Essential Business Rules for Start-ups
Earlier this summer, my sons--William, 19, and Nolan, 16--started a power-washing business, Hamilton Power Washing. As someone who started his first company at 23 years old, I've found myself conflicted as I watch my sons venture into entrepreneurship: I want to impart to them the business knowledge I've acquired over the past 26 years, but I also know how important it will be for them to make the mistakes typical of first-time business owners.
I don't want to be an overbearing father, nor an overbearing boss. Neither sons nor employees respond well to those kinds of situations.
Rather, I've had to strike a healthy balance between offering my expertise and letting them learn from their own experiences. And in watching them struggle (and eventually succeed) in running a new business, I relearned some of the simple lessons all early-stage companies should know.
1. Set Honest Expectations
My sons' first idea was to start a Web design firm. They thought they could get customers by cold calling other businesses, but they were routinely hung up on.
Afterward, they tried to create a music-sharing platform, but soon realized that developing the software and gaining users would take longer than just one summer. My sons wanted to build their own summer jobs, not to enter a highly competitive sector like Web design or create the next Spotify.
When starting a business (especially your first business), ask yourself, "What's the easiest way for me to make my first dollar?" At my gentle suggestion, my sons began thinking about opportunities that were in demand and eventually settled on pressure washing peoples' homes. Although it wasn't the game-changing software business they had dreamed about, creating a profitable pressure-washing business was realistic and attainable.
Your first time around, be open to the idea of starting a company that will work; you can pursue your dream business later.
2. Be Lean
William and Nolan are particularly social teenagers, and this is almost always a positive trait to have. But when they first started their business, they wanted to include all of their friends.
Running a low-margin business, especially one in its infancy, means you have to complete jobs with a limited number of employees. Until my sons have a client base that warrants it, they won't be able to include the five friends that wanted in on their business.
3. Take Advantage of Cheap Marketing
Young entrepreneurs seem to take it for granted that they have so many free marketing channels. Craigslist, Facebook, and even Twitter are all effective ways for some businesses to reach potential new customers.
However, those avenues weren't necessarily a good fit for my sons' power-washing business. Instead of promoting the company solely online, they printed 1,000 fliers and posted them throughout the neighborhood. It cost only $20 to have the fliers made, and the company added four new customers.
Remember that a marketing campaign does not have to be expensive to be effective--and the ROI can be significant.
4. Don't Price Too Low
Nearly every company does this in the beginning: The conventional wisdom among first-time business owners is that underselling the competition is the best way to gain your first customers.
On one of their first jobs, for instance, my boys didn't realize how much gas they would spend getting to the customer's location. After that, they added a fuel surcharge to all of their quotes.
A corollary to this rule is to also place contingencies on all estimates you give. On another occasion, my boys arrived at a job to find that the square footage of the driveway they had been asked to clean was twice what it had been described on the phone. The lesson: Tell customers that quotes are subject to change dependent on unforeseen circumstances.
5. Find the Right Partner
I always thought my younger son was shy. But when it comes to business, it turns out that Nolan is a natural salesman. Something about running a business brings out his personality.
William, however, has turned out to be a more strategic and reserved businessman. Not surprisingly, he has excelled at planning how the company will fulfill work requests, and is more natural as a COO.
One of the most discouraging parts of starting a business can be the isolation. So find a partner you get along with and whose skills complement yours--it's essential to success.
6. Learn by Doing
When I was a young aspiring entrepreneur, I would read as much as I could about the best ways to run a business. (One of my favorite business writers growing up was Norm Brodsky, in fact.)
Although reading about being an entrepreneur was helpful and inspirational, I later found that the greatest business lessons come on the job. I've done my best to not give my sons too much help in starting their power-washing business, even when I knew they were making a mistake.
My sons will learn 90% of what a successful business owner needs to know within six months of starting their own business, and that's a learning curve that can't be found anywhere else.
So maybe next summer they’ll have enough knowledge to get into Web design.
As told to John McDermott.
BRIAN HAMILTON | CEO, Sageworks
Brian Hamilton is the co-founder and chairman of Sageworks, an Inc. 500 honoree. Hamilton is an original co-developer of FIND (Financial Information into Narrative Data), which converts financial numbers into plain language.