Do you have the heart of an entrepreneur?
Being a small business owner can be a truly wonderful thing. Those who have the courage and drive to take a risk and start a new venture will discover the true American Dream. It is a hard road to travel, with many emotional ups and downs, and I can tell you that it is a road that most people prefer not to travel.
In starting any business, one must ask themselves the most important question of all: Why am I starting a business?
Everyone has their own reasons, but many include these basic premises:
- Financial rewards. Running your own business gives you a chance to make more money than if you were employed by someone else. You benefit from your own hard work.
- Independence and Lifestyle. You have the freedom to make the decisions that are crucial to your own business success. You decide when and where you want to work. If you want to spend more time on non-work activities or with your family, you don’t have to ask for the time off.
- Learning opportunities. Being involved in all aspects of your business creates numerous opportunities to gain a thorough understanding of the various business functions.
- Creative freedom and personal satisfaction. Choosing to work in a field that you really enjoy puts your skills and knowledge to good use. There is a certain satisfaction from implementing your ideas, working directly with customers, and watching your business succeed.
My first business plan came from an observation I made in High School while riding the bus. I saw a classmate sell a lollypop to younger student for 25 cents. I knew that individual piece of candy sold for 10 cents at the convenience store, so the math was easy. The classmate made 15 cents in profit on that sale. I approached my classmate and asked how he was able to get 25 cents for one lollypop and his answer was simple, the younger student offered him 25 cents, so he took it. So my classmate was not trying to make a sell, the younger student simply wanted the candy and had been willing to pay a premium for it. I went out immediately to the local convenience store and purchased all of the lollypops they had, which was about twelve. The next morning on the bus I approached the younger student that had made the offer the previous day and let him know I had lollypops for sale if he was interested. The bought four on the spot. By the afternoon he had spread the word I had lollypops for sale and three people approached me to purchase candy which caused me to sell out my first day. Returning to the store that afternoon, I inquired about buying candy in bigger quantities. I was pleased to hear that the store was willing to give me a bulk discount – only 5 cents apiece if I purchased whole boxes. I bought two boxes for $24 and my first business was born.
About one month later I learned one of my first lessons about business competition and product saturation in the marketplace. People saw how great I was doing selling candy, they wanted a share of the market and took the initiative to start selling candy as well. My buyers started to shrink and my easy profits started to dwindle. It is said that business competition is a good thing for a number of reasons:
- Competition validates your idea You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are customers for your product.
- Competition pushes you. Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive for the business to innovate.
- Competition forces focus & differentiation. Some businesses start expanding into areas that do not serve the best interests of the customer. Competition forces you and your business to figure out how to be different from your competition and how you can focus on your customers. In the long-term, competition will help you build a better business.
Though I hated the fact that someone had taken my idea and capitalized on it, I did not want to give up on one of my extra sources of income, plus, I had a lot of inventory that needed to be sold. It was up to me to find out how to improve my services and regain my clients. The easiest way to do that was to simply ask. I polled a few of my first customers and found that my competitors were charging the exact same prices that I did – one lollypop for $25 cents. My clients were still buying four for $1, so I came up with a different offer – five lollypops for $1. I asked if they would they buy from me again and the answer was a resounding yes. I was able to regain a few of my old customers and sell my remaining inventory at a nice margin.
As you may already have suspected, the competition caught on to what I was doing and quickly changed to match my pricing structure. This was not an unexpected turn of events at this point and I had already made a decision to get out of the market once my current stock was sold out. The experience had been a profitable one and I had learned something along the way. Did I know that this was simply a stepping stone to bigger things? My next business opportunity would come in the form of a franchise, which I will share with you in my next blog.
What was your first business and at what age did you first start it? Join the conversation below…