Business Entrepreneurship

Welcome to Free Business Entrepreneurship Course from Courses Buddy!

So let’s talk about entrepreneurship!

“Entrepreneur” feels like a buzzword that business people throw around, like “synergy” or “NextGen.” But it has a pretty clear definition: if you see a need in the world and take a financial risk to fill that need… you’re an entrepreneur!

Congratulations! I’m so proud of you! A real-life entrepreneur!

Everyone’s path is different, and because entrepreneurship involves a lot of risk, it’s okay to be nervous. And it’s okay to fail.

We’re gonna talk about how to tackle the scary stuff head on, and how to learn from failure so it doesn’t turn you into a smoking burned out husk of a human.

We’ll start with the seed of any business -- a good idea -- and talk about how to ask for help and grow it into a whole thriving entrepreneurial venture.

We’ll cover big-picture concepts like how to get helpful feedback, scope out your competition, develop customer relationships, and start making money. And also what the heck to do after you start making money!

Moreover, we’ll make sure to translate all the entrepreneurship jargon and legalese along the way. You’ll be throwing around terms like “value proposition” and “minimum viable product” like a pro. And you’ll know the difference between C-corps, co-ops, and LLCs.

How entrepreneurial is THAT!

Our goal is to help you achieve your goals. With a little grit, determination, and luck, your dreams or hobbies could potentially become a whole career.

So join me, as we start our journey by asking who entrepreneurs are, and how you might forge your own path to start a business.

What makes someone an entrepreneur? Am I an entrepreneur? Are you an entrepreneur? Do I know any entrepreneurs? Is it genetic? Can I catch it? Is it fatal?

Wait, what?

The word “entrepreneur” seems to be thrown around everywhere for everyone doing anything. It’s used to describe celebrities and business tycoons like Beyoncé, Elon Musk, Richard Branson, and Bill Gates. But your brother who keeps bringing up his idea for coffee-flavored toothpaste might make the list too.

Entrepreneurs pop-up in all types of industries and can have widely different backgrounds. Some build personal brands, while others work tirelessly on a physical product they believe in. Really, anyone can be an entrepreneur, given an idea and the right tools to develop it into a functional business.

Together, we’ll develop our business acumen and learn the importance of grit, determination, and a fair bit of luck.

Some people define an entrepreneur with buzzwords like “trailblazing,” “innovative,” “problem-solving,” “passionate,” and on and on. These might all be traits that entrepreneurs can strive for.

But, at its core, an entrepreneur is someone who sees a need and takes on the financial risk to start a business to fill that need. That may sound kind of vague, but that’s kind of the point. Your idea might take the form of a physical product with a physical store.

Or instead of a tangible product, your venture might be a national empowerment network. It’s clear that entrepreneurs come in all flavors.

According to the Global Entrepreneurship Monitor, over 100 million businesses are launched each year. That’s 11,000 per hour or 3 new businesses per second.

So instead of just defining who is an entrepreneur, since it is such a wide scope - we can instead narrow down our definition by understanding who isn’t one.

For a while, the classic story of an entrepreneur was someone who created one business that became a long-term project, like opening a new restaurant or founding a tech startup to make flashy phone games. But that’s not the whole picture anymore.

There’s been a shift in the global job market that has opened the door for entrepreneurship to become more mainstream. Specifically, I’m talking about the rise of the Gig Economy.

The Gig Economy

Contract work, called gigging, is becoming more popular and taking up more of the labor market. And I don’t just mean gigs like musicians and comedians hopping between open mic nights.

Instead of a long-term relationship where employees are paid salaries by the hour or year, businesses are temporarily hiring people for specific projects.

This shift has made it financially easier for entrepreneurs to find people to get their businesses going, without committing long-term to paying employees.

And it’s allowed early-stage entrepreneurs to find flexible work to support themselves as they develop their product or service.

This doesn’t mean everyone in the gig economy is an entrepreneur, it’s just given more people the opportunity.

So a more traditional path might be joining an accounting firm right after college and working 9 to 5, Monday to Friday until you retire. Or die of boredom.

Some people might feel fulfilled with that kind of steady employment. And the stability that comes from being a salaried employee with health insurance can be incredibly valuable. Others, like us entrepreneurs, might itch for more independence.

In the gig economy, you could have a couple ways to make money, in addition to or instead of that 9-to-5 job.

And you can go online to look for gigs from anywhere -- not just your real-life community. So you might consult for a network of women small business owners on their day-to-day accounting, create vlogs with tax software tips, and sell unicorn knit hats on Etsy that are knit out of the softest fabric there is.

On the positive side, this allows workers to build robust portfolios of work and find fulfilling gigs.

Having separate jobs can also provide a stronger sense of income security than one full-time job. Even if you lose one, you’re still making money.

Today’s entrepreneurs are well-suited for the gig economy because we know how to hustle. We’re independent thinkers who are comfortable with developing our own diverse income streams, marketing ourselves, and connecting with others.

But there are still problems with the gig lifestyle. For some people, participating in the gig economy is a necessity, not a choice. Scrambling to pay rent and afford food is another reason to have a bunch of gigs.

And, depending on the country and government, gig workers can have fewer legal protections - like mandatory breaks and standardized pay -- or they might have a harder time maintaining insurance and retirement accounts.

This makes some countries more attractive to entrepreneurs, such as New Zealand, Singapore, and Denmark, based on The World Bank’s annual analysis of the “Ease of Doing Business.” But even in those countries, there’s a difference between legally being able to take a break and actually taking a break.

It can be a struggle to turn off the hustle -- especially for those of us trying to create a personal brand with our art or online presence. But taking time for fun hobbies and spending time with friends and family are important parts of being successful, and so necessary to stay mentally healthy. Trust me!

So it’s not all blue skies and rainbows. But if you ever wanted to be an entrepreneur, the gig economy has made it more possible now than ever. Even still, entrepreneurship isn’t easy.

Taking a financial gamble is stressful, and so is working long hours to try and get a project off the ground. I know for me, the lack of structured work time often means that my business has no off time. And if I’m not careful, I can work around the clock and get myself exhausted. But tons of us take the leap to start a new business and stick with it through the ups and downs, so what exactly keeps us motivated?

At the top of the list is freedom.

Entrepreneurs get to be their own bosses.

This can mean setting your own hours and deciding on dress codes... or lack thereof. Sweatpants all day everyday? Am I right?

Maybe you want to work from bed or while you travel, writing emails by a pool. And for traditionally underrepresented groups in business like women, people of color, or the LGBTQ community, ding ding ding, I am all those things. It can mean defining your own destiny.

You can create an inclusive company culture and work environment, rather than feeling stuck in an uncomfortable -- or even possibly illegal -- situation with a boss or coworker.

If someone keeps talking over you and dismissively says women can’t be funny, you don’t need to hire them for your writer’s room or film set. Or if a coworker from a previous job got fired for having a natural hairstyle, you can create a business where that would never happen.

You Wield the Power!

A study in the Social Science Research Network journal found that entrepreneurs start companies because they mostly believe that:

They are inherently more valuable than how they appear on paper.

They are wasted working for someone else.

Their resumes don’t show “the real them”.

Large companies can’t appreciate their full potential.

And they are capable of turning their internal value into real life money.

Basically, entrepreneurs believe in themselves. And sure, building self-confidence over time isn’t always easy, but it can be a powerful motivator.

And then, there’s potential wealth. Yes, there’s financial risk in starting a business, but there’s money in running a successful one.

Like, Oprah Winfrey has said she spent her early childhood wearing overalls made of potato sacks. But she became North America’s first black multi-billionaire and “Queen of the Daytime Talkshow.”

Sure, this is the stuff of inspirational posters, and not everyone can make it this big. But entrepreneurship does create a culture of opportunity that might work for some non-traditional workers. Of course, every entrepreneur with a massive success has also had hundreds of failures.

Lean Startup methodology is basically the globally recognized guidebook for entrepreneurs created by Steve Blank and Eric Ries. And it says stumbling is perfectly fine if we learn as we go.

But to identify and learn from failures, every entrepreneur has to ask themselves: what does success look like to me? Is it earning $30,000 a year in your food truck and skiing every weekend? Is it selling your idea for a million dollars? Is it becoming the CEO of a mid-size media production company and writing novels on the side?

Also where is the sequel and when can I star in the movie adaptation? Or is it owning 6 cats and producing your own films?

Whatever success is, it’s entirely up to you. Of course no one wants to fail.

But together we’ll learn how to redefine failure and pick up the pieces if it’s truly unavoidable. It’s not that successful entrepreneurs never faced failure; it’s that they didn’t quit.

Bottom line is: anyone can be an entrepreneur with a little grit, determination, and luck.

Whether it’s the classic lightbulb above our heads or a “Eureka!” moment, we imagine ideas bursting out of creative people’s brains -- like we all live in some cartoon universe, and a lucky few of us get struck with inspiration.

Maybe you’re wondering whether entrepreneurship is for you, because you don’t think you’ve had any great ideas, but just WAIT! Because we can all get them. Or maybe you have an idea and you’re not sure what to do next.

How do you feed, water, and nurture this tiny seed so it grows into a whole business? Don’t worry, we’ve got you.

Excitement!

Entrepreneurs aren’t a special group of people gifted with all the good ideas.

They believe in themselves and the value of their idea enough to take a financial risk to make it a reality.

Looking back at the people we now think of as great entrepreneurs, these people were just looking to make life easier or better in some way -- from inventing the wheel to dreaming up the dishwasher. But what sparked their imagination? What was their apple falling from a tree?

Innovative ideas can be traced to three main sources: our passions, our complaints, and our egos.

Let’s start with the exciting one:

Our Passions

If you weren’t working at your current job or going to school, what would you do? Many ideas come from us being excited about something and wanting to share it with the world. It could be Grandma’s hot sauce recipe, video game walkthroughs, or upcycled yard sale furniture.

Sometimes you start doing something as a hobby, like art. But then you might get commission requests from people you don’t even know.

So, if you take a risk, that hobby could become a full-time job.

Complaints

Next, there are complaints.

There must be something that bugs you, whether it’s tangled headphones or a lack of movies directed by women.

Interesting Facts: Dropbox was founded because someone was annoyed they kept forgetting their thumb drive. Under Armour was founded because someone got tired of their shirt getting so sweaty they had to change it multiple times during one workout.

So if you’ve ever found yourself thinking, “Wow, I really wish someone would do something about that,” guess what? You can do something about it! And, of course, there are the “I can do it better” ideas. Everyone has them!

Our Egos

Our egos are a great place to find innovation and motivation. Maybe you visit the same coffee shop every morning and after the thousandth cup of hot sludge, you are so done. You could make a much better cup of coffee!

And the cups would be compostable!

And the tip jar would have a witty joke!

And you’d have fresh scones!

Let the outrage fuel you.

Think of something that needs freshening up. Uber and Lyft looked at the taxi industry and saw something outdated and clunky. So they made sleek apps with automated payments and directions.

Now, obviously, there can be overlap between these three motivations.

You might be able to make a better cup of coffee than the big chain in town -- that’s ego. But that’s only because you’re into coffee and experiment with techniques and “blends” at home -- that’s passion. And maybe that hobby started because there weren’t any coffee shops in your neighborhood -- that's a complaint.

Whether or not you have an idea notebook filled to the brim, you do have experiences, opinions, and a whole complicated life. And these are the building blocks of entrepreneurial innovation.

Understanding the Problem

So the first step is acknowledging you have an idea. Step two is understanding the problem at the root of your idea. Think of your idea as the beginning.

You may have your own experience of a certain problem, but by understanding what others think, your idea can grow and affect more people.

So when you’re chatting about that big chain coffee shop with your friends, listen to what they say. Have they been there? What do they like? What do they hate?

Maybe they complain, “That place is a health hazard and their service SUCKS.” Or they say, “I never go there because I only drink tea.”

So, use that quick insight to make your idea better. Maybe your coffee shop will focus on excellent staff training to ensure high quality coffee, cleanliness, and customer service. And you’ll offer lots of teas alongside those artisanal lattes.

Even after you understand the problem, there’s more talking to do. Let’s look at my latest big idea. It’s great, right? But now that I’ve told you, I’m going to have to kill you! Sorry, I got a little dramatic there.

When we have exciting new ideas, our first instinct is to squirrel them away so no one can steal them. But that’s bad. When we keep things to ourselves, we end up thinking shoe umbrellas are the next big thing.

We have to share our ideas with the people who are actually going to use the product or service. Otherwise, our solutions inherit our blind spots and biases.

They might not actually solve the problem, or they might only be useful for a few people. It’s easy for us to judge a story, but who would you share an idea with? Your mom?

Your trusted friends? Everyone on your morning bus ride? After all, a bus is just a limo full of friends you haven’t met yet!

It depends on the idea, but generally at this early stage, we want to target two main types of people.

First, customers who might have the problem we’re trying to solve. And second, people who can help us think through our ideas.

We can also look to professionals who might be able to connect us to established entrepreneurs in the field or available resources. For example, we could look for a college campus with professors in entrepreneurship or entrepreneurial consulting. Or turn to entrepreneurial networking groups, like those in co-working spaces. And in the U.S, there they have Small Business Development Centers.

Around the world, you can check with your local government for similar organizations that provide education and financing for budding entrepreneurs. All these options are well-connected in the entrepreneurial community and it’s their goal to mentor, consult, and connect fledgling entrepreneurs.

Don’t be afraid to reach out and ask for help! BUT before we get carried away, we have to remember: we’re still making sure our idea is good and talking with potential customers. This is NOT the finance stage. We aren’t asking people for seed money… yet.

The next step in workshopping an idea is to think big about the fundamental pieces of your business. And a great way to do that is with a business plan tool like the Business Model Canvas, a lean startup template created by a company called Strategyzer.

Most lenders care about your story, proof your idea works and is wanted, an understanding of your customers, and your financial plan, which often takes only 5-10 pages tops.

And the Business Model Canvas has sections for all those things! Really, filling out a business plan or Business Model Canvas lets you collect all your thoughts about your idea and visualize how your business might exist.

Let’s explore the canvas using a little company you’ve probably never heard of: Netflix. For each section, we need to answer a key question.

Value Proposition

We’ll start with Value Proposition:

What is the value we deliver to our customers? Basically, why do they want whatever we’re selling? Netflix leverages technology for global audiences who want on-demand, customized entertainment.

Customer Segmentation

Next, we move to the cluster for customers. Let’s think about our people in three pieces.

First, who even are they? All the types of people interested in our product form the Customer Segments section. In 2019, over 50% of Netflix’s business came from subscribers outside the U.S. They use internal algorithms to predict and offer certain programs to certain demographics.

Customer Relationships

Once we decide who our customers are, it’s time to define the relationship in the Customer Relationships section. What type of relationship do our customers expect us to establish?

Netflix customers expect quality programming, good predictive suggestions, excellent customer service, and high-end technology performance. And then, through what Channels are we going to speak to them? How are we reaching our customers?

Netflix uses email, streaming apps, and social media campaigns to communicate with customers (they’re even on SnapChat.)

Now that we know the “who,” we need to describe the infrastructure of our business, which also has three pieces.

To start with the basics, what do we actually do? These are our Key Activities. Netflix licenses existing content and creates their own that they deliver through an online platform. And they do all the usual business things like sales and marketing.

After that, we have to decide what we need to do?

Like Netflix relies on SO MANY resources to keep their massive wheels turning.

