8 Things to Know When Starting a Business (What I Wish I Knew)
So I’ve recently been spending a good deal of time working on some new training. It’ll be released at the same time as my new book.
While I was doing that, it got me thinking of the beginning about things to know when starting a business…
Especially what I wish I knew when I first started a business. That was way back in 2007, when I first started in eCommerce.
What things would have given me a big jump start if I had known them at the beginning?
After some thinking, I had a list of eight things things to know when starting a business.
In this blog post I’m going to cover those eight things to know when first starting a business. These are the strategies and methods I wish I knew when I first started in eCommerce!
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8 Things to Know When Start a Business
- 90/10 Rule for Money & Time
- Handing off Tasks can Actually Improve Things
- People Lie
- Numbers Don’t
- The Money is in the List(s)
- Everything is Negotiable
- Usability Over Design
- Build to Sell
1. 90/10 Rule for Money & Time
The first thing to know when starting a business is the 90/10 Rule. It’s similar to the 80/20 Rule, but just 90/10.
This is something that I apply to our marketing efforts, which includes, how we're trying to attract people to become customers, and even things we're doing once they're on our site. So, where we're spending money, what we're doing in terms of conversions, how much testing we're doing.
For the formula that I like to do, it's 90% going into what is working and 10% on experimental.
Let's just say hypothetically that Google Ads is making up all of our revenue. It's all coming from Google Ads.
Rightfully I would start thinking, "You know what? We should test some different platforms out.” Because, what if, you know, knock on wood, something happens with Google and we either get too much competition or they decide they don't like us anymore.
Back in the day my thought process was very similar to the one above. I was ready to start spending money in other places to grow my sales and business.
What really ended up happening, was I was taking too much of the main budget (not just the money budget, but also time and effort budget) and diverting too much away from what was working.
I was putting money and effort into all these little ‘buckets’ of testing, doing this, this, and this. Therefore, too much money and time were being pulled away from what was working to put into testing other projects.
Now what we do, and what I believe everybody should do, is only take about 10% away.
Whatever your thing is, whatever is working, you want to basically double down on that. Put your foot on the gas. You want to make that as best as it can be.
And you still do want to be experimenting. In my opinion, only about 10% of your budget in terms of money and in terms of time should go towards those experimental things.
If you wanted to get into Facebook Ads and Google was your moneymaker right now, you should not take 30% of your budget and throw it towards Facebook this month to see what happens. That’s going to take away time and money from what is proven to work.
So again, 90/10 rule. That's the first thing I wish I knew when starting a business.
It would've allowed me to put more of my own time, energy, and money into what is working. I still would be able to have this playground where we're learning about what may come next or what could be there as a safety net.
2. Handing off Tasks CAN Actually Improve Things
Now another one of the things to know when starting a business is that handing off tasks can actually improve your business. It’s simple. When you outsource tasks and when you hire people, and when you take things off your plate and have other people do them for you, they can actually improve.
This might sound obvious to you, but let me tell you, in my first few years in business, I was terrified to let anybody do anything. I was doing it all, every single bit of it.
I thought if I hired somebody they might tell the customer the wrong thing, or might steal my credit card number. What if they don't answer the phone and we miss out on all these orders, or what if they offer bad support? I had all these things running through my head of why somebody else couldn't do what I did.
And finally what happened for me, the reason I started to was we got a breaking point in the eCommerce businesses where I just literally couldn't do it anymore. It was too much. There was too much volume. So that's when I started to outsource.
I, firstly, which I recommend everyone do as well, outsourced customer service. Instead of everything breaking like I thought it would, guess what? Our customer service was dramatically better.
We had happier customers. They were being responded to faster. The customer service people liked customers a lot more than I do, so they were nicer to everybody, and it grew the business.
Turns out, this thing that for years that I was so hesitant and terrified to do was actually better than it was before. It was better than when I did it myself.
I wish I would've known that earlier on. I wish I would've trusted that earlier on. Doing so would have allowed me more time myself to focus on more of expansion instead of expansion and operations.
Hopefully that helps you if you're kind of feeling that way right now, like you have to do it all yourself. The truth is you really don't. There's people that are probably better at at least some of what you are doing than you are!
3. People Lie
Speaking of people, the next things to know when starting a business was the fact that people lie. Maybe, again, you’ve had an experience with this already.
I started young in eCommerce. I was only 21 years old at the time. And I just always thought that people were honest especially from a customer perspective. I thought all my customers would be ‘normal’ people shopping online.
I thought if somebody had a bad experience they would tell me. I thought if somebody was happy, they would tell me.
HOW TO START
YOUR OWN BUSINESS
WITHOUT PRIOR KNOWLEDGE OR EXPERIENCE
What I didn't think is that people would do things like place fraudulent orders. I didn't think that people would get something delivered to their home where there was literally something signed by them saying they received it, and then they would say, "No I never got this thing."
