggling business and minimize losses. One of the biggest mistakes entrepreneurs make is sticking around way too long with a failing business and plowing more and more capital (and time) into it. Set your markers in your operating plan, and if you’re not getting there, get out.
6. Build your Revenue Forecasts. Then cut in half.
If you don’t know how to build a revenue forecast, then learn. It’s essential to managing your business.
7. Build you Operating Budgets: Then double.
If you don’t know how to build your operating budget, then learn. It’s essential to managing your business.
8. Identify your Division of Labor.
Who is going to do what? Make sure you fill in areas that you are weak in or you don’t have time for. Who is going to do your book-keeping and accounting? Who is going to run your social media? Who is managing your facilities? Do you know how to legally and fairly manage and support your staff? And how much will these people cost. Build it into your operating budget.
9. Get Someone Technical.
I repeat. Get Someone Technical.
I don’t mean someone who has built a website from a template before. I mean someone who gets it all; IT, software, hardware, developer. All of it. I was lucky I had a tech guru husband who was free to the business. Honestly I don’t think iona would have been able to get off the ground if we actually had to pay for this person. Monty managed and installed our POS (point of sale system), our secure network, website, security system, all of our computers and other hardware, our phone system, accounting system and music system. And he was ongoing tech support. Good luck finding your Monty.
10. Capitalize Before you Start your Business.
Raise the money you need to run your business for xx period of time. Don’t be afraid to give away equity. My husband would agree with me on this. It’s better to have less equity and be capitalized than it is to be 100% owner of a business that is under capitalized and could fail because of it.
Raising capital in the midst of day to day operations is time consuming and distracting. This isn’t to say additional rounds of capital raising aren’t encouraged or needed. The art and science of raising capital is a whole topic unto itself.
Bonus point 11. Set your Realistic Expectations.
Know that no matter what type of business you are going to start, it is going to be all consuming. Make sure your life balance is pretty solid, you have partner and family support and you are a star at managing stress. You think I’m being dramatic, but I speak from experience. Even after I had done this once before, I was delusional in setting up my second business thinking I could build it to be only high level involved.
Be prepared to do things you never expected; cleaning toilets, being on hold with the State Department, dealing with constant emergencies, working long work weeks. Know that not every business is the unicorn Uber or Facebook. Nor is every business a pre-revenue million dollar valuation like we hear all the time now. If you would like a fun lesson in the start-up world, watch the series ‘Silicon Valley’ on HBO. It’s a comedy but it is spot on accurate.
Have I successfully discouraged you? I hope not. Despite all of the tough elements, being an entrepreneur is enriching and rewarding. You just have to pick the right space and do the work. I’ll write more business posts in the future to help you with some of the things you will likely experience yourself if you do venture off onto your own. Many of the lessons I learned in running my own businesses I have been able to apply to other areas of my life too. So hopefully there will be some nuggets of wisdom in this and in future posts for everybody.
Good luck! xo Pdub
P.S. If you would like some small business consulting advice from Monty or myself, where time permits, we will charge an hourly rate and will donate it to the Stepping Stone Foundation.
Loved This! Thank you for sharing xo
Love this. So true and right on. As a fellow entrepreneur, all of these steps are SO important to take before taking the leap. And this is so great as it includes the REALITY of the American Dream to own a business: cleaning toilets and all! 😉 Enjoy and reap the benefits of this great post! Thank you Pamela!!