They have people making content including their in-house studios, engineers to make sure their website and apps work, customer service to troubleshoot, attorneys to deal with licensing, internal teams for promotion, and a global network of data storage facilities -- to name a few.

Key Partners

Remember, we need key partners, we don't have to do this alone. And we need to look for Key Partners and ask: Who do we need to team up with in order to deliver our value proposition?

In this case, Netflix partners with law firms, studios, agents of actors, and other companies who want to co-promote products -- like Comcast Xfinity or T-Mobile.

Finally, after we’ve figured out the who and the what of our business model, we have to think about the money. Half of that is our Revenue Streams. Where are we making money? What are customers willing to pay for each product or service?

As of 2024, Netflix uses three membership subscriptions: Standard ($15.49/month), and Premium ($22.99/month).

Unfortunately, entrepreneurship isn’t free.

There are Costs involved in doing Things for your People. So where are we spending money? For Netflix, examples of costs are employees, licensing and production fees for content, servers for data storage, brick and mortar workplace locations, DVD production and mail, and R&D. And… that’s Netflix in a nutshell.

This is exactly the goal of the Business Model Canvas: to provide a framework for anyone to break down the pieces of a business -- especially your future business!

Today, we grew the tiny seed of an idea into a full business model. So remember that everyone has ideas, and the real work of an entrepreneur is in sharing them and getting lots of feedback!

When we use the word “value,” we’re usually trying to describe something’s worth, importance, or usefulness to us. I value your opinion. That’s nice. That hat seems like a great value for the price.

And when it comes to entrepreneurship, value is everything. Value is the core of any business, and it directs all future decisions, innovations, and customers that get targeted.

Even if we’ve thought about the big picture, if we can’t explain how an idea makes someone’s life better, then why should anyone pay attention?

So let’s talk about strategies to answer the two fundamental questions at the core of any business model: “What value do I deliver?” and “Who are my customers?”

Value Proposition

Sometimes business jargon can seem confusing, but here’s the trick: the words usually have pretty literal meanings. Since value means worth, a Value Proposition is the worth you offer to your customers.

Typically, a value proposition is a sentence or paragraph that clearly articulates what your service, business, or organization does, who it brings value to, and why it’s valuable for those people. It should be clear why someone should choose your company over the competition.

Value can be something tangible like offering products at a lower price or higher quality, or something more abstract like better customer service. No matter the business idea, a value proposition saves us precious time and money.

Without thinking about value, we risk developing something that customers don’t need or want. And don’t get me wrong, creating a value proposition can seem daunting. We have to be confident in ourselves and the work we’ve done to develop our ideas.

So… what are you worth? What are you worth? What’s your value? Why should people care about you and your work?

When we write a value proposition, we have to think about two main things: first, the experiences of our customers and second, the capabilities of our product or service.

If we’ve got those down, it’ll basically write itself!

To make sure we’re covering our bases, we can use the Value Proposition Canvas created by a company called Strategyzer. Half of the work is understanding customers. And to do that, there are 3 main questions to ask:

3 Main Questions

1: What are their jobs? And this is a little confusing, but I don’t mean their literal jobs. More like… what do they do at work and in everyday life, and what problems do they have?

2: What pains do they experience, like risks, obstacles, or bad outcomes?

3: What positive gains are they looking for and receiving?

Everyone is trying to maximize gains and minimize pains, or at least strike a healthy balance. So we entrepreneurs can try to tip the scales towards gains.

After considering the customer experience, we can turn the spotlight onto our potential business with 3 response questions:

1: What products and services are we offering customers to help them complete jobs?

2: Is what we’re offering a pain reliever that cuts out risks, obstacles, and

bad outcomes? And

3: Better yet, is what we’re offering a gain creator?

Together, customers and products help us define our value!

So let’s get down to the nitty-gritty details of writing a value proposition, shall we?

In order to figure out the jobs, pains, and gains of our customers, we have to find them and get nosy about their lives. But keep it professional -- this is entrepreneurship!

Research

Leave your Facebook stalking skills out of it. Some might call this research finding your target market, the people most likely to buy Research from you.

There are lots of ways to connect with potential customers, but industry favorites include: interviewing them one-on-one, holding focus groups, or conducting surveys -- either in person or through an online service like SurveyMonkey.

Remember, the goal is to learn from potential customers to turn your idea into a top-notch solution to a problem, whether you’re working on spill-proof takeout containers or more affordable childcare.

Answer Your 5 W’s

So to find out the Who, What, Where, When, Why, and How of your target market.

Who do you think or know is experiencing the problem? How old are they, do they have a family, or do they speak different languages? What are they doing when they experience the problem? Are they working at a desk job, crafting something, or exercising?

Maybe they’re hiding under a blanket away from the world and their problems until they crumble into dust. Where are they experiencing the problem? Are they at work or at home? On a plane? A train? An automobile? When are they experiencing the problem?

Is there a time of day, week, or year? Is it a seasonal problem? Why are they experiencing the problem? Why are others not experiencing the problem? And, like, why me? Why is it always me???

And, finally, how are different people experiencing the problem differently? How are they learning to cope with the problem or develop their own solutions? I mean, ignoring the problem is an option. But not always the best way to cope.

All these questions paint a picture of who we’re dealing with, and give us a peek at their jobs. And when we’re dealing with value propositions, customer jobs can be functional, social, and emotional.

Functional, Social, and Emotional Jobs

Functional jobs are what we’d traditionally recognize as work that pays the bills. A big mistake when writing a value proposition is only focusing on the functional jobs of our customers. But customers feel social obligations to look good or support their community. And emotional jobs are all the work we put in to grow as humans.

The ultimate goal of understanding customer jobs is to get into their heads. What they do illuminates what they value, or what they’d like to value.

Entrepreneurs want to change the status quo.

So if we know what customers value, we can figure out how to get them what they want in a new or better format. Remember the point of the value proposition: why should people choose you over everyone else?

Disruption is one strategy to give customers value, and it’s a hot business vocab word.

Blue Ocean Strategy

Instead of challenging existing markets and trying to make our idea stand out in a field of others, why not create a new market (often called a blue ocean) so our idea is like a Blue Ocean seed sprouting a whole new garden?

Here, we’re not talking about value that comes from lower prices or faster delivery -- we’re talking about letting customers achieve the same jobs in a totally new format.

Like once upon a time, radio was the cream of the crop for the media in everyone’s home. Radio listeners had two needs: one, to be entertained, and two, to stay informed. And radio met those needs by broadcasting different programs, from music to dramatic theater to news.

Then, along came television -- a new, disruptive media format that entertained and informed people. Because TV achieved similar customer needs in a fresh way, TV entrepreneurs didn’t have to compete within the world of radio. They built their own world, created new value, and maybe even found new customers who weren’t interested in radio at all.

Of course, we know jobs don’t come without pain.

We’re all human. The struggle is real.

So when we think about our customers, we need to consider what risks or annoyances are getting in their way. If we can address those pains, that means we’ll create a better business with more value.

And customers wouldn’t do jobs at all without gains, which tell us what they need or want to experience before or after a job.

Now how are you going to help them - product. Now that we’ve researched our potential customers, we’ve filled out half of our Value Proposition Canvas. Or you can sort all that knowledge with one of those conspiracy investigation walls with pushpins, multiple colors of string, and newspaper clippings. It’s your value proposition.

Using all this info, we can prune our big entrepreneurial idea to make sure our products and services are truly alleviating pains, creating gains, and adding value to people’s lives.

Once we’ve done this, our value proposition will be flourishing.

After all this thinking and research, our value proposition is done. So when you’re asked “What are you worth?”, squish down that panic. You put in the work, so show them what you’ve got.

Now, we learned about value and how customer-driven thinking can help us show off what our business has to offer. By understanding customer jobs, pains, and gains, we can make sure our products and services alleviate pains or create gains.

And then -- boom -- we have a value proposition, a statement basically saying why we’re better than anybody else.

We’re used to competitions with clear winners and losers: baseball games, math Olympiads, pie-eating contests, and games involving thrones. We crown a victor and everyone else goes home empty-handed [-- or when you play the game of thrones, you win or you die.]

In business, there isn’t just one winner.

In today’s world, there are very few actual monopolies, or markets with a single seller. Participation trophies actually mean something!

So as entrepreneurs, we have to take stock in the middle of the competition, and ask the question: “how competitive am I?” Our competitors are more than happy to answer this for us -- maybe not with words, but with what they do.

So get ready, it’s time to study up on the competition. There’s way more to learn from the competition than trade secrets. I know. You know.

Instead of spies or emperors, entrepreneurs are more like scientists.

We come up with a hypothesis -- our business idea -- and observe our environment to help us make informed decisions. A crucial part of our environment is our competition -- the businesses or products that customers might buy instead of ours.

What is Business Competition?

Competitors and customers are both important players in our market -- any structure that allows buyers and sellers to exchange goods, services, or information.

From competitors, we can learn standards for doing business in our market, who our potential customers are, and possible gaps in what’s currently being offered where we could provide more value. But we’re not being shady or unethical about it.

We’re NOT trying to destroy everyone who dares to make a product or service similar to ours. We want to learn all we can so we have the best chance of being profitable -- that’s the ultimate goal, right?

To make money doing something we love while making the world a better place? And to do that, our business must be competitive, and we have to do this research.

Comparing ourselves to other people can definitely make us feel insecure, but these days, people are using their foes as fuel for more innovation. This special kind of competitor can push us to work harder on our ideas, even if they have no idea who we are.

Market Standards

Not to mention, our competitors are just as curious about us. I might be someone’s enemy and not know it!

So let’s start with the first thing we can learn from our competitors: market standards. We have to work smart, not just hard, so take note of what they’re doing.

They’ve set price points, created marketing campaigns, contracted with suppliers, and already have customers.

Straight-up copying is illegal, and sure, not everything will work for your specific business. But gathering this information can give you an idea of industry standards.

Pricing is Tricky!

Pricing is especially tricky. It’s common to underprice products when you’re starting out, but you need to make enough to keep doing business. And you don’t want to go to market with a $100 pizza when everyone else is charging $10. Unless you’ve replaced cheese with gold.

But what monster would do that? Or if you notice that someone is wildly overcharging for their service, your calculations may show that you could charge less and still make a tidy profit.

Paying attention to your competition can also tip you off to the winds of economic change. Have they slashed prices or rolled out several new products? Have they rebranded? Have they merged with a related company?

All of this information reflects what customers currently want from your market. Besides what customers want, our competition can also tell us who potential customers are.

We know how important it is to talk to our potential customers.

So if you’re at a loss for who might buy your product or where to find them, start with your competition. You might find key demographics from public data, like marketing on their social media channels and website.

Or look at reviews on Amazon or Yelp -- customers are telling us all the time who they are and what they like! They’re laying out what gains they want and what pains are still frustrating.

The Source

If you still can’t find what you’re looking for, try going straight to the source -- which is about as close to corporate espionage as we’ll get. Call a non-competitive, similar business in another state or city so you can ask them slightly deeper questions like “Why did you price your product this way?” and “What is your biggest target market?”

Or go visit a physical establishment and pay attention to the other customers and the overall atmosphere. Is the place full of angry old ladies, or mild-mannered Wall Street brokers? What time is it busiest? What is their customer service like?

Once we have a sense of what our competitors are doing, it’s just as important to consider what they ARE NOT doing or what problems they’re having.

Those are the gaps in the market.

The Gaps in the Market

There might be 100 burger restaurants in your town, but none of them offer vegetarian options and gluten-free buns. Hello, that's a gap! I need it!

There might be 3 electric scooter rental companies operating downtown, but none on the university campus. That's a gap!

There might be dozens of dog-walker fliers in the community center, but none of them send pictures and walk reports.

When we talk to customers to understand their jobs, pains, and gains, we need to understand what they’re currently buying to make sure our business isn’t more of the same. We want to offer something valuable and unique that meets customer needs. In other words, we want to differentiate our product.

Now to really help our business stand out, we need to understand the two key forms of competition: direct and indirect.

Direct Competition

Direct competition is when different businesses offer similar products or services to a wide variety of customers. Your local bookstore, Barnes and Noble, and Amazon are all in direct competition to sell you the latest fiction gem.

Customers Consideration Factors

Customers consider lots of factors, such as price, location, service, and products when deciding where to buy their books. But people have different preferences, so everyone will probably choose different combinations of those factors.

That’s why competition exists, and what lets you find gaps!

The college kid down the block who shops local may choose the independent bookstore, while the errand-running parent goes to Barnes and Noble, and the price-conscious retiree uses Amazon. In the end, they all get the same book.

Indirect Competition

Indirect competition is when a variety of products and services are offered to the same customer base. Bookstores aren’t just selling books, they’re also selling enrichment and entertainment.

So indirect competitors of bookstores would be other things people do to enrich their lives or be entertained, like films, television, video games, or board games. Movies as a medium can be considered indirect competition -- it doesn’t have to be a particular business like a theater chain or streaming service.

So competition is sort of a multi-dimensional tug-of-war between businesses, and it’s not easy to be competitive.

In 1979, business academic and author Michael Porter wrote about competition in the Harvard Business Review, and his insights are still referenced today.

Porter’s 5 Forces of Competition

Porter’s 5 Forces is no Pride and Prejudice, but it’s considered a business classic. So it is a truth universally acknowledged that there are five key factors you have to balance to be a competitive business. The lower these are, the better.

Supply Power

Number one is supplier power. How easy is it for your suppliers -- the people who get you the stuff you need to run your business -- to demand higher prices? Supplier power is high if there aren’t very many suppliers in the market, the product you need is rare, the supplier is large and you’re one of thousands of clients, or switching suppliers is too expensive.

In all these cases, you’re sort of at the mercy of their whims.

Buyer Power

Can you choose your price, or are you constantly trying to lure in buyers with sweet deals? Buyer power is high if there aren’t very many buyers in the market, each buyer is very important to your business, or there’s a low cost for the buyer to move between you and your competition.

Threat of Substitution

Is anyone doing exactly what you’re doing? When there are lots of close alternatives, customers are more tempted to switch what business they support if your prices increase.

So the threat of substitution is high if changing loyalties appeals to your customers’ wallets.

Threat of New Entrants

Money attracts competition, so who else could try to do similar things? More competition means fewer profits for any businesses currently in the market.

Barriers like patented technology or other Intellectual Property, governmental red tape, lack of access to distribution channels, or expensive startup costs can prevent this.

The threat of new entrants is high if such barriers don’t exist.

Competitive Rivalry

How many competitors do you have? Rivalry is high if growth is slow across an industry, getting out is hard, there are high fixed costs (like rent, utilities, or insurance) that drive price cutting, or if you have competitors that don’t seem to sleep -- or literally don’t need to, like AI.

More competitors often means lower prices across a market.

So basically, with more information, entrepreneurs can make better decisions. Learn everything you can from the competition, and remember, in business there can be more than one winner.

When will your idea transform from a casual side-hustle into a full-blown business? Is it when your podcast gets sponsorships, when your catering company is booked for 5 weekends straight, or when you’ve sold your 100th bottle of Slug-be-Gone?

Basically, when do things get REAL?

I can’t tell you when you’ll start to feel like a businessperson, but the world

recognizes it when you legally register your formal business structure.

You could be an LLC. Or a C-Corp. Or a B-Corp. Or a Co-op. So many different letters!