Never thought people were like that before I started my first business. This is one of the things to know when starting a business.
It took me a while, but I finally realized, guess what. People are not ethical, and it's really sad. I think it's gotten worse too. We've just seen it in different businesses with how people are so confident thinking that it's fine to rip people off. It's crazy.
When you get into business, you can't have this naive attitude like I had. Where everybody is always honest all of the time, and you can take them for their word. There's some bad people out there.
However, you can definitely do things to protect yourself when it comes to different ways people might scam you in business.
There's better fraud prevention tools that are available now than when I first started. Shopify has built-in fraud protection. There's also different apps that you can use, and that helps on that side.
And then, you know, on the same line with that, like, when people do freak out and if you get like a nasty email or a nasty phone call, I used to take it personally. I used to think we really must have messed up. But I realized there are some sick people out there.
I might've taken it a little too personally for my first year or so in business. So learning how to be able to brush it off as soon as the interaction is over has really helped.
4. Numbers Don’t
People lie, and number four of these eight things to know when starting a business is numbers don’t.
You’ve probably heard that one before, but it’s true.
One of the things to know about starting a business is to not tracking. I did that early on. Tracking where my visitors were coming from, what they were buying and how often they’d return before buying from us.
I neglected this because the money was coming in, I was profitable. I was successfully running paid traffic from all different ad sources. And I just didn’t think about tracking the numbers.
Maybe this is something you need to learn this you're new. Either way, it's what I wish someone would've told me way back when I was first starting.
Tracking everything is so important. Not just tracking things where like, for example, you have Google Analytics set up and you don’t feel confident looking at it. You don’t know whether it’s accurate or not.
No you need to get tracking set up to the point where you are confident enough that when you see a report that you can make decisions off it.
When I'm saying numbers don't lie, I mean you might have in your head- "Wow, Facebook is doing well for me. It's gotta be. I see all these people liking my stuff. I'm sure it's doing well."
Well if you have a report in Google Analytics with eCommerce tracking enabled, and you see that maybe Facebook, it's showing you’re losing 30% compared to ad Spend every month. You need to be able to look at that and make a clear decision on what needs to be changed.
You need that data, but more importantly you need data that you’re confident in. So when you see numbers like that, you can accept them for what they are or actually implement the changes that need to be changed so you can just grow faster.
Again, I wish I knew that when starting my first business. Now it’s something I spend a lot of time and energy on now and I recommend you do as well.
5. The Money is in the List(s)
Fifth thing that I wish I knew back in the day, especially these past few years, is that the money is in the list. I'll change that now. What I mean by that is email lists, Facebook lists for E-marketing, you know, Google lists for E-marketing, Pinterest if you use them, basically every platform.
What you should be doing when people come to your website is capturing their data.
Now for emails, simple enough, right? We're collecting their email addresses.
Do this all different types of ways such as giveaways, incentives or even through abandoned cart emails sent to customers.
When I first started in business, I never thought that email marketing was important. The only emails that I captured for years were from customers, people that were checking out and buying. It’s a great list to have, but I lost out on a ton of money.
At this point, email marketing makes up between 30% and 40% of our revenue. It's because we have a list of people we can reconnect with.
We could send them emails, we can make different offers, and we can bring them back, whether it's a day later or five years later.
So definitely focus on growing an email list. Yes, even in 2019. Start focusing on that today.
Not just with a little basic opt-in box that says, “Sign up for my free newsletter”. Make it, “Hey you can get a discount code or enter to win a free $100 coupon (or whatever it is).” But incentivize it and start building those email lists.
Then, of course, have your Facebook pixel on your website so you can remarket to people on Facebook. Same thing with Google and basically anywhere else that you wanna run ads.
Having those remarketing lists has led to very, very, very high return on ad spends. It's not worth neglecting. Building marketing lists, I had no idea about when I first started, and now is a massive focus and source of revenue and profitability.
6. Everything is Negotiable
The sixth thing I wish I knew when I was first starting a business is that everything is negotiable. This is an one of the most important things to know when starting a business.
Now when I started, my goal was obviously I wanted to make money. But the thing I really was looking at is how do I get revenue as high as possible. What's good about that is you can have a business that's generating $ 200-500K a month.
The thing is when you’re at that size, it sounds weird, but the numbers don’t really seem real. You’re paying off your credit card everyday from $30K or so of orders. Literally, every day it’s getting billed like that and money can start to not feel real. The big numbers seem the same as the little numbers.
I know it sounds crazy, and I’m not trying to be cocky. It's just when you have huge numbers going through your accounts every day, like, an instant thing. It just totally changes how you see and spend money.
