5 Tips for Starting a Small Business

My friend Nicole and her family visited our house for breakfast this morning. She and her husband are the founders of Green Ronin, a Seattle-based game publisher. As we enjoyed a couple lovely hours outside at the picnic table, we chatted about life and work. We talked about what it's like to own a small business.

Because my father was a serial entrepreneur, I've spent most of my life around small businesses. Chris and Nicole have had a taste of the lifestyle over the past eight years. They've seen the bright spots and the dark, and have some strong opinions about entrepreneurship.

“What sort of advice do you have for somebody who might be starting a small business?” I asked. Here are the highlights of our conversation:

  • Be wary of going into business with your friends. Though it sounds like a good idea, working with friends is often a recipe for disaster. “At the very least, partnerships with friends prevent you from being effective,” Nicole said. “You don't say the things that should be said, or in the way that you should say them. You pull your punches.”
  • Do your research. “I think it's important to know what you're getting into,” Chris said. “You can't be successful by just jumping into an industry without having some idea of how it works. I didn't just start publishing games, for example. I started by writing for somebody else. I had to learn about how a game company operates.”
  • Start slowly. We all agreed that small business owners should move slowly. “We started Green Ronin in our spare time,” Nicole said. “Chris still has a full-time job outside the company.” By starting small, you're able to control growth and focus on what's important. Starting small also keeps things manageable. During my sixteen years working at the box factory, I saw all sorts of businesses come and go. Many of those that failed had tried to grow too quickly.
  • Embrace guerilla marketing. “You can spend thousands of dollars on traditional marketing and see poor results,” Chris said. “We've placed big ads in magazines that just didn't work. But it's possible to spend much less on non-traditional approaches that get better results. For example, one way for us to introduce people to our products is to give away quick-start guides to our games at large conventions.” Think outside the box.
  • Create boundaries. We began to discuss how much time our businesses take, and how I always seem to be working on Get Rich Slowly. “You need to create boundaries,” Nicole said. “A lot of people think that they can just work from home and enjoy a life of leisure. It doesn't work that way. I wish I had better boundaries. My workspace is in a corner of the kitchen. It's too easy to find myself answering e-mail at one in the morning.”

In the end, we all agreed that owning a small business offers advantages over a traditional job, but it also has its drawbacks. The best part, of course, is being involved with something you love on a daily basis. Unfortunately, that can be the worst part, too!

Here are some related posts from the archives:

This post is part of the Money Blog Network group writing project for July. Here are articles from other participants:

Starting a small business can be scary, but it's also a great way to make money doing what you love.

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The Restaurant Blogger
The Restaurant Blogger
12 years ago

I agree that there are pros and cons of owning a small business as to having a traditional job. Although there are several risk in running your own business, I believe one has to remember that at the end of the day, at least you own it. No more grueling hours of working for someone else. These are all great tips you have mentioned that any new business owner should know. I have worked for new business owners who had excellent vision and concept, but unfortunately lack the know-how in executing it. Most of them rushed into the business without… Read more »

A. Dawn
A. Dawn
12 years ago

I agree with “Be wary of going into business with your friends”. However, I would like to add that entrepreneurs should also be wary of going into business with relatives. I experienced that relatives often have difficulty seeing the business aspect of an entrepreneurship outside relative boundaries.
A. Dawn
http://www.adawnjournal.com

Nicole II
Nicole II
12 years ago

The “go slowly, don’t grow too quicky” point really got to me. I’m involved on the board of a small non profit and I think applies in that sector as well. My co-director on the project wants to take on lots of new clients, etc and I do not think we are at the capacity to do so at this point. If any readers have links or resources to kind of flesh that point out, I’d love to read them. He’s on board with me that we need to perhaps go slowly to improve the quality and reliability of the… Read more »

Katharine
Katharine
12 years ago

Tack on there don’t start businesses with family. My father had a pretty horrendous experience going into business with his siblings… There were a whole bunch of issues that went on there.

My mother also used to work for her father, can you imagine the issues it caused when she got pink-slipped?

fathersez
fathersez
12 years ago

Unless you end up as a sole proprietor, the chances are you will become “friends” with your partners.