It can be daunting to move from the abstract idea stage to the realm of bank accounts, taxes, and liability. Sometimes, it can feel like you’re making arbitrary decisions, but we’re going to wade through the legalese together.

Things are about to get legit.

The legal basics of entrepreneurship aren’t as flashy as generating ideas or staking out the competition. But think about them like a Choose Your Own Adventure novel.

Choosing a business structure opens up a different future with unique twists and turns. So buckle up.

Legally, you have to register your business.

And depending on where you live, your government might have certain requirements to do that. In the U.S., you register to say a cordial “what’s up?” to the state and federal government. They need to know you exist so you can get the licenses and permits you need to do business and -- everyone’s favorite topic -- pay your taxes.

For you as the owner, and anyone you’re doing business with, registering can create some legal and financial protection. Specifically, we’re talking about liability -- or the state of being legally responsible for something -- and potentially using helpful tax structures.

We’ll talk about a bit of money stuff here, but check with your government’s commerce, tax, or treasury departments for more details. There are lots of different options to pick from when you register your business, so it’s time to choose a path.

These are most of the U.S. options, but a lot of countries have similar structures.

Let’s jump in.

Sole Proprietorship

A sole proprietorship is a type of business that’s owned and run by one person.

Think freelance writers, independent landscapers, or even YouTubers.

This is the easiest Choose Your Own Adventure decision: choosing nothing.

If you provide a service or product to someone by yourself and get paid without registering for any kind of business, you’re considered a sole proprietorship.

But it has some drawbacks.

You aren’t considered separate from your business -- you’re personally liable. That means your business money isn’t separate from your personal assets like your money, car, or house -- and your personal assets could be taken in a lawsuit.

Raising investment money can be tough because you can’t sell stock -- or shares of ownership in the company. And banks might hesitate to lend money because they perceive a bigger risk in lending to just one person.

Filing taxes as a sole proprietor is pretty easy.

You have what’s called pass-through status, where profits are passed straight to business owners and are just part of personal taxes, instead of also being included in the business taxes.

Basically, since the business money isn’t separate from your personal money, you just submit once with a few extra forms. Also, you have to factor in self-employment taxes, which are explained on IRS.gov.

The cool thing about a sole-proprietorship is that your business expenses can be tax write-offs! New computer for work? Write it off! New desk? Write it off! You want to check with an accountant, of course, but that is a real advantage of owning your own business.

Partnership

A partnership is a way for two or more people to share ownership of a business, which is great if you don’t want to go it alone, or for professional groups like attorneys or dentists. All the fun groups.

If you choose a partnership, you have to pick one of three flavors that mostly affect power and liability: General, Limited, and Limited Liability.

General Partnership

In a General Partnership, you and one or more partners share personal liability and all have an equal say when making decisions. Just like a sole proprietorship, it’s the easiest choice for partners, but personal liability can be risky.

Limited Partnership

In a Limited Partnership, someone takes on unlimited liability, so their personal assets can be seized in a legal battle, and they have to pay self-employment taxes. But they’re the head boss and own and run most of the business.

The other partners have limited input, but also limited liability. They’re only responsible for a slice of the business assets so they’re personally protected from lawsuits. These are often silent business partners... who are basically just the money.

Limited Liability Partnership

In a Limited Liability Partnership, or LLP, everyone gets limited liability. It’s more work to form than a general partnership, and gives less protection than fancier business structures.

But it does give owners at least SOME liability protection.

No matter the flavor, you’ll have an easier time raising money in a partnership than alone, since banks might be more willing to lend to multiple people. And you could get investments if you’re willing to take on silent partners.

Partnerships are also helpful for tax reasons.

General partners have pass-through status for taxes, like a sole proprietorship. Everyone splits the profits through the business, and deals with their own taxes, including self-employment taxes.

Overall, partnerships -- especially LPs and LLPs -- are more expensive than sole proprietorships because they need more legal and accounting help.

Now a corporation, sometimes called a C-corp, is an entity that’s completely separate from its owners. Like a person, a corporation can have profits, taxes, and liability. The BBC, eBay, and AirBnB are all corporations. Where you incorporate matters for many legal reasons.

In the U.S., for example, lots of people form their legal entity in Delaware. If you choose the C-corp path, you’re protected from lawsuits -- you aren’t personally liable and have limited liability.

Funding is also easier, because corporations can sell stock to the public. While corporations can borrow from banks, they typically find it too restrictive and find money in other ways.

Moreover, if stockholders -- the people who own shares of your business -- leave or sell their stocks, you can keep chugging along instead of stopping to restructure.

But for all these benefits, you have to be ready to hustle.

Any type of corporation needs a giant pile of state and federal paperwork to form. They require extensive record-keeping, operational processes, and annual reports on their activities to the government.

C-corps are also expensive to form.

And unlike sole proprietors and partnerships, C-corps pay tax on profits before handing money out to stockholders, who also have to pay their own taxes, which means a little less profit for each owner.

C-corps are also beholden to profit.

Their decisions have to be based on what makes the most profit for stockholders. A benefit corporation, sometimes known as a B-corp, focuses on social good. Patagonia, Ben & Jerry’s, TOMS, and The Honest Company follow this path!

Like any corporation, B-corps give you lots of protection with limited liability.

And maybe more importantly, this structure empowers and protects you to make a difference and a profit.

B-corps are designed to let the CEO -- the person in charge of the business who may or may not be an owner -- make decisions for social good. Even if those decisions are a little less profitable, the CEO won’t get in trouble with stockholders.

The funding and structure is similar to a C-corp. But you can also look for impact investing -- people investing money to create a specific social or environmental benefit. It’s still really expensive to incorporate, and B-corps are taxed the same as C-corps.

Additionally, to make sure you’re doing social good, you have to create even more reports for transparency. Get ready for mountains of paperwork!

A limited liability company, or LLC, is sort of a corporation-partnership hybrid. LLCs can have one or more owners. It’s literally in the name: you have limited liability. And, you can still choose to become a corporation later if you want -- that path is still open.

Many startups begin with an LLC because of the protection and flexibility it has.

In fact, this might help you attract investors. LLC stock is privately owned, so being able to transform into a corporation and eventually sell stock to the public might draw in the financiers.

And like a partnership, you have pass-through status for taxes, which can be nice, but you still pay self-employment taxes. One risk of choosing this path is when an owner joins or leaves an LLC, you might be forced to reform. But you can also create a legal agreement within an LLC to cover ownership transfers.

A cooperative, or co-op, is a business owned by the people using it -- like REI or a farming co-op. An elected board of directors runs the co-op, while every stockholder-slash-owner can vote on the overall direction.

So stockholders have a real voice!

The main problem is that the wheels of democracy turn slowly. Stockholders vote on all decisions, which means that responses to market changes are slower. But in the spirit of equality, each owner gets precisely one vote and enjoys limited liability.

You can generate money for a co-op by selling stocks, and any profits are distributed among the stockholders. But you might have a hard time getting outside investment.

Traditional banks aren’t super excited about lending to businesses where their money won’t be guaranteed by one or a few specific owners. And, like a corporation, co-ops have the “double taxation” treatment for stockholders.

Nonprofit Corporation

And finally, a nonprofit corporation is created to do charity, education, religious, literary, or scientific work that isn’t taxed. Nonprofits include Amnesty International, Better Business Bureau, or the Foundation to Decrease World Suck.

If you choose this path, your work benefits the public.

So nonprofits have tons of paperwork and record-keeping, operational processes, and must submit an annual report on their activities to the government, similar to a C-corp. Also, owners are well-protected and have limited liability.

After jumping through some hoops with the IRS, the government will grant you tax-exempt status, meaning you don’t pay state or federal taxes on any profits. And there are strict rules on what to do with any profits you earn -- like, you can't distribute them to stockholders or political campaigns.

As for funding, nonprofits are often eligible for grants -- or money given by a government or organization for a specific project.

Other people and corporations can also just give you money so that they can write it off on their taxes. And out of the goodness of their hearts, of course.

There is really no “best” structure because every business is different, your path might change over time, and success involves grit, determination, AND luck.

We recommend talking to a trustworthy attorney or tax accountant for specific and nuanced advice, since they’ll know your business idea inside and out.

Once we’ve chosen a legal structure, we still have to say “what’s up?” to the government so they know we exist. And this means… paperwork.

In the U.S., you need an Employer Identification Number from the federal government, which will help you with taxes and getting a bank account. If you open a branch of your business in the Scottish Highlands or the Bolivian Salt Flats, you’ll need to look at what those countries require.

Next, register your business through your Secretary of State’s website. There are often small filing fees, and if that’s a barrier, try to find an advocate at a local Small Business Development Center, bank, or your state’s Department of Commerce.

Someone may know someone who knows a program to get your fee waived. It never hurts to ask! The worst they can say is no, go away! Then, check in with your local government. Are there requirements to doing business in your city, like a business license you need to get?

And finally, it’s never too early to start thinking about taxes! Review the requirements for your state and federal tax reporting. You could use an accountant or DIY software like TurboTax -- depending on your needs.

Make a plan. Stick to the plan. File your taxes.

So the bottom line is: registering your business is a big decision, but an exciting one, because you get to define your own path.

Where do you see your business going in 5 years?

What does success look like?

What infrastructure will you need?

It’s up to you.

Imagine if the only videos on YouTube were people looking for love. That could have been the world we lived in! Before it had 1.9 billion users per day, YouTube started as a video-based dating service, complete with the truly excellent catchphrase: “Tune in, Hook Up.”

If you look, you’ll find tons of these quirky origin stories behind some of the most successful companies. But why? The reason they didn’t flop is because they were willing to listen and fundamentally change their business when their original idea didn’t meet the needs of their market. They were clever observers and nimble enough to pivot.

We’ll look at the bare minimum we need to make an idea a business reality, also known as our minimum viable product. And we’ll be ready to pivot if things fall flat.

I don’t know about you, but I tend to dream big. My vision for any of my projects is in vivid technicolor. And it’s great! I know where I want to go and pretty much what an idea will look like in the end. But especially when it comes to entrepreneurship, we want to take that vision of a product or service and break it up into smaller steps.

Use the mantra: dream big, start small.

We’ve done all the research we can in the idea stage, so now we have to take the risky leap to the next level.

Thinking strategically, we want to focus our energy and our money on what creates value for customers, so they support us!

Minimum Viable Product

The first iteration of our product or service should be our minimum viable product -- the simplest version that will attract customers and maximize our learning as we launch our business.

It’s called an MVP for short.

And there are 3 key parts to a good MVP:

It has enough value that customers want to start using it. It hints at what we’ll produce in the future to keep customers interested, and It gives us feedback to learn from as we refine our product or service.

Basically, the MVP is like a really useful first draft.

Our goal isn’t perfection -- and honestly, it’s never going to be perfection in entrepreneurship, but more the goal is to produce a great first offering that enables learning.

Once we’ve launched a product or service, we can start gathering feedback and implementing changes, so we can deliver more value to customers faster than competitors.

Design Thinking

To make an effective MVP and turn it into a successful business, it’s important to put customers front and center and think about people having an experience.

In buzzword lingo, this is applying a human-centered approach to design-thinking. The good news is, all the entrepreneurial thinking we’ve been doing so far is human-centered.

We’re all humans, and we all have small wishes about products and services that could make our days a little easier -- like wishing there was already a coaster on the bottom of every cup, or that we could somehow reuse our favorite notebook Forever.

Those passions, complaints, and nagging “I can do better than that!” feelings from Our egos give us the seeds of ideas. Also, we consider the jobs, pains, and gains of our customers to make sure our ideas have value.

Doesn’t get much more human-centered than that!

Design-thinking experts emphasize that coming up with a good idea isn’t a linear process. It’s a jumble of loops that include steps like: finding problems, brainstorming solutions, prototyping, testing, getting feedback, and making changes.

And I know we have been teaching these concepts in a pretty linear way, but entrepreneurship totally isn’t a linear process. Every entrepreneur comes to the table with different knowledge, skills, and expertise.

Sometimes we recognize an idea but it takes years to take the financial risk to start a business. Or we never do anything with the idea at all. When it comes to sketching out all the details of our business, we have different interests too.

Someone whose passion is marketing may have cool branding, but they aren’t excited about choosing a legal structure. Or an accountant may start thinking about the costs of their future business before investigating the competition, so they have to circle back.

Everyone’s starting point can be different!

But we want to stay focused on a human-centered approach to design-thinking as we create any product or service -- especially our MVP. For example, despite great strides in global health, some countries are still struggling to prevent parental death during pregnancy.

So in rural India and Bangladesh, innovators came up with the idea of a smart bangle -- a water-resistant, plastic bracelet that gives important pregnancy info twice a week for 10 months, without needing to be charged.

The bangle also monitors carbon monoxide, a gas that we can’t see or smell but is extremely toxic if it builds up in our blood. The bangle alerts the wearer when they’re exposed to unhealthy levels of carbon monoxide, like possibly when they’re cooking over wood-burning stoves.

If the entrepreneurs hadn’t talked to the women they were trying to help, they might have designed a culturally insensitive wearable, rather than something that matches the patterns, colors, and cultural nuance of jewelry in India.

If nobody wanted to wear the bangle, it wouldn’t help!

You might assume that all successful entrepreneurs have this process down. They’re changing the world, making money, and living the dream, right?! But we all have biases and limitations, and big mistakes happen.

Maybe not enough research or testing was done, or there was oversight. For example, the most common crash test dummy was designed around a statistically average male body, from height and weight to muscle distribution.

So cars and seatbelts have historically been much less safe for people whose bodies aren’t like that. Power tools are easier to hold if your hand is a larger size. And personal protective equipment, like safety goggles and body armor, doesn’t always come in the sizes that people need. And this unfortunately happens a lot across medicine too.

Like, the dosage of the morning-after contraceptive pill is barely effective in people who weigh more than 165 pounds.

So design-thinking is complicated -- especially when it comes to health and safety -- and it takes a lot of work to make a thoughtful MVP and consider all the different types of people who might use it.

But no matter how well-researched or user-friendly your MVP is, people just might not want it.

Pivoting

That feeling stinks as a new entrepreneur. But all is not lost!

Instead of burning everything to the ground, you might be able to pivot. That’s the business way of saying: make a big change to a product or service based

on customer feedback, because they don’t like or need it. In fact, many of the brands we know and love (or at least use) today were born from pivots.

Take Instagram, for example, which started as Burbn -- a check-in slash gaming slash planning slash photo-sharing app named after alcohol. It was a lot. And it wasn’t popular. But instead of quitting, the founders used their app analytics to see how people were using Burbn.

No one cared about the check-in or gaming features, but they loved to share photos.

And thus: Instagram was born.

Simple, intuitive, and now with over 1 billion users.

The key to a good pivot is listening.

As you test your MVP, are you paying attention to what your customers are telling you? You may uncover a job, pain, or gain that you didn’t know about before. Then the question becomes: can you change?

Change is hard!

It’s easy to think you can handle it before you’ve gone through the emotional rollercoaster of a new entrepreneurship venture. Of course I’d be able to adapt!

I’m super flexible, and I love hearing other people’s ideas. But really listening to feedback can be rough. And it’s easy to disregard useful feedback as worthless because you think you know best.

This business idea is my BABY. I spent all this time listening and working and making this thing that you SAID you wanted. Why don’t you love it?! How dare you! This kind of thinking can mean the death of a fledgling -- or even a mature -- business.

