Many a plucky entrepreneur has a story that goes something like this. “I started my business, I had no clue what I was doing and then suddenly I was a multimillionaire,” right? Well, no, not so much. There’s nothing wrong with winging it at times, but almost nobody succeeds by winging it all the time.
Yes, there are exceptions to every rule and the occasional entrepreneur probably does succeed without any clue what they’re getting into. But the harsh reality is that the majority of businesses fail in their first three years of trading. Winging it won’t get you as far as you think it might.
Learning As You Go Is Fine But Have A Plan
Now, we’re not suggesting that you need to know everything about running a business before you start a company, if that were true, nobody would have a business. But it is a good idea to have a plan in place and to be ready to change that plan when the situation requires it.
Here’s what you can do to be better prepared to run a business without going to business school or spending the rest of your life getting ready:
Evaluate the risk vs the reward. It is easier to enter a market with competitors than to be the first mover in a market (this is why MySpace, HPDos, Atari, etc. are long gone and Facebook, Microsoft and Apple are big winners). Work out what you will be putting on the line and the potential returns. Make sure it’s worth the effort before you start building a business around it.
Get some numbers down on paper. Business is a numbers game. Specifically, it’s all about ensuring that a.) in the long-term more money comes in than goes out and b.) that you always have cash on hand to pay your obligations when they come due, this is known as “cash flow”. You should prepare a simple financial forecast for, at least, your first year in business.
Do your research. You need to know your industry, the competition, the costs of raw materials, the potential suppliers you can use, the costs of warehouse space or retail space, and many other things. You don’t need to spend forever on this and it’s fine to start with a few grey areas still unexplored, but it is important that you get as much data together as you can and make use of it, before you sink your life savings into anything.
Read books and industry publications. The more you read up on the business that you’re going into, the easier it’s going to be for you to be credible in that business. It’s going to be really hard to sell, for example, golf clubs to executives if you don’t know what a “links course” or a “handicap” is in relation to golf. You need to speak the language of your industry if you want to thrive in it. Most of all, you need to be able to spot trends and patterns in these publications which can better inform the future development of your business.
Final Thoughts On Winging It To Get To The Top
You will always face things that you hadn’t foreseen in business and the best entrepreneurs balance “winging it” with “education” when that happens, but you shouldn’t be winging it all the time.
Sooner or later, you’re going to make expensive mistakes when you’re winging it, mistakes that you could avoid simply by having a bit of a plan.