In my case this is what happened. We don’t really pull our punches, but the message is delivered in a much more diplomatic manner. I think this has helped us to learn better communications more than anything.

I don’t think we should just write off the possibility of a a friend or a relative as a partner. A known devil should always be better than an unknown angel.

Ryan @ Smarter Wealth
Ryan @ Smarter Wealth
12 years ago

I love all of these tips especially 3 and 5. Starting a business slowly is a great idea because you can learn from your mistakes early on without having to lose to much money for your mistakes. I started many blogs early on using a free blog site and so I lost no money but I learnt a lot from my mistakes (all my blogs were failures). Also I love the idea of having boundaries. Just work certain hours and don’t get carried away. Remember why you started your small business (to enjoy a better lifestyle) and don’t let your… Read more »

Wayne Mulligan
Wayne Mulligan
12 years ago

These are all good, but my favorite (and the one I can relate to the most) is “Do your research”. I’m a fan of using the “analysis vs. paralysis” line, but at the end of the day if you march onto the battle field without knowing the terrain, you’re probably going to get killed. Same in business. You need to know who the other players are, what can give you a leg up on them, how the financials for a particular industry work, etc. I’d go into any business as I’d go into war — fail to plan and you… Read more »

John Forman
John Forman
12 years ago

Lots of good stuff in this post. I would add a couple of things. One is to be very cautious about taking on debt. The other is to read The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael Gerber.

Ed Siok
Ed Siok
12 years ago

My father is a serial entrepreneur as well. I find that when you own a business, you are more deeply connected to the business. It’s not so much a job as it is your life. In the corporate world employees are always looking for work/life balance, but that does not exist in the small business world; your work is a large part of your life. For people that can handle it, it is a great thing.

Ron@TheWisdomJournal
12 years ago

“Be wary of going into business with your friends.” I would change that to “DON’T”

It makes things very messy and has the potential to ruin a good friendship in my experience.

James@capitalcouplesfinance.com
12 years ago

Number 4 is huge! I almost started a small business with my wife and within a week it was apparent that we just weren’t going to be able to work well together. I’m so thankful that it happened so quickly because it could have caused serious problems.

The Financial Philosopher
The Financial Philosopher
12 years ago

Taking the “going into business with friends / family” point farther, I would advise avoiding partnerships altogether and go it alone, if at all possible.

Depending on the business and your given skills, modern technology allows for a sole proprietor to be quite productive and profitable.

Don’t get me wrong, you will still need at least one good mentor (ideally two or three) and you will “outsource” your weaknesses…

From a small business owner’s perspective, this post is simple but profoundly useful…

Thanks…

Croc
Croc
12 years ago

Is it “Start Slow” or “Start Small”? When you saw those businesses fail, was it because they tried to start out too big or because they started to grow too quickly? Is there a difference?

J.D.
J.D.
12 years ago

@Croc
Hm. Great question. In my mind, I equate them, but obviously they’re different. The important thing is to not grow faster than your cash flow, and not to grow faster than your ability to control the business. The starting size is less important than the rate of growth, I’d say. Good catch.

No Debt Plan
No Debt Plan
12 years ago

You’re exactly right on the boundaries. If you don’t have a daily routine (in general for life, as well as for business) you will find yourself behind on the important things of life (time with your spouse or dog) and answering e-mails at 3AM.

DeeBee
DeeBee
12 years ago

I absolutely second the idea of Tip #1 “Be wary of going into business with your friends.” I planned to start a small craft business and brought a friend into it. After a year of planning and research, I realized that I could not trust my friend in business and did not like the influence her husband had over her and her decisions. Their values came into conflict with mine and I felt that I had to “pull my punches” or else the friendship would be at risk. I finally decided to place my values first and NOT to enter… Read more »

Alison Wiley
Alison Wiley
12 years ago

Good article and good comments. I owned and managed a small business for 10 years, with great effort and lots of ups and downs. I would add to the above: learn how to talk clearly and effectively about money. Murkiness in this area tends to be disastrous. In fact, I’m happy to share what I learned: http://www.diamondcutlife.org/how-to-talk-about-money/

Shanel Yang
Shanel Yang
12 years ago

A quick questionnaire to test your mindset, personality, and business idea to see if you’re ready to start your own business is my post called “Future Entrepreneurs Test” at http://shanelyang.com/2008/07/04/future-enterpreneurs-test/