The best thing for your idea is to have a critical eye and a hard heart: pay attention to what customers are using and let go of what isn’t serving them. And it’s so important to get feedback early on. Even though you’ve still put in hard work, time, and money into an idea -- it’ll be easier to pivot when you’re less attached.

The bottom line is: be flexible.

You want your minimum viable product to draw in customers, who provide lots of feedback, so you can adapt. And if you need to, pivot!

Figure out what parts of your idea people like and use, and focus on them.

To figure out if an idea is as good as we think it is, we have to talk to our customers. We’ve said it over and over again. We have to ask them what they like, dislike, want, or need, and we want honest feedback about our product or service. But… how?

Just walk up to them on the street? Or in the produce aisle? Or in spin class? Start babbling about value propositions and minimum viable products? That’s definitely how you make friends.

As entrepreneurs, we’re creative problem solvers willing to take risks for our ideas -- and this is part of that risk-taking.

We have to be the boldest versions of ourselves to send out surveys, conduct interviews, and give presentations to end up with the best business idea possible.

These conversation strategies are useful for the whole entrepreneurship process -- from our initial idea for 2 years in.

Think about how many times we’ve already said go talk to people!

Value Proposition

But feedback in these early stages informs all kinds of crucial decisions, and some of the trickiest customer interactions are getting people interested in our product or service in the first place. So that’s what we’ll focus on here.

First, we want to pull out the old value proposition, and review how we expect to provide value to customers. This will help us come up with questions and explain our minimum viable product.

The goal of this stage in the process is putting our MVP through validation, or initial tests before launching. Next, we have to decide what exactly we want feedback on, because we don’t want to waste everyone’s precious time by asking unfocused questions.

Is it a physical product that people need to get their hands on? Is it a website that people need to click through? Is it software that we need to demo?

Getting Feedback

And now...drumroll please...we have to actually get people to give us feedback! Woo!

This early stage is where we have to really embody that “hustle” we keep talking about. Steve Blank, famed entrepreneur and author of The Startup Owner’s Manual, says, “Get out of the building.”

But that doesn’t necessarily mean running up to the first person we see on the street and bombarding them with questions… usually we like to use a more tailored approach!

Networking

One easy place to start is with our networks. Friends and family are a good place to make sure your questions make sense and will get you the type of feedback you’re looking for. But we need to go beyond them, because we want unbiased opinions about our ideas.

You probably know more people than you think, like work colleagues, friends of friends, or LinkedIn connections! Talking to them will give you a chance to practice before talking to complete strangers.

Now, there are a few tried-and-true ways to get helpful feedback:

Surveys

Surveys are flexible ways to get lots of responses on whatever key metrics we’re interested in. Some people basically have degrees in designing effective and informative surveys -- so, uh, there’s a lot more where this came from.

But there are 3 key sections we want to focus on:

Target Market

First, the target market. Open with a few demographic and behavioral questions to get a sense of who the person is and what their life is like. This helps contextualize their answers and informs our marketing decisions.

Demand

Second, demand. We’ve checked out the competition, but what do other people have to say? Do they already use a competing product? Are we battling fierce brand loyalty?

Willingness to Pay

And third, willingness to pay. We think our idea is worth a million bucks, but how much do other people think it’s worth? After all, they’re (hopefully) doing the buying.

It’s really easy to create and deploy surveys. If you’re going digital, you can use templates from services like Survey Monkey, Type Form, and Survey Hero, or make one from scratch.

Survey

You can ask your network to take your survey by sending emails directly to your friends and colleagues. Branch out even more by asking them to pass your survey on to 5 people in their network -- but make it as easy as possible!

In that initial message, include language that they can easily copy and paste like “Help my friend, a cool entrepreneur, kickstart their business by taking a 5-minute survey. Please!”

In the age of social media, consider posting a link to your survey on Twitter, Facebook, or even Instagram. You can tag people to try gaining some traction -- that personal touch can help persuade people to fill it out.

And we do still live in a physical world, so you can conduct surveys IRL too! Phones still make calls. Shocking, I know. So you can ask people questions while you take notes.

It’s also not too cliché to pick a busy street corner and ask passersby a few questions, especially if they’re within your target market. If you’re nervous, try bringing some exuberant friends with you who can help break the ice.

Entrepreneurs aren't “entrepreneurs” alone.

“I’m on your team, be on my team!”

You could even ask a non-competitive business owner with a similar target market if they would let you survey their customers either in store or by email. You can sweeten the deal by offering to include a few questions that make sense for their business.

If we want more depth than a survey can offer, focus groups and interviews are a good strategy.

Focus Groups Interviews

The key difference is that we can watch people use our product and ask follow-up questions to really understand their experience.

I wouldn’t visit your website. Why? I don’t like it. Why? It’s hard to look at. Why? The background. Why? I don’t like the shade of green. Why?

Because it reminds me of vomit, the walls of my high school cafeteria, and the ultimate futility of human endeavor. Also the home screen loads really slowly and the background music is annoying. Okay, now we’re getting somewhere.

Some schools of thought recommend asking “why?” five times when solving a problem, to get to the heart of an issue. Although, for the record, you should mix it up with actual full questions, not just “why?” like a 3 year-old.

Stalking

Sometimes you may want to approach someone specific that you only sort of know or you haven’t met before. Now, we’re not encouraging stalking -- use common sense, never make anyone feel unsafe, and be respectful of their time.

Self-awareness is the most attractive quality. And in some cases it’s not appropriate at all, like surprising an actor and throwing your screenplay at them, or going to an elementary school playground to ask kids to demo your game.

But say you’re looking to sell a new alumni directory app to universities and scholarship programs. And maybe you’re having trouble getting in contact with the alumni coordinator by phone or email. So you can try showing up to their office during business hours with a kind smile and a reasonable ask.

Your basic goal is to get in the door, talk with an important potential user, describe your project snappily, and try to build a relationship. That way, maybe you can conduct a test, have a deeper conversation later, or even land them as a customer.

Building Relationships

Sometimes it doesn't work, but taking these kinds of risks can be part of the “hustle”! Focus groups and interviews take more time and don’t have the same reach as a survey. But the feedback can help you figure out what really needs to change, or what people truly like.

Then, there’s the classic sketch comedy bit from I Love Lucy to Saturday Night Live: the product demonstration. Today it’s more common to demo software than vacuums, but the idea’s the same.

The Product Demo

With this method, we test our MVP with people or businesses -- basically, anyone who has purchasing authority and could buy it. The goal is to understand where we could make big improvements to the user experience, before officially launching.

Notice for all of these strategies, we need large groups of people willing to listen to our ideas. If you’re having trouble finding them, universities and colleges, entrepreneurial advocate groups, networking groups, and Startup Weekends can help!

Connections at each of these places can fundamentally change your progress, support, and feedback. Once we have a pile of information about our MVP, our work is only half done.

Next, we have to sift through it all and sort the valuable feedback from people being grumps. Ideally, we want to use the power of math to help. Surveys especially give great data for statistical analysis, but we can use any method to get helpful quantitative and qualitative feedback.

Quantitative Feedback

Quantitative feedback involves numbers -- things like rating our product or service on a 5-point scale (1 being the worst, 5 being the best), or asking how much someone would be willing to pay for it. Calculating the average response to these questions is often a good start.

Qualitative Feedback

Qualitative feedback is basically everything else -- people’s meandering thoughts about what they liked or didn’t like. We can analyze the results by grouping answers into several categories like “fun,” “complicated,” or “ugly shade of green” and noticing how often those categories show up.

In general, we want to collect information from a meaningful chunk of our customer base -- a statistically viable sample. We should try to have at least 100 responses, but more responses lead to more useful results.

Ultimately, we want to use every drop of information we’ve collected to recognize all the opportunities to improve our MVP. But we have to take some feedback with a grain of salt. We’re really looking for trends in the data.

Trends

If a self-proclaimed technophobe says your paper-thin tablet is a huge monstrosity, you may need to ask yourself: is this one criticism from someone who will never be my customer? Or is this a frequent concern that’s a trend across all the feedback?

After we’ve sifted through to find the golden nuggets of feedback, we need to actually modify our MVP to increase the value we’re providing to our customers.

We could make minor design tweaks, or completely scrap features to focus on one aspect that people love -- that’s one of those pivots we talked about! We want to make sure our future customers get what they’re paying for.

The bottom line is: are people going to buy whatever you’re selling? We hope the answer is yes, but validating our idea by testing and gathering feedback will help us make sure before we go all-in.

What do entrepreneurs do all day? What are we actually supposed to do all day? When someone says they’re “studying business” or they “work in business,” they could mean so many different things. They could be in marketing, sales, finance or human resources. So much goes into keeping a company running smoothly.

As entrepreneurs, we probably stumbled into business -- we were passionate about an idea or saw a problem we wanted to solve that developed into a business. Or maybe our side hustle got so big it turned into our main hustle.

So here’s a secret: as entrepreneurs, we have to do all those business jobs. Yes marketing, yes sales, yes finance, yes HR.

You may be concocting the perfect blend of spices for artisanal pickles, but you still have to complete payroll. You may love being outside planting flowers and sculpting shrubs, but you still have to market your landscape business. You may draw a daily webcomic, but you still have to make sure the tech is running smoothly and your website design is on point. There’s so much to do!

But to help us prioritize, we need to figure out what tasks we need to do to deliver value to our customers -- called key activities -- and what stuff we need to get it all done -- called key resources.

Key Activities

Our idea is the core of our business, but so much more goes into operating a business day-to-day. In our value proposition, we wrote down why customers should choose us over the competition -- our competitive advantage, if you will.

All of the tasks we absolutely need to do to keep our business going and maintain that competitive advantage are what we call our key activities. So yeah, if you teach ukulele lessons, playing the ukulele is one of your key activities.

But let’s not forget about all the less sexy stuff that you -- or your staff if you have one -- are doing every day.

Maybe it’s putting up flyers advertising your fun music curriculum.

Maybe it’s making and posting how-to videos on YouTube.

Maybe it’s offering free trial lessons at the public library.

Or maybe it’s just driving from client to client.

Or biking, scooting, unicycling... you do you.

For IKEA, they need to design new 1000-piece puzzles -- I mean… furniture -- that people will want in their homes. But they also need to source materials that are high quality but low cost to keep prices down, keep their stores stocked, manage any shipments, maintain their website, and update social media to show off those meatballs and communicate with customers.

When we’re just getting started, figuring out what’s essential to our business keeps us focused, helps us develop strategies to make better decisions down the road, and potentially saves us a lot of time and money fixing a big mistake.

Planning minimizes surprises.

Think big picture to start and keep it simple.

You don’t need every logistical piece entirely mapped out!

And remember, we’re focusing on the activities that are absolutely crucial to delivering our value proposition. If I listed out every single thing I do in a day, we’d be here for a while. So I’m not going to put down “feed cats,” even though they might be hungry, because that’s not directly helping me deliver value to my audience.

Key Activities Questions

To really make sure we’ve covered our bases when making a list of key activities, we can ask some precise questions.

One, if you have a product, what are the necessary steps to produce it?

Two, if you have a service, what are you offering customers and what do you have to do in order to provide it?

Three, how are you sharing updates and information with customers, or how are they getting your offering?

Four, what’s most important to creating revenue? -- Do you sell products in stores?

Source materials to make your products? Create bundles of services to sell?

And finally, what activities do you find yourself doing every day? So we do amazing things that provide value for our customers, but all that doing usually relies on having stuff.

In business speak, the stuff we need to accomplish our key activities are known as our key resources.

Key Resources

If we don’t outline our key resources, we might get caught unprepared or not be able to perform one of our key activities. Knowing what is just as important as knowing how!

If you’re selling online, what online store system are you going to use?

Amazon? Shopify? Instagram? Etsy?

Will you need software to record the sales so you’re ready for tax season?

Will you need storage for the merch in your basement?

Will you need shipping materials to send packages?

Will you need employees to help you operate all of this?

There’s a lot to consider, so let’s break key resources up into four loose categories.

First, there are physical resources for business activities like manufacturing equipment, buildings for employees, warehouses to make and store products, vehicles, cash registers or credit card machines, and distribution networks.

For example, Amazon relies heavily on their warehouses -- both for data storage and product storage. They also need all the equipment to create their original products, the buildings that their employees work in, as well as the locations of the 11 physical Amazon Go stores that exist as of 2019.

Financial Resources

Next, Intellectual Property covers various ideas that can be patented or copyrighted, which includes specific branding, proprietary knowledge, partnerships, and customer databases.

IP resources are tough to develop because it takes creativity to come up with a completely unique idea or design. But then you have something no one else has, or they have to pay you to use it -- and if they don’t, it could be illegal and it’s definitely unethical.

So… don’t steal!

Intellectual Property

Intellectual Property is an incredible competitive advantage that helps us stand out. When I say the word Nike, what springs to mind?

The “swoosh” and “Just Do It” are everywhere in the athletic world. Nike relies heavily on their brand, plus patented technologies for things like textiles and shoes, to draw in customers.

Now, both of these kinds of resources don’t magically create or operate themselves. [This isn’t Fantasia. There aren’t any magic brooms.] Often we have tasks that only some people can handle because they involve specialized knowledge.

These human resources -- or people with specific skill sets -- pop-up all over different industries. More people probably know how to swing a hammer than weld.

Laika Studios creates stop-motion films like Coraline or the Corpse Bride, which are notoriously time-intensive and have thousands of moving parts. The handmade puppets and character designs depend on a bunch of humans: painters, sculptors, screenwriters, film editors and more to tell these stories.

And, lastly, key activities and resources aren’t free, and might not even be cheap.

So we need financial resources. For example, an aspiring photographer might save up cash to purchase high-quality equipment and launch their independent photography business.

A local retail company may opt for a line of credit in order to manage the ebb and flow of their patrons. And a tech startup might tempt talented programmers into working for them by offering them stock options as part of their contract, kind of like a financial bonus.

We can think about any business and do some detective work to guess how they might put all these key activities and resources together.

Example

So let's take a look at one example.

Maybe you’ve heard of Squarespace, the website building and hosting company.

So… besides what you’ve heard in ad reads... what do they do exactly as a business? From the About section of the SquareSpace website, we can find their value proposition:

Basically, their main key activity is providing the technology to help people make and host websites. And part of their competitive advantage is that they offer customizable themes and templates that hopefully helps people make websites that look good.

They also provide digital storage and backups for all their sites, and they use marketing and advertising -- like paying YouTubers -- to tell potential customers about their services.

Now to accomplish these key activities, they need key resources. Physically, they need buildings for their employees and servers for data storage and website hosting. And part of their intellectual property is all the website templates that they provide users.

Human-wise they need programmers, graphic designers, marketers, customer service reps, and people forging key partnerships. And all of this requires money or financial resources.

SquareSpace raised private cash to get started and then got more funding from investors to grow rapidly in the easy-to-use web design market. All these key activities and resources align with their value proposition.

So any business, including our own, should take a similar approach and make sure to stay focused on what’s essential!

Focused businesses, where all key activities and resources go into achieving the value proposition, have clearer pathways to success.

The bottom line is: What do you do, and what do you need to do?

I don’t know about you, but my first instinct is to try to do EVERYTHING myself.

Help?

HELP?!

I don’t NEED help!!

That sounded so fun and efficient, didn’t it?

Entrepreneurs do have to wear a lot of hats, but we need to understand where we fall short and where other people or products could help get the job done.

We can’t be an expert in everything or have time to do everything.

