Blueprint for Building Your Successful Business

Starting a business and becoming successful is often part of the American Dream. But there is a difference between starting a business and building a successful business. Many businesses fail within the first few years of existence due to the lack of planning for the long-term. There is not enough vision and there is not enough done to strengthen the business properly from the ground up.

If you want to start a business there is an easy way to get a better understanding of why some businesses fail and others don’t. When starting a business try to think about it in terms of building a house. If done right, the house will protect you against any kind of storm or other dangerous elements from the outside world, and it will last for a long time.

Following the same line of reasoning for your business, as the house offer shelter and protection because it was constructed properly, your business will offer economical well-being when It is built properly. For you and your business the translation is, you want to have a business that is able to weather economical ups and downs (a la the storm in our house example) and that will provide income to pay the bills (a la shelter and protection in our house example).

When building a house there are several different steps you must take in order to have that house built properly. You know you want a house, but first you have to pick a location and get an architect to draw up a plan and a set of specifications. In the business world that would translate to: You know you want to start a business, but you have to come up with a business idea and develop a business plan.

The next step for the house would be to build a foundation (and eventually the basement) for the house. In the business scenario, you have to build the initial infrastructure (example: connecting with vendors, finding a manufacturer for your product, creating a sales team, renting office space, getting a delivery truck, etc.). Once that is in place you’ll be able to actually do business and earn some money.

However, you are not completely done yet, because you still need to build a frame, put in windows and install a roof on the house. Similarly for your business, you’d have to pay off debt, improve business processes and get professional help when needed (example: find a tax accountant, select a payroll service, etc.).

Once the house is built you probably want to furnish it and make sure the interior is suitable for your family’s comfort and safety for present time as well as years in the future. Obviously nobody wants to sleep on the floor, if a bed and other furniture is available.

This stage of the house construction, which is close to completion, is translated to building the business in the sense that you are investing money you earned back into your business. Business owners reinvesting in their businesses is something that is done routinely. One example of that is buying machinery instead of leasing it.

Eventually the business buys a building, hire more staff, develop more products, move into new markets, build up a high cash reserve, and buy other businesses and so forth. This is often the step where winners and losers separate. Re-investing money into the business is a key factor for success. If you go and spend all the money on your own salary to buy personal things, you have nothing to go back to when the economy slips into a recession or some kind of disaster.

The successful business owner has built up a cash reserve or can borrow money from bank – securing loans with the assets of the business. Going back to building a house this pretty much matches the same efforts.

You pay off your mortgage and have equity available to eventually borrow against when emergency arises. Emergencies do not include paying off credit cards to use them again or to buy a car. Financially responsible owners (home or business) should be looking at the long term and not finance short-term goods with long-term debt.

Creative Professionals Need Not Charge by the Hour

One of the biggest challenges creative businesses have had to contend with in the past, and still exist to a great extent, is getting paid what they are worth. The root of the problem was not the client’s inability to pay the money requested; and it isn’t that the client is unwilling to pay what the service is worth. The root of the problem is in how you, the professional, is charging and how you are creating value in the mind of the client.

In order to buck the trend – so to speak – and start getting paid for the value you provide, instead of the time you spent on a particular project, you must do a couple of things. First, you must create a business based on value pricing and not hourly pricing. The number one worst way to charge (and most creative businesses have been charging this way) is by the hour.

Frankly, it shouldn’t matter how long it takes you to solve the client’s problems or provide your service, it should matter that the client is getting what s/he needs and what he wants. If you’re creating value and you’re giving them value, they’ll pay you for that value. They should not be paying you for your time.

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Second, you must determine what value you are providing. If you’re being paid for your time you’re essentially setting a ceiling on how much money you can make because you can only work so many hours. Therefore, you must determine, specifically what your value is to the customer/client, not how many hours you will work for that customer/client.

Here are a few questions to consider in that regard:

  • How do you impact that customer or potential client?
  • What do you provide to them that will help them and help to solve their problems?
  • How will solving these problems impact the customer?
  • Is it a problem with high impact or low impact?
  • What is important to the customer?
  • Why is it important to the customer?
  • How important is it?
  • Have they had experiences working with someone in your type of business before?
  • If so, was it a good or bad experience? Why? Exactly what happened?
  • Why is the client coming to you for this issue?
  • What is the client’s definition of success with this project?
  • Ask him to describe specific ways he will know he made the right choice in hiring you.

By getting the answers to these questions – not guessing what the client will say, but actually getting the client to answer these questions – you will have the information you need to create VALUE in the mind of the client. If they perceive your work to be valuable, they will be thrilled to pay you. If they do not perceive your work to be of value, they won’t pay you no matter how low you go on the pricing scale.

It’s all in the mind of the client. Get in their head and understand specifically what they want and, even more specifically, why they want it. Once you do that, getting paid what you are worth becomes a matter of how-much-is-your-bill-I’ll-get-the-checkbook, instead of “I don’t know-I want to think about it a little more, let-me-get-back-to-you.

For the purpose of pricing, think of your business as if were a real estate agency where commissions are negotiated between the principal (the seller of property) and the agent (the real estate broker), without the imposition of any “set” fees or hourly payments for the agent’s time.

The broker may negotiate a higher fee if s/he believes the job may require more resources, advertising and risk, or s/he may negotiate lesser of a commission if the sale is considered a “slam dunk”. The point is – based on my frame of reference – there is no preset fees, hourly prices or time-based payments for the agent’s compensation.