In many of my speaking engagements, I frequently get pulled aside by aspiring young entrepreneurs seeking advice and feedback on how to get started. Almost always, their main questions revolve around whether they should go ahead and leave their nine-to-five jobs and start their own business, and whether their business idea is a workable one.
I must admit, I never worried too much about those matters when starting out all those years ago. After a number of years in the corporate world, all I wanted to do was to start my own business and create value in society. In recent years, I’ve noticed that entrepreneurship has become an aspirational career choice, so I thought it’d be worth sharing some thoughts and tips on how to get started.
1) Find a problem that you want to solve
This is perhaps the most important factor that determines whether it is worth venturing out into “entrepreneurhood”. Why? It’s simple – people will pay for a solution to existing problems or issues. By providing a solution to a problem, your business can extract value (profit) from that by attracting the customer base seeking your very product or service.
Now, depending on how big you want your business to be – or how ambitious you are – the issue you wish to solve scales accordingly. It can be something as small as “there are not enough places to have good coffee in Sentul”, to national-level problems like “our fisheries are unable to meet the demands of the Malaysian consumer appetite”. It can even be a global issue – “there are 1.1 billion smokers globally contributing to a worldwide health issue which needs solving”.
Similarly, should you then be an expert at either the problem or the solution? To me, being knowledgeable definitely helps, but it’s far better to be passionate about the problem – this will drive you to be relentless about solving it.
2) Start small, but always dream big
You may identify the issue that needs solving, but how do you know if your solution has value?
A simple way is to test it with people on a small scale. This definitely doesn’t mean limiting your dreams, but starting small lets you stretch your capital to build and enhance your solution – which should be your core focus in the first place. Prioritising having a tangible product or solution and pushing it to the market should be ahead of spending on all kinds of other things (rent, admin, fixed assets) that may not be used for that reason.
Let’s take that “not enough places to have good coffee in Sentul” scenario as an example. Rather than going all out and spending a ton of money in market studies to validate your observation, and then spending a chunk of your capital in securing a location and renovating it to its Insta-worthy limits, why not test your product (ie great-tasting coffee) with a pop-up cart in Sentul and see if it gains traction? Remember, it is your product that will generate revenue, not Instagrammable walls.
Similarly, in a technology or service business, why not test out your solution with what many call a minimum viable product or MVP, and do it on a smaller scale first? This can be done direct with a customer or small business owner on a freelance basis, which minimises the financial commitments on both parties.
This “start small” mentality can extend to every facet of your business and not limited just to the product or delivery. For example, renting a co-working desk instead of a full office makes plenty of financial sense if you have a lean team but regularly meet clients.
That said, you might also grow quicker than you initially anticipated, so this next point is just as important.
3) Stick to your principles, but be willing to adapt
Oftentimes, your identification of the problem may not be fully reflective of the whole issue – or shared by others. Similarly, your initial solution may not be solving the issue as well as you thought it could.
As you start out, it is crucial to adapt your product or service to market demands, and not stay fixated on how you get there. Listen to your first few (hundred) customers – they are usually the ones who will give the best feedback. Use this and reflect – is your product or service serving its needs? How can you improve?
Remember, there is a huge difference between conviction (“we have to solve this regardless of the challenges we face”), and unwillingness to adapt (“I don’t care what our customers say, we have the best product!”).
4) Don’t run out of money
This sounds incredibly easy on paper, doesn’t it? The number one rule of business is “cash is king”. But I’d argue that having a business plan is even more important.
Most entrepreneurs worry a little when I say that having a plan is more important, but remember that a business plan is really just a map for what you want to do, what you expect to achieve and how much you need to get there. With a plan in place, you can then set out to fund your business. For this I’d go down the following hierarchy:
- Savings: The only funding source that keeps you in control of your business. Provided that you can attain profitability and achieve your growth goals with just your savings, this is the best route!
- Family and friends: As you might expect, these folks won’t usually invest in your idea, but in you, the entrepreneur. And while they would like to have financial returns as an objective, they have a larger desire to see you personally succeed as well.
- Equity crowdfunding or peer-to-peer lending: These platforms were not available until recently (after 2015), and I’ve seen them be a great tool for businesses that have exhausted their immediate circle of funds but have yet to qualify for either bank or institutional investor funding. With platforms such as PitchIN, Funding Societies and more, entrepreneurs in the startup-to-scaleup phase of business have far more options than when I started out many years ago.
- Banks: Usually the institution with the lowest interest rates, a bank is, however, also one of the most difficult to attain due to requirements such as a three-year history and some measure of profitability. Nevertheless, use this option as soon as you can meet their requirements.
- Private/public investors: Generally, this is the final option for most entrepreneurs, and with good reason. Using institutional money as a source of funds can be game-changing, but it also involves essentially giving up varying degrees of control of your own business.
5) Pay yourself!
This is dead simple: If you have a business that “cannot afford to pay” its most important employee, then it’s not a business – it’s a hobby.
Hann Liew is the CEO of Malaysia’s leading financial comparison website, www.ringgitplus.com. He is also a chartered financial analyst, a certified financial planner and a member of the Financial Planning Association Malaysia