But some people or some software can help!

It’s time to figure out where we could use some help and find our people.

In the above topic we have discussed all the key activities and resources we need to keep our competitive advantage -- the reasons why customers should choose us over the competition.

And now we’ll dive into the people outside our company that help us do our key activities, also known as our key partners.

Key Partners

These aren’t employees, to be clear.

When you’re just starting out, employees are a human resource you might not have the money for. So instead of hiring someone long-term and full-time, it might be wiser to contract with individual people or another small business to do specific activities for just a few hours a week.

And some tasks are really specialized. Even if you have employees, it might not be worth it to keep someone on staff if you don’t use their expertise often, so you might contract with someone for a specific project.

Now in general, lowering costs is a great reason to forge a key partnership.

If you have a growing business bottling your grandfather’s famous ketchup recipe [the secret is apple cider vinegar, shh!], you might partner with a glass bottle company who will give you discounts if you place big orders. So you get a discount, and your bottle supplier gets a giant -- and hopefully repeat -- order. This advantage is called economies of scale.

As your production becomes more efficient and sales increase, your business will order more ingredients in bulk (like glass bottles, stoppers, tomatoes, spices, all that stuff), which lowers the cost per item you produce.

Besides costs, working with key partners might reduce risk -- or exposing our business to factors that would lower profit or even cause failure.

Reducing Risk

As entrepreneurs, we’re willing to take financial risks to start a business.

But it would be silly to not use strategies to minimize risk.

We want to keep our business open and profitable!

So we might consider a strategic partnership for any key activities we’re unsure about. Say you’re a food entrepreneur with a recipe blog where you’ve amassed a following. Your specialty is American southern-style food, and you’re known for zesty hushpuppies.

Now, you’ve got your eye on creating a line of seasoning and breading mixes for grocery stores. You know a few bloggers who have made the leap from side-hustle to business owner, but creating a product is extremely risky.

There’s a lot of hoops to jump through -- from government health and safety requirements, to finding suppliers, to finding people to buy and sell your mixes in stores, to probably getting a loan.

You might want to consult with a blogger friend, or even partner with a company with experience in product launching. You’ll get invaluable guidance, and your partners get an opportunity to launch a high-potential product that could bring all of you lots of revenue.

In this case, more cooks in the kitchen is a good thing!

It’s also pretty likely -- and pretty standard -- that entrepreneurs form key partnerships to get something they need, like knowledge, licenses, or certain customers. Even the mighty Starbucks went looking for help to sell their coffee and paraphernalia outside their coffee shops.

Enter Nestlé, the largest food and beverage company in the world with factories, distribution channels, and connections literally everywhere. When the deal was made in 2018, Starbucks was especially interested in leveraging Nestlé’s vast and established influence in China to spread their brand.

And Nestlé admitted they were late to the coffee game, so with this deal, they catch up and get a powerful brand-name product to sell. Both sides are hoping to caffeinate the world.

So the point of all this is: we don’t have to go it alone.

There are lots of good reasons to contract with key partners.

And there are some basic types of partners we might consider working with. The Laws of Physics unfortunately say we can’t make something from nothing. So if we’re trying to make a product, suppliers may help.

They might get us raw materials -- the ingredients our product is made of, like the wool to make yarn, the lemons for lemonade, or the wood for furniture. Or they might help with supplemental products -- basically the finishing touches our product ingredients require.

Maybe we need boxes for shipping or silverware for a restaurant. Customers don’t really want to eat soup with their fingers. To find a supplier for what we need, we have to consider price and personality.

Ideally, we want low cost, high quality materials, and someone who will cut us some deals!

It’s important to maintain a good relationship once we find a key partner, but never stop researching. If I was paying a dollar a lemon but the market down the block sells lemons for 30 cents each, there’d be a sour taste in my mouth, and I’d need to switch suppliers.

Or we might decide that product creation is where we need help. So we’d find a manufacturer -- someone with the equipment, expertise, and sometimes even developed supplier relationships to create products.

Manufacturers

When looking for the right manufacturer, we want someone who will adhere to our high standards and maybe even someone who will do small test batches to try out materials before going all-in.

Distributors

Now a distributor can help us handle the process of getting a product into the world. We might know to talk to John, our local grocer, if we want to sell in town. But maybe we eventually want to get into a big box store or even another country.

We love John, but he’s probably not going to be super helpful anymore, and there are professionals that have wider reach as distributors.

We might look for an expert consultant to guide us, or we might look for larger companies who already have vast distribution networks that want to acquire our business.

Marketing Branding

Marketing and branding are so important yet so easy to do badly, no matter the business size. So we might look for a key partner to get our design and messaging ideas out into the universe, develop our trademark symbols, logos, and even colors, and help cultivate customer relationships.

We could hire someone full-time if we have the budget and enough work to keep them busy. But if we’re just starting out, a local, trustworthy consultant who we meet at a networking group would be an excellent choice.

Also, I hate to tell you this, but you’ll probably need an attorney or law firm.

Legal Services

Legal services can help us make sure we’re abiding by the law, and help us draft contracts, policies, patents, trademarks, investor deals, and more.

If money is an object -- which it is for most startups -- we can check our local city government for low-income legal services, or even ask an attorney if they ever do pro-bono work.

It never hurts to ask!

At some point we might want to hire legal counsel full-time, but unusual situations

can still pop-up that require special experience. And fortunately, there’s not a lot of cutthroat corporate espionage in entrepreneurship, as we learned in our video about competition.

So it’s possible to find a complementary business to partner with for a special campaign or sales incentive that will add value to our customers. We might look for someone doing something completely different with the same set of customers, or a customer base we’re looking to break into.

So overall, to pick key partners, we need to ask 3 questions based on our key activities and resources.

One, what key activities are we good at?

If we don’t know how to do something or we’re worried about doing it well, we may want to look for a partner to help.

Two, who supplies our key resources?

If our business can’t begin without stuff, whoever has that stuff is a key partner.

And three, is the partnership sustainable and helpful to both parties?

For a partnership to be healthy and long-lasting, it needs to be a win-win!

This hypothetical example needed at least four key partnerships, but there’s not a golden number that all entrepreneurs should have.

Every business is different.

The bottom line is: ask for help.

“Can somebody help me with this?"

By thinking strategically and partnering with experts, businesses can provide the most value for their customers and lower risk.

Like any committed relationship, the relationship between a business and its customers needs nurturing. And that shouldn’t come as a surprise!

We need customers to run a successful business, and naturally they’re going to have certain expectations. So we want to make sure we deliver on those expectations and develop those relationships as our business develops.

So the first question we have to ask ourselves is: what kind of relationship do we want with our customers? We daydream about building our perfect partner. For me it would be the body of Chris Evans with the head of Chris Evans. Or finding a BFF, so why can’t we do the same for our customer relationships?

You know, the level of commitment, kinds of interactions we want to have, or even the medium we use to communicate.

There are lots of options to consider before making any decisions or jumping into anything.

The easiest type of relationship to build is no relationship.

Transactional Relationship

If a business only engages with customers at the moment they make a purchase, or either person could be a robot and nobody would notice, this is called a transactional relationship.

A good example is a credit card machine that takes 3% of a sale as a processing fee. The credit card company never needs to see the shoppers, and the shoppers might not even know that 3% of what they just paid is being sent elsewhere.

In love, transactional relationships are a no-go, but here both sides are happy.

Self-Service Relationship

Another fairly hands-off option is a self-service relationship. This is where the business has no direct contact with the customer but provides all the necessary equipment for customers to help themselves.

Think self-pump gas stations or self-serve frozen yogurt shops. The customers do all the work, but they get to customize to their heart’s content. We can kick this up a notch by providing automated self-service.

Generally, this recognizes something about the customer and can be personalized using customer profiles.

Automated Services

Automated services can simulate a more personal relationship, like Goodreads suggesting books or Hulu offering movie recommendations.

Love those computer algorithms learning everything about us… Some companies like to deliver an even more personal touch with a personal assistance relationship -- one where the customer can communicate with a real person to get help during the sales process or after the purchase is complete.

This could happen in brick-and-mortar stores, on the phone, by email, or some other way. I hear skywriting is making a comeback.

Live Chat Service

Many companies are integrating a “live chat” feature on their websites, like Internet or mobile phone providers. Live chats provide immediate access to a company representative without the hassle of going into a store or the horror of a live phone conversation.

Dedicated Personal Assistance Relationship

The next level is a dedicated personal assistance relationship where each client has a specific representative devoted to them. You could even say they’re...going steady. The point is to create a much deeper bond that will last a long time.

This is possible in businesses that don’t have millions of sales and expect to be with customers for a while.

For instance, local tax accountants or insurance agents usually maintain personal relationships with their clients.

Loyalty Program

Then, there’s the modern-day classic: the loyalty program. [If you don’t have at least 3 memberships and punch-cards in your wallet right now HOW ARE YOU SURVIVING WITHOUT ALL THE DEALS??

Switching costs -- like money, time, or plain old hassle -- are a way to describe how easy or hard it is for someone to switch loyalties to another business.

So loyalty programs reward customers for their purchases and make it a little more costly to switch brands, so they return again and again. It’s far cheaper to retain or “lock in” previous customers than to start from scratch with someone new.

Not to mention, happy customers also talk about how happy they are with a new product. Kind like those couples who just got together and they're like SUPER obsessed with each other.

Gym memberships are notorious for this. Maybe they give you a discount if you get a friend to join, but to cancel you have to go all the way into their office and fill out 1 or 2 or 15 forms.

Or on a simpler level, maybe your favorite lunch spot has a loyalty card and the feeling of getting closer to 12 punches and a free sandwich makes you want to keep coming back.

Long-Term Relationship

At the most involved end of the spectrum is the long-term relationship. These are built with customers over time through regular interactions and possibly with an emotional connection. This type of customer is like the die-hard Patagonia fans who support the company over many years.

They’re not just in it for the snazzy vests, they believe in things like Patagonia’s environmental mission and the quality of the clothing. But also the snazzy vests. Might as well put a ring on these folks.

But sometimes a business isn’t necessarily the expert providing everything to its customers, it’s a conduit for greatness.

Co-Creation Relationship

In a co-creation relationship, companies don’t rely on a lot of in-house innovation and instead work directly with customers to develop products, which relies on some great chemistry!

You almost never see videos created by YouTube employees — creators like us are making almost all of the content.

Communities Online

And finally, a business can also rely on customers’ expertise by creating communities online or in real life. In these spaces, customers can interact and exchange user knowledge, which can end up strengthening their bond with the business that brought everyone together!

Not to mention, it’s an opportunity to stay up-to-date on what people who care about your product are saying. If people are complaining about a glitch or sharing innovative uses in these communities, that’s awesome feedback!

So after we know the options, we want to decide which customer relationships will work for our business.

All of the decisions we’ve made so far about our business -- from choosing a legal structure to getting customer feedback -- have involved asking key questions and listening to trusted advice.

So figuring out what relationships we want to nurture is no different!

And just like you might have multifaceted relationships with a parent, a friend, a partner, and the coffee barista that works at your local shop on Thursday mornings, customer relationships aren’t mutually exclusive. So go ahead and pick more than one for your business!

There’s also no ideal mix, and we’re not here to tell you exactly what you’ll need to do as an entrepreneur. What works for one business in one region might not work somewhere else.

There’s no right answer, but engaging in some human-centered thinking about what would work -- or is working! -- for our customers to help us make sure we’re on the right track.

Basically, our value proposition should never be far when we’re trying to build a business.

The bottom line is: begin as you mean to go on.

Plan how you’ll interact with your customers and get ready to react to feedback if you find the relationship has evolved.

Here’s a hard truth: no business, no matter how innovative and amazing it is, will survive if people haven’t heard of it.

If people don’t know something exists, they’ll never be able to purchase it. Beyoncé might drop a surprise album, but then she promotes the heck out of it. The hype she gets from the surprise is part of her entrepreneurial strategy!

Ever since we’ve had products and services, we’ve needed channels to create awareness and communicate with our customers. And as our culture has evolved, so have our channels -- from simple posters in the 1800s, to the launch of Pinterest (and the heyday of DIY wedding inspo) in 2010, to whatever’s happening on Instagram now in 2019.

We’re always looking for new ways to share messages and stand out in the ocean of media around us.

It’s time to work on our communication skills.

Communication Goals

We’re in a relationship with our customers.

And the key to any successful relationship is communication, which, in the business world, should have at least one of three main goals.

Acquiring New Customers

First, there’s acquiring new customers. This means finding and telling new people how valuable our business is, which is by far the most expensive kind of communication.

Retaining Customers

Second, there’s retaining customers, or making them want to stay with our business ahem, can you say loyalty program? This means communicating with them to demonstrate the value we’re providing and how much we care.

Growing Customers

And third, there’s growing customers into better customers -- people who are more devoted to our brand or spend more money at our business – by telling them about the awesome new products or services our company is offering.

To acquire, retain, and grow customers, there are lots of things we might want to tell them:

That we exist.

That we’re awesome.

We’ve developed so many different communication methods that it’s hard to know what will grab someone’s attention.

Some companies even go the extra, uh, 24 miles, like Red Bull. Back in 2012, Red Bull set all kinds of records when they sponsored the world’s highest skydive -- 128,000 feet -- and live-streamed the whole event to over 8 million viewers.

There are direct channels and indirect channels.

Direct Channels

All these communication strategies (yes, even the skydiving) fall into two types of channels, depending on who’s spreading the message.

Direct channels are communication pathways a business already owns or controls.

So ultimately, you’re in charge of the message your customers receive. Now, direct channels can be a physical message like an ad in the mail or a flashy billboard.

Physical messages also include conversations in physical places like stores or trade shows, or even over the phone.

Or there are digital messages, like a website, an email, or posts from a business’s social media accounts. REI, the outdoor equipment cooperative, is a master of the direct channel.

On the physical side, they’ve developed a strong community relationship with customers. When you walk into a store, the staff are typically avid outdoors-people and know the products well.

Customers can also call a local store to ask questions.

They offer classes for anyone who isn’t born knowing how to backpack or fly-fish. And they send coupons and distribute annual dividends to each member through snail mail.

REI’s digital communication is also pretty sophisticated, with an e-commerce website that includes customer reviews on products and links to photos, videos, and writing about the outdoors.

Also, they have an expert advice blog with posts on everything from how to fall off a paddle board to fixing a jacket zipper. They send emails with coupons, event updates, and new gear announcements.

And customers can download eight different REI-developed mobile apps for climbers, skiers, trail runners, hikers, mountain bikers, and national park enthusiasts... to name a few. On top of all that, they’re active on social media.

Each of these direct channels helps them acquire, retain, and grow customers!

Indirect Channels

REI encourages beginners with how-to classes and helps members stay engaged with updates, sales, and other opportunities.

Indirect channels, which are owned by other businesses and organizations, can be really useful for customer communication too. So you can do all the talking, but you might also let other professionals talk to people for you to widen your reach or get new customers to trust you.

I might doubt a TV ad that tells me a restaurant has the best turkey sandwich in the world, but if John Green says it’s good in a vlog, I trust his judgement. I still won't eat it because I don't eat turkey, but I'll believe him.

Physically, an indirect channel could be selling a product in someone else’s store -- anything from a big retail store like Target, to a wholesaler like Costco, to an independent brick-and-mortar business.

These places already have customers and key infrastructure in place, so this can really help you keep expenses down. Digitally, indirect channels have exploded.

