Tuesday, June 05, 2007

What makes a good start-up business.

This week I offer my thoughts and experience on what makes a good start-up business.
One of my long term clients, and now serial success story, have created a number of successful and sustainable businesses in recent years. The key contributor to is the surprisingly simple formula of automation = duplication = success.

Although my agreement with him won't allow me to share the specifics of his businesses with you he happily agreed for me to tell you about the wonderful formula and how it works.
1. He believes in a low start-up cost and over extending himself regarding initial capital introduced into the business. Most professionals are surprised at the actual costs of equipping an office and launching a new business, and start out under-capitalised. This client developed a business model can be set up for under R200,000 so he can afford to do it right and create momentum from the very beginning. A fantastic way to start!

2. His products are low cost, quickly consumed, and standardized. In other words, he makes lots of repeat sales. Think McDonalds restaurants, gas stations, or dentists. His customers appreciate the predictability and reliability, and when they need more, they come back and make repeat purchases. The cost of sales goes down, while volume and profits go up. Good system!

3. Finally, because the business is composed of standardized units, he can easily duplicate himself. Once the problems are worked out, he can either establish more offices and hire people to run them, or franchise the idea, or follow a number of other plans. The key is duplication.
Unless you can duplicate yourself, no matter how well you are paid and how fancy your title, you are basically working for wages. A surgeon may earn thousands of dollars per hour, but she only gets paid when she operates.

To increase your earnings, duplicate yourself. Find a way to compose standardized units for your business model and let other people make money helping you make money. You really can't do it all yourself!