So, what I'm saying with everything is negotiable is if you're starting to hit these huge, huge, huge numbers, you might just stay at them and be happy.
What I realized after a few years in business is there are some very, very simple things you could do that could add 5% more margin, maybe even more.
Take this example:
Let's just say you're operating at a million dollars in top line money. You're netting 20%, so $200,000 a year in profit.
Now, instead of making $200,000 that year, you could make $250,000 for literally not doing anything different, besides sending a few emails. Because everything is negotiable.
These were some of the main things that saved us a ton of money and just instantly made a ton more
- Getting different pricing structures with suppliers,
- Negotiating different pricing terms, sometimes only around the holidays, sometimes forever,
- And finally, shipping.
Shipping isn't a fixed cost. It varies from everything that's going out. So there's usually a lot of room there to save money, especially if you've never tried it before.
Negotiating your shipping costs especially can make you a ton more money this year. If you do both, you could have enough to buy a new sports car at the end of the year.
And again, this is assuming your revenues are already up there. Either way, you should do that now because, again, it's just extra money in your pocket and bank account every year.
7. Usability Over Design
Seventh thing to know about starting a business is very important: usability over design. In fact, I have a whole training lesson in this in my Drop Ship Blueprint.
Just so you know, my first dropshipping store was (visually) disgusting. When I first started in business, that store was literally me trying to figure out how to use Yahoo stores. However, as soon as I started making money, I was ready to hire some fancy company to make this beautiful and cool-looking website.
What I learned after doing that, probably too many times, is that having a pretty website will not make you any more money.
What people care about is usability. They care about information. They care about trust.
If I could go back to the beginning, I would have told myself don’t spend thousands and thousands of dollars on this gorgeous site design.
Instead, just make sure when people go to your site, they can actually find what they want. And not only that, but they can add it to their cart, enter their payment information, and have an overall good experience.
That’s so much more important than the vanity of having a sleek, cool-looking Shopify store. So I wish I knew that. Hopefully, that helps you.
8. Build to Sell
Finally, on this list of things to know when starting a business is that you should always build to sell.
For more on building a business to sell I highly recommend reading the book, “Built to Sell: Creating a Business That Can Thrive Without You" by John Warrillow.
When I first started, I didn't know my businesses would ever even be sellable. So I was doing things like using my personal checking account and I was a sole proprietor.
Then I made some money and turned it into a S-Corporation, and now I have a business account. At the time, I also had another business that I'm doing and I'm using that same account.
Basically things got like co-mingled. And while that's fine if you're not going to sell the business, it's not good if you ever want to.
Maybe you're thinking you never want to. I never thought I wanted to, but I did.
So my first network of stores that I sold, I wish I had done this instead. Things would have been much easier....
- This is the business. This is the business bank account. This is for eCommerce stores A, B, C, D for that network.
- Then if I want to launch eCommerce stores X, Y, Z, I'm actually going to have a whole different bank account for that. I'm going to have a different credit card for that and everything.
That way if I ever sell stores A, B, C, and D (normally they would be interrelated niches, so you would sell them as a network) then that would have its own accounting, bank statements, and credit cards all for those stores.
Now everything would be so clear and simple.
You could talk to a broker. They would have a nice package of your financials. They would give it to the prospective buyer. They would look at it. They would say, "This makes sense. "I'm gonna give you a good multiple." And everybody is going to make money.
If you do it the other way… Then you have to start pulling things out, and trying to figure out what is what, and it just gets messy.
This is as easy as opening another checking account and having another credit card just to separate things. Make sure if you want to sell your business, you have that separate so things don't co-mingle.
Wrapping Up Things to Know When Starting a Business
So those are the eight things to know before starting a business. Here’s a quick recap:
- 90/10 rule. Put 90% of your efforts, both financially and time wise, into what is proven to work. Put 10% into what you're experimenting with.
- The second is handing off tasks and hiring people can actually improve the operations that you might think you're the only one that could do.
- The third is people lie whether that's crazy customers or demented competitors that just rip your stuff off and pretend to be you.
- The fourth is numbers don't lie. So set up tracking, tracking that you trust, so you can make data driven decisions off that.
- The fifth is the money is in the lists, that includes email lists and remarketing lists.
- The sixth is everything is negotiable, and you can easily make more money just by sending a couple of emails or making a couple phone calls.
- The seventh is usability over design. Don't focus only on cosmetics. Make sure people can get what they want out of your website. Meaning find the products, add it to their cart, easily buy, and trust what is there.
- And finally, build to sell because you never know when you might want to cash out. When you do, you want to make that process as easy as possible, and you want to make sure your business is worth as much as possible.
Hope you found this list of things to know before starting a business valuable! As always if you did, please leave a comment and let me know below.
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