Customers could find a business from another website, a podcast, a video, word-of-mouth, or even featured on the news if someone famous is seen using a particular product.

Have you seen Channing Tatum's video talking about The Pattern? Google it!

Product reviews count as an indirect channel, too. Like, who hasn’t scrolled through Amazon reviews as research? Even if a customer review is negative, people are still talking.

That can be good for entrepreneurs because certain complaints can help us learn for the next iteration or product.

Don’t forget, we LOVE feedback, so don’t let the critics get you down! Listen to the trolls.

Social Media Influencers

And then, there’s the social media phenomenon of influencers.

No matter how you feel about that label, everyone seems to be talking about #ads and #spon.

Usually, influencers are people with a lot of followers on different social media sites who get paid to try out a product or promote a brand. This has really widened the reach of some companies, while also contributing to what makes marketing so complicated and messy. But love them or hate them, professional marketers are recognizing the power of social influence.

Every entrepreneur has to go through the process of setting up customer channels. And with any new business, we want to focus on talking in places where our target market is. But we also want to make sure we have enough channels to acquire, retain, and grow customers -- in order to get the word out as wide as we can.

So how do we decide which channels to pursue when we’re just starting out?

Even new businesses can communicate through a whole spectrum of channels, but what a business should tell their customers can vary drastically. Marketing messages will look different depending on the entrepreneur in charge and what value they’re focused on providing.

That being said, here are four solid starting points from the online entrepreneurship magazines Entrepreneur and Inc:

One, use familiar language -- not a bunch of business jargon -- and empathy.

Two, be clear, concise, and timely.

Three, delight the customer with originality and make them smile.

And four, communicate trust: engage with the customer and attempt to persuade them.

But the bottom line is: get the word out!

Vary the ways you choose to communicate with your customers so you capture the whole range of your target market.

Once upon a time, there was a woman with a strong entrepreneurial spirit who was ready to transform her side hustle into a magnificent full-time business. She identified a problem and crafted a solution, and now she needs to make her voice heard by the people. But how?

This story might sound familiar.

Any entrepreneur’s path is full of critical sales, elevator pitches, and persuasion.

We want people to buy our product or service, but we also want them to believe in our ideas and seek our expertise. It can be hard to strike the right tone or know what’s going to appeal to someone, but there are tricks.

We can craft a narrative and use well-placed emotional appeals to tell customers a story. Maybe it doesn’t start with “once upon a time…” but you get the idea.

Even if you don’t consider yourself a persuasive person, you don’t need a +5 charisma modifier to succeed at this crucial stage of entrepreneurship.

So, we’re going to learn how to sell ANYTHING!

For some of us, sales might be the scariest part of starting a business, while others might be like… HECK YEAH WORLD COME BASK IN MY AWESOMENESS!

If we did our job in the validation stage of entrepreneurship -- talking with prospective customers and making adjustments based on their feedback – we should have developed some relationships that can turn (or have already turned!) into a customer purchase.

And despite all the stereotypes, you don’t have to turn into the worst version of a used car salesman to sell something.

The key to selling is developing relationships and telling a meaningful story to prospective customers.

Now there’s a lot of research on how to sell things, and everyone has their own 7-to-50 step process. But all those strategies boil down to two key points: persuasive people ask questions and make emotional appeals.

Ask Questions

Asking open-ended questions to learn more about a customer’s life can help us make a sale. Don’t just ask one question then jump into a pitch. It’s clear to the customer you’re not listening and that you’re only focused on selling them something, and that’s no way to build a relationship. You believe your business can help these people.

So just like giving advice to a friend or anyone you care about, have a meaningful conversation where you’re asking a lot of questions to understand their needs. Or, convey that authenticity and empathy online if you’re selling there.

Asking Why

Remember some entrepreneurs recommend asking “why?” five times, to get to the heart of an issue and learn where a customer is coming from.

What do they really need?

How can you connect with them?

What does their time frame look like?

What obstacles are they facing?

Really hear what the person is saying.

If they mention the need or problem that inspired you to become an entrepreneur, it’s totally fine to say “I had a hard time with that too.” And then, once you have a connection, offer suggestions or bring up your business.

“Gut instinct” also plays a huge role in making purchases. Even the most logical person can’t totally separate themselves from their emotions, which is why emotional appeals can be persuasive too.

Marketing experts like Geoffrey James at Inc magazine say customer decisions come down to a mixture of six emotions:

greed, fear, envy, pride, shame, and altruism.

Depending on the situation, we can target different ones.

Greed

With greed, entrepreneurs want the customer to think “buying now means I’ll be rewarded.” You can use words like “exclusive,” “profitable,” or “distinguished,” and emphasize all the great benefits you can provide. Even toss in a few testimonials from satisfied customers.

Think about fast food commercials.

Sure, you know those crisp French fries go straight to your arteries, but those ads make them look like salty heaven that will instantly reward your tastebuds.

Fear

Fear can also spur immediate action.

Don’t leap out at people wearing a ski mask, but you want customers to think “I have to buy now or I’ll lose out!” You can use words like “consequence,” “cost,” or “harm,” or an argument focused on “missing out,” to make a fear-based appeal.

Pharmaceutical companies notoriously play on fear.

They list off a whole textbook of symptoms you may be feeling and how they might lead to your untimely demise unless you buy this one miracle product.

Envy

Envy can lead customers to think “my life looks nothing like this, but if I buy this product, maybe it could!”

When using this strategy, name drop -- who are your current customers and what awesome things did you do for them? Instagram, with its well-framed and well-lit photos, is a hotbed of envy.

We all see filtered views of people's lives that make us yearn for something we don’t have -- the perfect dinner, drink, or yoga pose on a cliff overlooking the ocean.

Or we can appeal to someone’s sense of pride and get them thinking “I’m so smart for making this purchase” by using words like “reputation,” “influence,” or “powerful” to make the value all about their image or status.

Show off awards you and your customers have won!

Fair Trade labels do this implicitly.

Theo Chocolate is a Fair Trade company that jumped through significant hoops to build a mission-driven business and get that certification, partly so customers can feel like they’re spending money wisely.

Shame

On the flipside, shame can get people thinking “I better listen or bad things will happen.” Drop hints about how dark the future could be with words like “mistake,” “disappointment”, or even “failure.”

Seventh Generation doesn’t hide the fact that they’re an eco-friendly business. The environment is a key part of their sales strategies and they can make people regret wasteful past purchases.

But our darker emotions aren’t the only decision-makers.

Altruism

Altruism can get customers thinking “my purchase will help people.”

When talking with customers, emphasize the benefits to them, to employees, to partners, or to the world.

Talk in terms of collaboration, and use vocab like “give,” “help,” or “improve” to drive your narrative home. Any time you’ve bought something where the “proceeds go to charity,” that’s an altruistic plea.

Sarah McLachlan’s partnership with the SPCA is a prime example of this, making soulful appeals to raise money for animals.

To see how a new entrepreneur might combine asking questions and making emotional appeals to be persuasive, let’s understand this with an example.

Andrea is a whiz at Excel with some statistics training, and she wants to start working with small firms and nonprofits to do some basic data analysis and make visualizations for them.

She knows her skills are top-notch, and she even has a few examples of her work from personal projects. But to survive in the freelance world, she needs to find new projects and customers. So Andrea starts with her network. She meets with a few people and businesses who know someone who knows the manager of her neighborhood grilled cheese-erie.

She now starts by asking those people questions to figure out what a restaurant might want to know, like if there’s a difference in the number of appetizers they sell on Fridays versus Wednesdays.

From there, Andrea can make informed suggestions when she’s talking with the manager. She could say, “That’s an interesting problem.

Might I suggest creating a sales dashboard that shows sales by category, and also what your current top-selling dish is?” If they’re still on the fence about working with her, maybe she’ll add an emotional appeal.

Fear would be a realistic starting point.

She might say, “Data analysis is complicated, but without it, your business could suffer in the future. If you want to compete with big chain restaurants, you’ll need an edge. I can help you create that.”

Pride might work too.

Do they want to make the best decisions possible and look like a business master? She might say, “Your brand, You Cheddar Believe It, is something that people want to wear on a T-shirt. If you wanted to create merchandise, I could help you analyze what sells best.”

They still might say no, but Andrea will have a much better idea of what to say (or not!) with her next potential customer.

And that’s it.

Even when using emotional appeals, the goal shouldn’t be to trick a potential customer into buying something. By researching their pains and gains and asking questions, we can know that a product or service will authentically help them in some way.

We’re all on the same team.

If you’re still at a loss for how to get started, or even if you’re well-prepared, the internet is the place to be! Developing a strong customer-base online can make it easier to successfully start up a physical store or network with bigger retailers down the road.

Using tools like Squarespace, Weebly, WordPress, or Wix, even the least tech-savvy person can have a professional-looking site up and running in no time. But it shouldn’t just look good.

Websites are also important channels to communicate with customers.

So a value proposition -- or at least a simplified version of it -- should be on display.

Square

Square, the point of sale system used by lots of small businesses, says they “help you save time and grow faster” on nearly every page. Then, you want to show off the site on social media platforms -- as long as that’s where your target market is.

If you’re trying to sell to the 60+ retirement crew, maybe SnapChat isn’t where you want to spend energy. Now, the tasteful color scheme of your website, your eye-catching tweets, or your value proposition might be enough for some people to make a purchase.

Lead Generation

Entrepreneurs also want to generate leads -- or lead gen in business slang -- and give people lots of opportunities to “opt in” besides making a purchase. Email addresses are like gold in the marketing world because we’re given more chances to connect with the person.

We can use automated systems to follow-up with an emotional appeal or attractive coupon offer, and turn that lead into a real customer.

Systems like HubSpot or MailChimp help with everything from formatting to mass-sending email campaigns to thousands of people. And many of these systems even have free versions for startups.

Of course, not every visitor to your website will become a lead, and not all leads will actually become customers.

The Sales Flywheel

Here’s an analogy:

Traditionally, the marketing world has relied on a visual called the sales funnel. Once people are aware of a product, a fraction of those leads will be interested in learning more, and a fraction of that fraction will decide to make a purchase.

That fraction of a fraction is where we can put in the work with these sales strategies. But there’s also a new visual popping up: the flywheel.

Instead of constantly starting over and pouring new potential customers through the funnel, the sales flywheel captures the fact that happy customers talk, and word-of-mouth can lead to even more customers.

Whichever metaphor speaks to you, remember it’s all about developing a relationship with a person that eventually turns them into a loyal customer.

The bottom line is: anyone can sell.

Listen, ask follow-up questions, and use all your available information to tell a story, develop a relationship, and make it easy to make a purchase.

You know what business people really like to talk about?

MONEY!!!

Profit, revenue, income, assets, cash flow -- all these words mean money, but they all have specific uses. In business, money is important to us and we want to describe it as accurately as possible.

That can make it confusing for new entrepreneurs to talk about the money flowing into their business, and it seems like we need a translator for all the jargon! But, really, making money comes down to understanding a few basic terms and setting up some sales structures that let customers make purchases in a way that works for them.

Money can be an awkward subject, I get it. But to make a living, have an impact, and be taken seriously at decision-making tables, we entrepreneurs need to know the ins-and-outs of our business, including the money stuff.

And we believe that one step to making the world more equal is making money less of a mystery.

So let’s get rolling.

Revenue AKA Sales

If we consult our “Finance to English” Dictionary, we can see that revenue is the amount of money a customer hands to us when they buy a product or service. To calculate it, revenue is the number of things sold times the price of each item. But that’s not the whole story, right?

Making a product or offering a service costs money upfront, so we can’t ignore expenses or operating costs. That’s money spent on operations to generate revenue, like for employees, supplies, or equipment.

So profit is the money we make if our revenue is greater than our expenses. To calculate it, profit is just revenue minus expenses. If you reported a million dollars in revenue last month, but spent $999,999 making your product, you only made one dollar in profit.

Revenue, expenses, and profit are the three basic concepts we need to decide how well our business is doing financially. When it comes to other financial business-speak, Investopedia or Accounting Coach are great resources.

Lots of words might sound fancy, but the concepts are usually pretty simple. Now that we speak the language, we can ask an important question: how do we actually generate revenue? Got to make that money!

We learned how to be persuasive and hone our sales pitch, but we also care about how customer sales can be structured, known as our revenue streams. Basically, revenue streams are decided by what we’re selling and how we want to sell It.

Like how small water streams feed into big rivers, our revenue streams make up our whole revenue. If you have a physical product, a product sale or asset sale is a natural revenue stream.

Product Sale

There’s a transfer of ownership rights, so the customer gets a physical product and you get money. As long as there have been civilizations trading, there’s been some form of the product sale.

For example, a hardware store sells hardware. A bookstore sells books.

Target sells… well… SO many things, the dollar section is a dangerous place, my friends. But maybe complete ownership isn’t the goal at all.

Usage Fee

In some cases, you could charge a usage fee, where customers pay based on how much they use a thing you own. Utility companies charge based on how much you leave the lights on. Buying a whole power grid would be impossible!

And your cell phone carrier charges based on how much data you’ve used -- you’re not buying satellites.

Renting or Leasing

Next, there’s renting or leasing, which is slightly different. You charge a fee to grant someone the exclusive rights to use a thing you own for a fixed time period.

Here it doesn’t matter how much they use it, but how long.

You get a recurring revenue stream, and the renter doesn’t have to pay for the full cost and responsibility of ownership. Anyone who’s moved can appreciate renting a moving truck for a few hours to haul your boxes of stuff. Seriously, where does it all come from??

It’s also possible to rent places to live, or a lot of other specialty equipment, like tractors or industrial mixers.

Licensing

Licensing is like renting but for ideas -- basically, it’s giving customers permission to use protected intellectual property in exchange for a fee. Licensing is especially common in the tech and media industries.

Patent-holders can grant other people the right to use their technology for a fee, or creators can copyright their IP and sell licenses for other people to use it.

For example, Marmoset music supports emerging artists by licensing their music to large corporate brands for storytelling, like in campaigns for the Academy Awards.

A popular revenue stream in the brave new world of TV and music streaming is charging a subscription fee to sell continuous access to a service. If you’re a student, you can pay one convenient fee each month to get unlimited Hulu access and ad-free music with Spotify. It’s like they don’t even want you to study!

But there are offline subscriptions too, from meal-kit services like HelloFresh to boxes of new clothes from Stitch Fix and Trunk Club, or even gym memberships.

Then, there are revenue streams if you’re a middleman, like if customers are looking for someone to act as a go-between during a negotiation or a transaction.

You can charge them a brokerage fee for brokering, or arranging, the deal.

Real estate agents earn their money this way, by getting a commission each time they successfully match a buyer and seller.

Advertising

Finally, you might move away from generating revenue directly from customers with advertising -- promoting products, services, or brands from other companies for a fee.

Many “freemium” services, like mobile apps or YouTube, earn money this way -- by showing ads to their free users. Even the mighty Google generates revenue with advertising, by letting websites pay to appear in the first two or three results slots in a search.

So there are a lot of options for revenue streams, and you don’t have to pick just one.

While you ultimately want to diversify, you don’t have to do it all at once! GoldieBlox matched revenue streams to their key activities and partners, which makes sense because successful businesses stay focused on their value propositions.

If you’re still having trouble deciding on revenue streams, look around to see what your competitors are doing. If what they’ve chosen seems successful and you like it, feel free to give those money-making things a try. And revenue streams change a lot, or a business might use multiple versions of the same stream, so don’t feel like you’re stuck forever.

