I am sure we have all heard the expression "rule of thumb". I am also sure we can all relate to decision-making based on these rules. In a past role as an IT director, the rule "never be biggest and never be first" proved true on numerous occasions, some of which were when I didn't follow it.
Rules of thumb based on our own experiences can be useful, but can equally be dangerous. Of course we can conjure up a rule to justify virtually anything. The choice between "too many cooks spoil the broth" and "many hands make light work" springs to mind in this context.
So with that caveat, I present my four rules of thumb for starting a business:
1 Don't just plan to compete on price
It amazes me how many people plan a start up, especially selling online, where they intend to undercut everyone else. The only way this can work is if you have something that makes your costs lower than all of the competition, for instance, by having a special relationship with a supplier that ensures you receive the best prices. If you don't and stick with that strategy, you will go out of business, overwhelmed by all the new entrants pursuing the same strategy as you, and by those that have a cost structure that enables them to succeed.
2 Do something that interests you
If you are good at something, you tend to enjoy it. If you enjoy it, you tend to be good at it. Starting a business is bad enough without being involved in something you know nothing about or worse still – hate.
3 Aim for happy customers as soon as possible
Until you have some happy customers, you only have a theory. Once you have some happy customers, you have a business. Some people who deep down in their heart are unsure about their idea postpone the day when the customer meets the product. In contrast, you should make that day happen as soon as possible. If it's not going to work, the sooner you know, the better.
4 Don't spend what you don't need to
Money is the most precious resource when starting a business. You need to focus this resource on finding customers and giving them what they want. Everything else should be kept to a minimum.
These are my top rules of thumb for starting a business – what are yours?