You can reduce the risk of starting your own small business by sticking closely to what you already know. By "what you know," I'm talking about (a) the product or service you will sell and (b) the primary method by which you are going to sell it.

So, assuming you're in an industry or business you like, get to know everything about it that you possibly can. Think of your employment as a free scholarship in the school of successful business. By spending focused time working to be a great employee, you'll learn lessons that you can use for the rest of your career. You'll learn how to make a business run more smoothly, how to help it generate greater profits, and how some aspects of it can relate to other businesses.

By learning "on the job," you'll develop many ideas for starting your own side business. Some of these ideas will be small, specific ideas that you will know exactly how to implement. Other ideas will be bigger, broader, and perhaps more exciting.

When it comes time to try out these ideas on your new business, take baby steps, one at a time.

This means that you should be willing to try something new - but just a little new. If you've learned how to sell cat food with banner ads on the Internet, for example, you might consider starting a business that sells cat food with small ads in magazines. (That's one baby step.) But you shouldn't let yourself get into a business that sells health-care products for cats through direct mail - even if you could convince yourself that you're an expert in selling cat products. That business would be too many steps away from your core competence.

How to Make Your Start-Up Business Profitable in Year One

You can invest a small amount of money (and a lot of hard work and well-spent time) in a small business and see it grow into a business that is worth a million in seven years. And you'll greatly increase your chances for success by having a plan - by knowing exactly what you need to do.

A typical start-up business that's close to what you already know should break even or lose a little money in year one, make a decent "salary" for you in year two, and provide a substantial bonus for you - in additional to a good, arm's-length management salary - in year three.

To make your business profitable in year one, figure out what you need, in terms of new customer revenue, to bring a profit to the bottom line. Then devote at least 80% of your resources - your time and money - to achieving that new customer revenue goal.

The key is to follow a program that breaks long-term goals down into shorter-term objectives and finally specific tasks. Each individual task should be something that can be accomplished fairly quickly. In terms of your marketing objectives, for example, individual tasks might look something like this: (1) Stop by three offices and leave brochures. (2) Call up such-and-such group and see if they would like to have you give a talk. (3) Buy a quarter-page ad in the local newspaper.

Put all of these small achievements together and you can achieve remarkable success in a very short period of time.

8 Important Things to Know About Business

Apart from starting (and sticking to) a good plan, I've discovered eight secrets to making a start-up business work.

1. Business doesn't happen until you make the first sale .

Buying office furniture and printing cards doesn't make the business go. Selling product does. Yes, there are some initial preparations you need to make - but until you have that first check in hand, all you're really doing is spending money.

2. The single most effective way of entering a new market is to offer a popular product at a significantly reduced price.

In every industry, there is a good market for specialty and high-quality product producers - but capturing a reasonable share of those niche market segments takes money, time, and experience. When starting a new business, you are usually short in these three essentials. That's why it's better to resist the allure of high-priced, prestige products in favor of selling the most desired products and services at ludicrously cheap prices. If you can figure out how to undersell the giants, you will be in a very happy starting place.

3. It's ultimately about selling.

Conventional business wisdom says you make money when you buy, not when you sell. I disagree. Great businesspeople make their fortunes by increasing the perceived value of their products, thus inflating prices and measurably increasing profit margins. (Think Chanel, Rolex, Range Rover.)

4. When choosing a business, select one that can be grown without your personal involvement.

Many businesses - especially those built around the personality or drive of a single person - depend for their growth on the commitment of the founder. Avoid this type of business. It severely limits your growth potential. Make sure your business can expand with the addition of more money, property, or people - but not more of you.

5. Have an exit plan.

Before you invest your time or money in any business (or anything else, for that matter), know exactly how much you are willing to lose - and get out if you hit that stop-loss point.

6. Focused effort is more effective than a diversified approach to business building.
Ambitious people tend to fall into two groups: those who focus on one project at a time and those who spread themselves out on many projects. The focused approach allows you to acquire mastery faster. The diversified approach gives you more balance. I've done both. And although I'm naturally inclined toward diversification, I've had the most success and made the most money from the focused work.

7. Let your winners run and cut your losses short.

Most business ideas or ventures that begin poorly, fail. This is a very important to learn. It's easy to get emotionally attached to projects/investments we believe in. But, when the marketplace tells you that your great idea is a loser, you shouldn't keep pushing. Close the project and minimize your losses. If you really have a good idea, it will come back to you in the future in another, perhaps better, set of clothing.

8. Pareto's Principle (the 80-20 Rule): 80% of your success comes from 20% of your resources.

Most of the success/income/satisfaction you will get in your career will come from a small portion of your skills/projects/efforts. Make it a habit to ask yourself, "Where am I getting most of the benefit here?" and compare that to where you are putting in the most work.

David
Small Business Resource