So advertising would be one of my revenue streams, whether on the platform or by finding sponsors. But lots of successful YouTubers have expanded beyond YouTube, so maybe I decide to write a book, or start my own line of merch. These would add a couple product sale revenue streams.

Once I’ve built up an audience, I might form some relationships with other businesses. Or I might pivot to other kinds of entertainment, like headlining concerts or starring in movies.

All of these give new revenue streams I can add to my overall revenue. No matter the revenue stream, a big part of making money is setting prices that customers can afford and let us keep our business running successfully.

Start by looking at costs and the competition.

How much do we need to charge to make at least a small profit? What is our competition charging, and can we estimate their costs and calculate how much profit they’re making? Is that how much money we need or want to be bringing in?

Like we said before, it’s common to underprice your products in the beginning, but that’s not a sound strategy in the long run. You still don’t want to charge $100 for that pizza when everyone else prices it at $10!

As you become established, you can try out different pricing strategies.

The international consulting firm McKinsey stresses four of these:

A margin expander changes prices according to a competitive edge or offers different things at different prices for different people. This works well in markets with a lot of competition, because it helps you stand out.

Next, a pricing disruptor completely throws out the previous model they (or their competition) has established to differentiate themselves or address a customer complaint. Maybe your rideshare charges by the minute instead of by the mile, factor in risk, or share profits with customers like REI’s dividend distribution.

Third, a revenue driver uses prices to acquire new customers or bundles additional products at good deals to get more out of existing customers. “Freemium” models where you let customers try your product for free for a limited time have become super popular.

And finally, a pricing pioneer is bold. It’s radical. It’s a pricing disruptor and a revenue driver all in one.

These entrepreneurs completely change up their pricing model, but they also introduce new products or services to get more value for them and the customer.

No matter what, re-evaluating prices means listening to feedback from your customers about what they like and need… while also paying attention to the competition and your costs.

The bottom line is: don’t be intimidated by the vocab, and pick revenue streams that are natural for your business and what your customers want.

One of the most common reasons startups fail is – Because they didn’t talk to customers?

There’s no market for their product and no one wants what they’re selling? They didn’t research the competition and someone’s already offering their service? Okay... so we’ve learned a lot of strategies to fight off failure. But we could be doing all this right and still fail if we straight-up run out of money.

Expenses can pop-up, supplies can suddenly be hard to find, or delivering the most value to customers can involve some expensive choices.

Businesses can run out of money -- it happens. But it doesn’t have to happen to us. There’s a common saying that you have to “SPEND MONEY TO MAKE MONEY.”

Well, when you’re just starting out, there are lots of opportunities to spend money, and lots of different terms to describe it all. We better pull out the “Finance to English” Dictionary again.

Operating Costs

First, let’s establish that all of these things we’re going to talk about fall under the broad category of operating costs or expenses. These are all the things you pay for to do business on a day-to-day basis. But you COULD NOT POSSIBLY use the same word to refer to product costs as you do administrative costs.

That would just be madness!

Direct Costs or Cost of Goods Sold

So underneath the umbrella of operating costs are two smaller groups: cost of goods sold and selling, general, and administration costs or SG&A. Cost of goods sold, also called direct costs, refers to all the expenses that are directly tied to producing a product or service.

So if we want to print an irreverent lit magazine, what we pay writers to create satirical content would fall under cost of goods sold, and so would the printing costs of the magazine.

SG&A or Indirect Costs

SG&A, also known as indirect costs, are basically everything else we need to run the business. This could include salaries for people in management, or even rent, utilities and supplies that aren’t part of manufacturing.

So the distribution costs of getting our magazine out to people, the marketing budget, and the salary of the head editor (since she’s an administrator) would fall under SG&A.

Breaking expenses down with these two categories helps us figure out where our money is being spent in broad strokes -- on our product or service, or on everything else.

But there’s another way to split up expenses that can help us pay attention to what expenses will change as we grow.

Fixed Costs

There are fixed costs, which don’t change in the short term based on the number of goods or services we produce. So, for example, the rent for our co-working space where we create and edit the magazine layout is a fixed cost.

No matter how many copies we sell, the rent isn’t changing.

Variable Costs

There are variable costs, which are expenses that fluctuate based on how our output changes. The amount of ink and paper we need, or the shipping costs change based on how many magazines we want printed. And we’re going to need a lot. This is a very basic overview of some ideas and vocabulary to get started.

After all, jargon can be one of the most intimidating barriers to overcome in entrepreneurship. So now that we know about different kinds of costs, we can decide what roles they’re going to play in our business.

At this point, we’ve thought a lot about our business and know our customers pretty well. We know what they value and where their pains are. So we want to make sure our business model reflects that, even in how we handle expenses.

Cost-driven Structure

And we can choose to prioritize minimum costs or maximum value.

In a cost-driven structure, we try to minimize costs wherever and whenever possible. This will show up in our value proposition -- if we’re working to deliver something to customers at the lowest possible price, keeping costs lean will be a key part of our business.

We might maximize automation, outsource expensive tasks, or devote lots of resources to optimize every step of the process.

If you live in Canada, you’ve probably seen the in-your-face yellow signs with NO FRILLS in giant block lettering. And they mean it. For 30 years, the No Frills grocery chain has allowed customers to trade “frills” for savings.

Store displays? That’s a frill.

Someone to bag your groceries for you?

Frill.

Taking products out of their cardboard shipping boxes instead of just cutting the sides and stacking them?

You guessed it -- frill.

They work incredibly hard to keep their SG&A costs low. And customers love it.

Losing all the frills means saving money, and they know the low prices aren’t coming from low quality, but low frill count. And they haven’t stopped with de-frilling the stores, they’ve even de-frilled products to keep down the cost of goods.

No Frills’ parent company created a generic brand called “no name.” It’s literally yellow labels with a basic description of the product in bold sans serif font. They’ve learned hard to their cost-driven identity, show that priority to customers, and they’ve managed to take that success across Canada.

You can see lots of other examples across industries. Airlines like Southwest or Ryanair, big box stores like Walmart, or giant thrift stores like Goodwill or the Dollar Store all have cost-driven structures.

Value-driven Structure

On the flip side is a value-driven structure, where companies are less concerned with how much a particular business model costs and more with how much value it creates for customers.

Everyone has to be conscious of expenses in order to turn a profit, but value-driven companies often splurge on pricier things like very personalized service. The Ritz-Carlton Hotel company has won awards for its customer service. The tales of employees going to extravagant lengths in the name of The Customer are the stuff of legends or viral tweets.

There are elaborate photo shoots of stuffed animals before they’re mailed back to their owners with handwritten notes, and employees who flew cross-country to deliver lost laptops before important presentations. And these aren’t one-off stories.

Every employee, from the highest level of the company to the kid who’s been there a week is given up to $2,000 to delight a customer with service. While The Ritz still probably does work to keep costs down (that’s why it’s $2000 and not 2 million) they’re willing to spend money if it creates more customer value.

The value-driven end of the spectrum is full of luxury car brands, clothing lines, or even watchmakers who sell $500,000 watches that pro tennis players casually advertise as they sweat all over the court.

Most businesses, including your business, will probably fall somewhere in between the cost-driven and value-driven range. The balance is up to you, but there are certain ways to be more cost-driven without sacrificing value.

Economy of Scale

As we discussed when we talked about key partners, an economy of scale is a cost advantage a business can have if it produces larger quantities and spreads fixed costs around more products. Or an economy of scope is a cost advantage a business can have by sticking its hand in multiple metaphorical cookie jars.

With several product lines or services, one set of marketing techniques and distribution channels can support multiple key activities. Even though the total bill might be bigger, with an economy of scale or scope, bigger really is better.

You can do more with the expenses you’ve already invested in to make sure your profits -- your revenue minus your expenses -- are bigger too.

Understanding where your money is going (to fixed costs, direct costs, all that stuff) will help us plan strategies that keep us profitable rather than spiraling and going bankrupt.

Our money is pulled in a lot of different directions when we’re getting a business into the world, so planning is absolutely essential. Entrepreneurs also pay close attention to expenses because we care about where our money is going.

For example, social entrepreneurs mix for-profit goals with creating a positive return for society. These are nonprofits or B-corps that make choices that may be less profitable to maximize their impact on social, cultural, or environmental goals.

Businesses like Warby Parker, who donate one pair of glasses for every pair sold, were started by social entrepreneurs. And tracking expenses is really important to make sure they’re budgeting effectively so they can make those less profitable decisions. They don’t just want to maybe donate profits later on -- the higher purpose is infused directly into the fabric of their business.

So sales drive any business, but careful expense-tracking drives a profitable and responsible business.

You have to spend money wisely to make money effectively.

The bottom line is: Pay attention and plan.

You know what conversation starter will make you the life of the party?

Spreadsheets. Maybe not unless it’s a wild accounting party, or if everyone really loves math. Even then. Honestly, “spreadsheets” are kind of the vegetables of the business world -- the very idea of them makes some people queasy. But that’s ok! They can be intimidating, but they’re not impossible to understand.

So we’re going to learn to love them, because basic accounting can make or break a business. If we lose track of expenses or overestimate a revenue stream, we might end up questioning where all the money has gone.

The key is using organized systems and knowing the right vocabulary. We’ll be bookkeeping pros... or at least able to talk about balance sheets and profitability with an accountant.

Point of Sale

Every entrepreneur has to seriously think about how we’re going to take in money and where we’re going to put it. The place (and it could be a digital place) where customers hand over money in exchange for a product or service is called the point of sale.

Cash registers, credit card machines, the checkout page on a website -- these are all points of sale. Now, we want to make the buying process as painless as possible so customers will feel good about doing business with us. And having a seamless point of sale system is a big part of that.

Here are a few options.

Some of the most popular electronic systems are created by Shopify, Square, and PayPal. Both Shopify and Square help you set up e-commerce sites and have hardware to use in physical stores to register sales. And PayPal is an online checkout system that makes it really easy for customers to make purchases.

These are great options for entrepreneurs with a lot of transactions or who are selling a product. If your business isn’t set up for immediate transactions, you can send customers invoices -- basically, itemized records -- to get paid.

Many freelancers do this!

Customers may want to pay by credit card, so you might still look into one of those systems we mentioned. If you’re using a system that can process credit cards, there will probably be a 2-4% processing fee, so you’ll want to take that extra cost into account when pricing your products.

Then, of course, we’re going to need somewhere to put all the revenue, like a business bank account. This is just like a personal account, except it has a business name on it. Unless your personal account is just under your mattress. In which case, it’s VERY different. This move is all about organization.

Imagine scrolling through your transaction history if you only had one account for both you and your business. It’s just a swamp of latte receipts, supply runs, grocery bills, production costs, and more.

Some of those were personal lattes and some were business lattes. When tax season rolls around in a few months, are you really going to be able to remember the difference?

Most importantly, we want to be able to tell, at a glance, the financial health of our business. If calculating profit becomes a guess-and-check walk through of every purchase we’ve made this year, that simple “revenue minus expenses” equation is suddenly much more complicated.

To get set up in the US, you’ll need your tax identification number, the official name your company is operating as, and most likely proof from your Secretary of State as to what kind of business entity you’re running.

Depending on whether you’ve decided to be an LLC, a corporation, a co-op, or something else, you may need additional forms. Start with your current bank and see what they offer for business accounts. But don’t be afraid to shop around.

Can you find free checking? Free savings? Better loyalty rewards?

After getting money from customers and storing it safely, we want to keep track of how much we have, and how much we’ve spent. And some idea of how well we’re doing would also be nice.

We can track almost anything and make tons of beautiful graphs, but there are three essential reports to measure our business’s financial success. These three reports are also well understood by other businesspeople who might be trying to help us out in the future.

Income Statement

An income statement, sometimes called a profit and loss statement or PNL, is a report that shows how much money we’ve spent and how much we’ve made during some period of time, usually a month or a year.

Basically, it tracks the total revenue, total cost of goods sold, the total expenses, and comes up with our net income at the bottom -- which is total revenue minus costs of goods sold; minus selling, general, and administrative expenses; minus all our other expenses like depreciation of equipment or taxes.

It’s important to write down every revenue stream and every expense so we’re getting a complete picture of what our net income is.

Balance Sheet

The second report is a balance sheet. This is a snapshot of our business’s financial health at any point in time. So on the income statement, we looked at just December or just 2023, but here we’re looking at all our money for all time.

And there are three sections:

The balance sheet will show our assets -- not just our cash, but anything we could convert into cash within one year like property, equipment, investments, or intellectual property.

Assets

Assets are broken up into two categories. Current Assets are anything we could convert into cash within one year, like cash or inventory. And Fixed Assets are purchased for long-term use, so we probably can’t convert them quickly into cash, like land or buildings.

It also shows our liabilities -- all our financial obligations and debts, like loans, mortgages, revenue we’re still waiting on, and expenses. Like with assets, liabilities are broken up into two categories.

Current Liabilities are debts that must be satisfied within one year from the balance sheet date. And Long Term Liabilities are debts that aren’t due within one year of the date of the balance sheet, like mortgages.

And it shows our equity -- or the amount of money that would be returned to our shareholders if all our assets were turned into cash and all our debt was paid off.

Many of us may not have shareholders yet, but we may have a friend or family member lying around that we just get to pay back.

These three things balance -- hence the name balance sheet.

Equity is really just assets minus liabilities, which we rearrange to make the business equation Assets equals Equity plus Liabilities.

Cash Flow

Finally, the third statement we should be familiar with is a cash flow statement which tells us how much money has moved in and out of our business in a specific time period (again, like in a month or a year).

There are three sections to this statement too:

The operations cash flow shows how much cash was spent or earned from running the business. So this includes revenue, expenses, and taxes.

The investment cash flow shows how much our business sold or spent on property, plant, and equipment, or PP&E.

This is stuff like selling old equipment or purchasing a new building.

And the financial cash flow shows the amount of money our business got in loans or paid in dividends to shareholders. We can remember these three sections with a made-up word “OIF.” And all three are added up to show the net cash flow for our business.

Since we’re looking at a specific snapshot in time, we can add in whatever cash we had from before to see the total amount of cash our business is sitting on.

Accounting Software

To create these statements, we can make our own spreadsheet for free, but that might require lots of data entry. Accounting software can be really efficient. And depending on our price range, many accounting software systems have options for generating invoices and can play nice with our point of sale system.

Since many people are intimidated by anything accounting-related (not us, of course!). There are tons of great choices.

HubSpot has collected a list with a quick analysis and cost breakdown. Some of the most common choices are QuickBooks, FreshBooks, and Xero. QuickBooks is by Intuit, the same company that creates TurboTax, and is probably the most well-known software for businesses. It can invoice people and interacts with many point of sale systems.

FreshBooks is also popular and offers very similar options to QuickBooks, but is usually recommended for subscription-based businesses. And Xero is what Square recommends.

So if you’re using Square as your point of sale system, you might try Xero because they work really well together and pricing can be a bit friendlier.

Do your research to make sure whatever you pick works well with the systems you already have, but ultimately, you’ll get very similar results with any of these. As we make more money, we might want to bring on a key partner like a bookkeeper to handle the data, or an accountant to manage projects and taxes.

There are even services like Bench or SLC Bookkeeping that will act as virtual accountants, but a local firm will also be glad to help you.