Eric J. Nisall
Eric J. Nisall
12 years ago

There are so many things that would-be entrepreneurs need to be aware of, I’m not sure any one person can even come close to compiling a complete list. One of the most important things one needs to do is to keep and open mind and realize that there are areas where others know much more. It is easy for someone to fall into the whole DIY trap, but there comes a point when they must recognize that it is more cost- and time-effective to call a pro. I wrote about this same topic back in June, and feel that it… Read more »

WiseMoneyMatters
WiseMoneyMatters
12 years ago

I think #1, #2 and #5 are golden rules. You should follow these implicitly. Especially about boundaries. Sure, you can make all of the money in the world, but if it destroys your family, did you really gain anything? I think #3 depends on a lot of stuff. I think you need to set goals. I would recommend 3 sets of goals and 3 sets of plans for those goals. The 1st goal is a “worst case” scenario goal. This goal is the basics to keep your business going. The 2nd goal is the ideal goal. This is where you… Read more »

Aaron
Aaron
12 years ago

I started a business with three other friends this past February. Three of us work really hard and are really growing the business. We sat down at lunch today and told the 4th, not so productive partner (and close friend), that we were significantly scaling back his ownership in the company and changing his pay structure to be incentive based instead of salary based. It was a hard conversation, but when we laid out the facts in a diplomatic and respectful way, it went really well and we walked away from lunch still friends and partners.

Ann at One Bag Nation
Ann at One Bag Nation
12 years ago

I’m amazed at how much time blogging takes, just as a hobby!

I have plans for a second blog, but I’m approaching it as a small business, and going very slowly. I want to maximize my time, effort and investment, even if it’s small!

Chima
Chima
12 years ago

We have had some interesting situations with “friends” who get offended when they find out that the rates we quote them for getting their websites or ad campaigns put together do not include a so-called “friend discount”. Somehow they forget we’re running a business.

Eric
Eric
12 years ago

These are some suggestions I think many first-time entrepreneurs should take to heart. While starting my first business, I learned a couple the hard way. Working by yourself it’s easy to imagine the entire world working on your schedule … until you’re faced with production lead times and contractors who don’t check email at two in the morning.

Learning to work slowly and enjoy the journey was the hardest thing I ever had to face, and by far the most rewarding.

Liz
Liz
12 years ago
DJ
DJ
12 years ago

What tips does anyone have on finding someone to manufacture your product, or help with building a prototype invention?

Cynthia
Cynthia
12 years ago

DJ — Have you completed an innovation assessment yet? These reports derive from a study of the market to determine the likelihood for product success. Competition, pricing, market demand/needs, industry expert(s) analysis and more are part of the assessment. If it’s been done and patent has been secured, than one potential for prototype development is via engineering students in a research-based university, particularly if they have a capstone program that encourages such work. Manufactures can be researched online. Given the changes in the U.S. manufacturing market, obviously overseas should be explored — but that is tied to type of product.… Read more »

Clay
Clay
10 years ago

This is a great article and some great tips. My wife and I also found a great way to save loads of money on our home business office furniture, computers ect. We go to the auctions. We knew nothing about auctions and were afraid of them but I found a great book by Oliver Phipps and after reading it (a couple hours) I bought some great office stuff at great prices. I know the book sells on Amazon.com for $3.95 (ebook) and it is sure worth it if you were like me and didn’t know anything about auctions. I’ll see… Read more »

7 Secrets of a Powerful Business Plan
7 Secrets of a Powerful Business Plan
7 years ago

Nice blog and thanks for sharing. Before starting a business first make a proper planning and analysis the market and your competitor.

Fund Arrangement
Fund Arrangement
6 years ago

Excellent article with great tips. When we discuss about how to start a small business, the funds plays a vital role. Because we can’t do any business without funds.

Zequek Estrada
Zequek Estrada
4 years ago

I’d say right about being wary of going into business with friends. I met this guy who lost a couple of good friends because their business they started together blew up in their faces. I would imagine that one of the ways to get insight to be successful is to talk to people who have had success and ask for advice. There’s nothing like getting a first-hand account of what to expect.

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