An interview with Rick Spence, president of Canadian Entrepreneur Communications & Business Columnist for The National Post
By Donna Marrin
I have a great idea brewing for a start-up. How do I overcome those doubts hovering in the periphery?
Many entrepreneurs are in such a hurry to launch their business that they skip important steps. Long before you open your doors to begin serving customers, you should be fine-tuning your product development and market-research work to make sure your product or service is the best it can be, and that it’s truly what your target market is willing to buy.
One of the best ways to eliminate doubts and make sure you’re on the right track is to take a leaf from high-tech companies and do beta-testing with potential prospects. Let people try out your product or service for free. Let them work with it, discover its uses, and identify the “bugs” or flaws that might have escaped your notice. Use these prospects’ feedback to create a better product for your market’s needs.
There’s nothing more important than engaging with potential customers early in the startup process, to learn what their actual needs are, what kind of solutions they’re really looking for, and how much they are prepared to pay for them.
How do I need to prepare before I approach a bank with my idea?
Very carefully. Understand first that very few banks are interested in financing startups; their margin on commercial loans is too small for them to tolerate much risk. Understand too that banks lend against assets, not against ideas, dreams or profit projections that may never come true.
No matter how flashy your business plan might be, your banker will lend to you only if you personally are a good credit risk. That means that you need a solid credit history – pay your bills and credit card balances on time! – and assets (such as a house with a small mortgage) that are worth lending against.
You can prepare by being able to demonstrate to the bank that you can read a financial statement, that you understand the importance of break-even, and that you are prepared for the daily drama of cash flow. But if you really want to impress your banker, demonstrate that you (and preferably friends and family as well) have believed enough in your business idea to invest substantially in it already. If you and your closest loved ones aren’t willing to take a risk in your business, why should the bank?
I’m about to launch my business. Are there ways of advertising to the general public without incurring huge fees?
You don’t have to spend a fortune to get your message out (although it would help). Make sure you narrow your marketing focus to reach only the target market you’re after. If you’re just advertising to affluent professionals, for instance, or you’ve opened a retail store on the west end of town, it makes no sense to buy a newspaper ad that reaches the whole city.
Look at these seven alternatives to blowing your budget on the mass media:
· Put up ads or posters in selected areas that will reach your target market.
· Target free or low-cost digital media such as Craigslist, eBay, or pay-per-click advertising (e.g., Google’s Adwords)
· Create eye-catching promotions (sales, contests, discounts, etc.) that will attract customers and encourage word-of-mouth publicity (the best kind you can have);
· Consider sponsorships or creating your own events that will put you face to face with your best prospects (e.g., if you’re targeting executives, get involved with a golf event)
· Get out and meet potential customers through appropriate networking events
· Use LinkedIn to snuggle closer to specific decision-makers
· Encourage referrals by offering a discount or other incentive to people who recommend your services to other customers
Can you suggest some actions I can take to help me better learn and understand the needs of my target market?
Great question! This is your most important challenge in business. There are numerous market-research techniques you can use: customer surveys, interviews, focus groups, statistical research, geographic market analysis, etc. The important thing is to find the technique that best fits your budget and your market sector. Best place to start: ask your local public librarian for the best sources of date on your market. Best free research you can do: grab a clipboard and go to where your customers are. Ask them about their experience with products or services like yours, what problems they have, and what benefits or inducements would make them seek out a new supplier.
My day is busy enough as it is. How important is it for me to devote time to exploring social media?
If you are a natural writer or communicator, you can make friends fast through new channels such as Facebook, blogging, Twitter or YouTube. But if you’re a busy entrepreneur who would rather meet clients and customers face to face, social media may not be a first priority. Do yourself a favor: explore Facebook. Figure out what you think it’s good for, and what your prospects might expect from a Facebook “page” (or mini-site) for your business. Then think through whether you have the time and talent to create new business-related content that would engage customers and prospects and help build stronger relationships. Statistics show that more and more people every day (300-million on Facebook alone) are relying on social media for news, relationships and all kinds of decision-making. But unless you have access to good content and marketing skills, you may find social media a lot of fuss over nothing.
Are there a few key strategies I can use to take my business from good to fantastic?
1. Create more value than anyone else in your sector. Whether it’s through lower prices, better quality, faster service, or higher-quality customer experiences.
2. Know your customers. Understand their frustrations and unvoiced wants. Anticipate their changing needs so you stay ahead of the competition.
3. Treat your employees like customers; they too are the foundation of your business. Communicate with them all the time so they understand what they need to focus on today. Align their goals with that of the business – profit-sharing is just one way to do that.
4. Look for partners whose talents complement your own. Two people with matching skills (e.g., one is the marketing/sales whiz, while the other is more detailed-oriented) can take a business much farther than one person with one set of skills.
What is the most common learning curve that small businesses tend to encounter?
There are so many! Running your own business is one of the toughest challenges anyone can face. I know very smart business people who have succeeded in big corporations, and then failed miserably in their own business – often high-tailing it back to big business, where they have so many more resources and are expected to demonstrate a much narrower skill set. You must understand book-keeping and cash flow. If you don’t master the details of operations, money will run through your fingers like water. You must understand marketing. And you must learn to work with all kinds of people, including employees, customers, and suppliers, to build trust and create lasting, win-win relationships.
Is there a really great entrepreneurial quote you’ve read lately?
“Forget past mistakes. Forget failures. Forget everything except what you’re going to do now and do it.” William C. Durant, Founder of General Motors and Chevrolet.
What is the one piece of advice you would like to share with others thinking about starting a business?
Always be ethical. You want everyone you meet to go away feeling pleased to have done business with you, rather than regretting it. More than ever before, today’s web-based world puts your reputation on public display, for everyone to discover.
RICK SPENCE is president of Canadian Entrepreneur Communications and an expert in entrepreneurship and business growth. He writes a national column for the weekly Entrepreneur section of the National Post and is the former editor and publisher of PROFIT, The Magazine for Canadian Entrepreneurs. He speaks widely on business trends, marketing, social media and business growth. He can be reached at firstname.lastname@example.org, or through his blog, Canadian Entrepreneur.