If this is the path you want to take, you should still review your income statements, balance sheets, and cash flow statements regularly and know what they say. This is all the behind-the-scenes action of your business, and you don’t want to miss out or get taken advantage of.

Remember, you are in charge!

So consult everyone you need to understand reports and strategize, but make sure you’re still the one making the final call. We have these three reports as printouts or PDFs, but how do we read them?

There are hundreds of different metrics we can use to see how efficient and profitable our company is, called accounting ratios. Because there are so many of these, we suggest pulling up our old friend Investopedia to research what could matter to your business.

This is where finding a key partner who knows their stuff can really help too!

And finally, we’ll say it again: don’t forget to file your taxes.

You’ll probably have to submit one or more of your financial reports along with the tax forms. Good thing you’re prepared.

Depending on the country and type of business, there will probably be different requirements. In the US, you can find most of what you need online.

For federal taxes, visit IRS.gov.

For State taxes, look on your Secretary of State’s website or visit your state department of revenue. And for city or municipal taxes, check your city’s website.

The bottom line is... on your income statement!

Enthusiasm and super soft cat sweaters are great, but they just don’t pay the bills, you know?

I needed to save up money through my other side-hustles, or I needed an investor -- someone who believed in me and my idea enough to give me money in exchange for (potentially) more money in the future.

But now it’s your turn.

So let’s find the right investor for you, because each has its pluses and drawbacks, and it’s time to fund your dreams.

You better know that entrepreneurship isn’t a linear journey. You might need funding to accomplish any of the steps to build a business, not just when you’re ready to take a product or service to market.

Some people look for money for their minimum viable product. Some market their product or service once everything is set up. And if you believe Silicon Valley legends, a few people get funding with just an idea.

But where should we look?

Start with the Three Fs: Friends, Family, and Fools.

And calling them fools sounds kind of mean, but we’re NOT trying to trick anyone -- this is just part of the quirky entrepreneurial jargon. These people are often the first stop for an entrepreneur, because they believe in us the most with the least amount of evidence.

According to the crowdfunding site Fundable, the three Fs invested 60 billion dollars -- three times as much as angel investors -- in budding entrepreneurs in 2014.

That’s right. Billion. With a B.

More seasoned investment pros -- like banks or venture capitalists -- will get bogged down with “proof of concept,” “financial performance”, or needing it “to be more than a stick figure sketch on a notepad.”

But the three Fs are more likely to be team us. A lot of this early-stage money is in small amounts to help create a prototype, get design software, or travel to meet with a prospective partner.

These moves can open a lot of doors, but they might not interest professional investors. The disadvantage of asking everyone you know for money is that you might fail, and then you’ve brought someone close down with you.

If you take this path, be honest about the risks involved, and don’t ask for more than someone could lose. The main advantage is that you typically get to keep ownership of your company, and your success is their success too.

Remember: The three Fs are a common starting place.

But maybe family and friends aren’t an option, or we want to cast a wider net!

Non-equity investment crowdfunding platforms let us pose an idea to the internet.

Crowdfunding is pretty simple and involves platforms like Kickstarter, IndieGoGo, or GoFundMe.

We can create a post with info about the product or service we’d like to make, and then set a funding goal and a time limit. Anyone who gives money will be sent a perk.

For instance, if you’re trying to fund a new multi-sensory meditation pillow, backers might be sent a guided meditation if they pledge $25, or maybe an early version of the pillow if they pledge over $50.

You get funding, validation testing, and a customer network all in one.

And a big plus is that crowdfunding lets you keep total ownership of your company. But it’s a lot of work to run a successful campaign, starting with researching the platform you like the most.

Maybe some platforms have higher success rates or tend to feature products like yours. A quick search through past campaigns can reveal how many reached their funding goals or help you think about why some products failed -- like, the idea might’ve been half-baked.

And just like paying attention to competing businesses, we want to pay attention to what other crowdfunding entrepreneurs offer as rewards. We may be able to offer something unique, but don’t fall into the trap of over-promising and under-delivering.

A customized all-in-one house cleaning robot could take YEARS to manufacture, while a sticker with your logo would be just fine. Also, on some sites, you could still end up with $0 if you don’t hit your goal.

Kickstarter, for instance, requires a project to be 100% funded before any money is paid out.

To avoid taking money directly from people, a traditional bank loan might be an option -- although banks aren’t usually the first stop for entrepreneurs. It can be difficult to get a bank loan when we don’t have many assets or proof of stable revenue over time.

Banks like to know we’ll pay them back!

And we’re just not there yet as a new entrepreneur.

So start building a relationship with a business loan officer when you open your business bank account. Take time to go into a branch and let them know what you’re up to.

Developing this relationship can pay off in the future when you want to take out a loan or a line of credit, or even when times get a bit tough and you need advances on payroll or deadlines extended.

It never hurts to have more people in our corner.

To pursue a loan, remember to check what the bank likes to see from a business plan. You’ll definitely need financial data, but they may be satisfied with a succinct 5-8 pages on the rest of the business if you tell a good story.

A formal loan can be hard to get and comes with a formal schedule to pay it back. And if you can’t pay, they make you take something else you own, like your car.

But your success -- or failure -- is all your own!

Many non-US countries also have lenders that focus on microloans and helping community members get ventures off the ground, but we can’t get into the nitty-gritty here. If we’re okay not having complete ownership, investment-based financing involves selling a piece of the company to interested people who become shareholders and partially own it.

This path often begins with an angel investor, or someone with a high net-worth and an interest in helping small businesses and entrepreneurs. They usually like to be hands-on with early-stage entrepreneurial ideas, and invest less than $100,000.

The typical venture capitalist is an investor or firm representing several investors that focus on startup companies. They often take a “high risk, high reward” approach and invest much more money than an angel investor, hoping to get more profit down the road.

The advantages of turning to investors is the ton of cash upfront, and the expertise from people who have already done what you’re trying to do. But on the flipside, investors expect a lot in exchange for so much money.

The more investment capital you get, the less ownership (like profits and voting rights to make decisions) you hold onto. There’s also a lot of business-y buzz around accelerators or incubators, which are programs designed to accelerate the growth of a company so it becomes more profitable faster.

Techstars, Y Combinator, and Boomtown are accelerators behind some of the biggest startup success stories. They usually come with mentors, paths to fast customer discovery and acquisition, and are often venture capitalists in disguise -- which isn’t a problem, just something to be aware of, because of similar disadvantages.

You may have to give up some ownership to get involved with these perks. And if you don’t know where to find investors but you’re still willing to give up ownership, there’s also a crowdfunding approach called equity crowdfunding. This allows anyone to pledge funds, but instead of receiving rewards, they receive slices of ownership.

This has been a game-changer in places like rural America where venture capitalists are scarce, but communities are strong. An advantage of equity crowdfunding is finding people who really believe in your business.

People who don’t have the money to be a traditional angel investor can help within their budget. And, like traditional crowdfunding, you can take it to the internet to find more potential investors.

However, the average successful equity crowdfunding campaign only raises $7,000, and you have to give up partial ownership. Also, there are some serious regulations around equity crowdfunding that vary state by state.

Finally, grants are given by companies, foundations, and federal or state governments looking to support businesses and spur economic development. On the plus side, you get money without having to repay anything or hand over ownership.

In the US, check grants.gov for federal opportunities, your state’s department of commerce for state opportunities, and your city's economic development agencies or tourism board for local opportunities.

But on the negative side, grants are tough to get because they’re usually only allowed to fund specific things. There are also often strict reporting and measurement guidelines that come with the money, and fulfilling these obligations can take away from your focus on key activities or plans for strategic growth.

The bottom line is: financing a startup can be tricky.

Go where your connections lead you -- whether that be friends, angel investors, bankers, or yes, the internet.

 

What does it mean to you to be successful?

It might be earning a lot of money, working from anywhere in the world, owning your own home, or creating new jobs in your community.

Only you can decide.

So, how can your business get you there? As entrepreneurs, we have control over how we grow our companies so we can be successful on our own terms.

And sometimes our business gets out of hand and we have to face our worst nightmare: failure. Or is that just MY worst nightmare? I’m working on it….

So let’s grow together (or decide to keep doing what we’re doing) and face down failure.

In business, growth basically means making a company more successful in some way: finding a new revenue stream, revamping the cost structure to minimize expenses and increase profit, or adding new people and knowledge to the team. Our options for growth are usually tied to the type of business model we started with.

Difference between Startup & Small Business

There actually is a difference between a startup and a small business.

A startup might sound like open office plans and twenty-somethings using giant computers… but it’s technically a company that tries out a new business model.

Startups are trying to invent a better way of doing things that quickly disrupts the status quo once launched.

RxBar, for example, wanted to change the way we made energy bars and has been able to scale from selling locally to internationally.

On the other hand, a small business uses a tried-and-true business model and wants to be successful but doesn’t care about completely revolutionizing an industry.

These businesses can be ideas that already exist but with a new spin, like a haunted bed and breakfast, a luxury cat spa, or just a really great new Indian place down the block.

Both startups and small businesses are created by entrepreneurs, and both are important to the world. So take a breath and reflect on what your values and goals are!

Once you’ve decided on what comes before “entrepreneur” on your nametag -- “startup” or “small business,” we can talk growth speed.

We usually picture entrepreneurs (both startup and small business people) trying to run what we call high-growth companies -- a company that grows profits astronomically fast.

A lot of high-growth examples come from the tech industry because these businesses don’t have a lot of expenses to get started. They can do a lot with some computer equipment and talented human resources, so they can turn a profit pretty quickly.

But many high-growth companies are actually in industries where there’s a clear gap and a pressing need. Healthcare is a great example, with many healthcare apps being developed to help patients without them having to leave their homes.

It’s important to mention that high-growth entrepreneurship isn’t always a choice, neither. Sometimes your value proposition just strikes a chord with customers, and you suddenly have more orders than you can handle.

In that case, you might be forced to expand quickly just to keep up. High-growth companies, while somewhat rare, can be a big deal for economies and jobs. But some entrepreneurs want to maintain careful control over their growth instead, and these businesses are just as important.

For these types of companies, growth is often in terms of doing more with what they already have. To increase sales, this could mean figuring out peak hours and focusing staff on those times.

Or it could mean narrowing down communication channels and really focusing on bringing in more customers. Again, the choice to shoot for high-growth or a more controlled path is up to you.

Think about what success looks like to you and then write it down. You’ll have something to refer to as your business develops, and visualization helps make goals a reality.

To decide what kind of business model to follow and how much growth to shoot for, we have to consider different motivations.

Think about money.

We started a business because we wanted to change the world, but we also wanted to get paid to do it. Growing our business can make it more profitable, which means more money for us, our shareholders (maybe even our families and friends if we got starting funding from them), and other things we care about like repaying loans or supporting local charities.

Think about employees.

Growth can mean hiring more people or improving the lives of current employees with better salaries or benefits. This could be the difference between employees working multiple part-time jobs to support themselves and being able to focus on our business.

We need good people by our side, so making it intellectually and monetarily easy for them to stay goes a long way.

Think about leadership opportunities.

Just like we want to create new challenges for our employees, we can keep challenging ourselves as entrepreneurs. With growth comes new opportunities to lead teams, develop business strategies, and solve new problems, which is exciting!

Think about customers like we’ve ever stopped! They’re important!

Growth can mean giving existing customers more bang for their buck, or expanding in order to solve pains or bring gains to entirely new customer segments.

And think about the competition.

We got to believe that our business will be better than the competition! Growth can mean delivering more value and shaking up the status quo to stand out and become a market leader, not just another business operating in the world.

Then, once we’re motivated, it’s important to take stock of our surroundings, because the universe [-- or our customers --] will probably send us a sign that our business is ready for growth.

Is there too much work to do? If we’re booked until November of 2030, it’s a sign that people like what we’re doing and we could use some help.

Are customers asking for more? If we’re flooded with requests for more products or longer hours, growth might be how we give the customers what they want. Or is everything just chugging along smoothly? Once we have regular, consistent profits and steady customer flow, it could be time to take on more.

One big red flag to be careful about growth is if an industry is dying or changing significantly. This doesn’t mean our business won’t be successful, though.

We could have steady customers wanting portrait-taking and photo-printing in our small town filled with scrap bookers, but it still isn’t wise to rush to open a second location when every phone comes with a digital camera these days.

It can be tricky to put all these pieces together and decide how to grow or change to meet your personal goals.

No matter the business, we should all do some serious soul-searching and goal-setting before charging down a path. And just like growth sometimes happens unexpectedly, life can throw a lot of surprises at our business dreams. Alright.

I’m just going to say the F-word: failure.

We’ve mentioned failure a bunch throughout this series because it’s a reality for a a lot of entrepreneurs.

Failure can be many things.

The ultimate failure is being forced to shut down our business, but we could have small failures along the way: mismanaging money, not paying attention to the competition, spreading ourselves too thin, or not listening to customer feedback so people lose interest.

All of these are realistic and tough.

For many of us, we work so hard because we’re afraid of failure.

If we fail, we might let our families down, have to stop working on projects we care about, or even lose everything we have.

But entrepreneurs can also fail by pushing ourselves so hard we just can’t anymore. We’re burned out, which is basically work-related stress on steroids. Burnout is a kind of physical or emotional exhaustion that can make us feel like we’re not accomplishing anything or that we’ve lost some piece of who we are.

So being passionate about our work can push us higher, but it can also do bad things for our mental health. Instead of spiraling from a fear of failure, we can practice emotional self monitoring and control.

When we’re more aware of our feelings, we can just feel them and let them float by, instead of letting them completely control how we think and act. And actively looking for weaknesses and problems and taking action can be a powerful way to reduce the fear.

Moreover, the unknown can be the root of a lot of fears. So we can learn to increase our capabilities and skills (but we should also recognize that we’ll never know everything).

And finally, seeking support is so important.

There are mentors and experts out there who can help us decide whether the risk is worth it or not. Getting advice makes us feel less alone, and it can help us develop more self-awareness, take action, and learn.

When it looks like all hope is lost and you might have to close your business, ask yourself these four questions from the startup incubator Y-Combinator:

One, do you have any ideas left to grow your startup? Two, can you drive that growth profitably? Three, you may have ideas, but do you want to work on the startup that results from that growth? And four, do you want to work with your co-founders on the startup that results from that growth?

The answer to any of these questions could be “no.”

That’s perfectly valid, and means you should probably accept the failure, take some time to recover, and move onto your next adventure.

As Arianna Huffington says, failure is not the opposite of success, it’s part of success.

I’m still working on my success, and I’ll probably make more mistakes along the way. But for me, my ideas and the potential I believe they have to change the world makes it worth the struggle.

The bottom line is: if you can dream it...then write down a value proposition, talk to customers, get feedback, check out the competition, do all the legal stuff, and take care of yourself along the way.

You can do it with grit, determination, and luck!

We believe in you.

Thanks so much for learning: Entrepreneurship!

We want to hear how your idea is going to change the world for the better.

https://alison.com/tag/entrepreneurship

https://www.edx.org/learn/entrepreneurship

https://ocw.mit.edu/collections/entrepreneurship

https://pll.harvard.edu/subject/entrepreneurship

https://www.udemy.com/course/entrepreneurship-basic

https://www.coursera.org/learn/business

https://shorturl.at/fqSZ2

https://www.udemy.com/course/entrepreneurship-course-for-beginners

https://www.udemy.com/courses/business/entrepreneurship