Sunday, February 1, 2015

Three P's of starting a business

Let me start out by saying that running a business isn't for everyone.  I think that most people should work for someone else and can be perfectly happy doing that.  However, I also feel strongly that everyone should understand and consider the option of working for themselves.  Our rules should make it easy to work for yourself and that our culture should make it acceptable.

Even if you'd rather work for someone else, having the freedom to run your own business is important so that you have leverage when seeking employment.  If you are desperate, without good options, then you are stuck accepting whatever terms some employer dictates.  As you can see in my other posts, I feel strongly that the best way to alievate this predicament is personal empowerment, and being able to run your own business is one way to do this.

Personal Accountability

When you run your own business you are responsible for everything.  When you work for someone else, it is easy to forget or ignore everything that your employer takes care of for you.  Running a business is a lot more than the day to day work involved.  It's a long term commitment to your customers.  You have to be prepared to not only do the work, but to take accountability for the work that you do.  Your customers need to know what you offer and that you are consistent and reliable in delivering that offering.  If your mindset is "I want to try doing that", or "That sounds interesting", then you probably aren't ready yet to make significant commitments to customers.

A lot of people think of entrepreneurialism as a form of innovation, but in reality trying to innovate is unreliable.  Most successful businesses usually strive to serve people first, and then in the process of doing that they will innovate.  There is definitely an observation bias here, because the most visible successful enterprises are highly innovative, like apple, microsoft, or facebook.  These are the rare cases, and these kind of ventures tend to be much more risky than something like mowing lawns or walking pets.


Your business has to be profitable.  If it's not profitable it's just a hobby.  It may be fun, rewarding, and even educational, but if it's not profitable it's not going to empower you economically.

Profitability is sometimes counterintuitive.  The unfortunate truth is that it is difficult to be sufficiently profitable creating and delivering necessities, especially for an unexperienced person working on a smaller scale.  Growing food or vegetables is a great way to save a little money, but trying to earn a significant amount of money doing it is challenging because raw food is so cheap.  Most commercial farmers cultivate acres of land and use expensive equipment and have large yields.

The same applies to other necessities like sewing clothes or making shoes.  Unless you can create something people are willing to pay a premium for, like organic food or trendy clothes, you will have a hard time making money.  In order to attract new customers, you must not only match the value and price of existing offerings, you actually need to do better.  Even if you offer a comparable product for a better price, a lot of people simply won't care enough to change their habits.  Even if they think what your doing is cool and they try your product, there's no guarantee they'll become long term customers.

Services are perhaps the easiest type of business when you are starting out small.  Large companies don't have all the advantages, small companies can offer better customer service and other advantages.  Paul graham, a famous tech entrepreneur, has an excellent article about this: Do things that don't scale.


The third P, and probably the least important, is passion.  Mike Rowe, the dirty jobs guy, has said something interesting, basically that you shouldn't follow your passion, but you should bring it with you.  Your business needs to be something you can be passionate about if you want to turn it into a long term success.  It doesn't need to be your dream job, but it should be something you care about and find engaging and worthwhile.