Starting, owning, operating, and growing your own business can be one of the most exciting things you do in life. Some famous entrepreneurs’ entire identity is based on their business. Jeff Bezos’s name is synonymous with Amazon. Same thing with Steve Jobs and Apple. Although running your own business can seem daunting, the rewards usually far outweigh the work.
So what if you’re just getting started? Most entrepreneurs who set out to start their own businesses are doing it for the first time. There is no rulebook, no corporate “Best Practices” to follow, or a manager to tell you what you’re doing wrong and how to improve. A lot of decisions just come down to your best judgment.
That said, there are definitely general rules that every business (if they want to be successful) should follow. These are the best ways to grow and maintain a business.
NOTE: Much of the content you’re about to read has been sourced from The Millionaire Fastlane by MJ DeMarco, a recommended read.
Start At The End
Surprisingly, if you’re thinking about opening a business we actually recommend starting at the end. What does your life look like after your business is up and running? Where do you want your business to take you? Obviously, you want it to print money for you but what will be your role once you’re out of the “start-up phase”.Do you plan on selling your business to a competitor for a nice lump sum?
Assuming that you would want to grow it into a Fortune 500 business.
Do you want to run it for years and years as the CEO?
Eventually would you want to take it public?
Will you be satisfied as long as it’s paying your bills?
This is called having an “exit strategy”. Knowing what your eventual goal is for a business will help you make decisions along the way. If you’re trying to grow your athletic wear brand into the next Nike, your decisions should look different than if you’re running a small boutique in Southern California as a retirement hobby.
Once you’ve determined what your exit strategy is, there are several other things you’ll need to verify if you want to run a successful business. In The Millionaire Fastlane, this is referred to as the CENTS Framework.
C – Control
E – Entry
N – Need
T – Time
S – Scale
The CENTS Framework
Regardless of which business you’re in, it’s size, industry, the number of competitors, or anything else, the CENTS Framework still applies. If you can’t look at your business and confirm that it follows this framework, your business will eventually suffer or be taken over by a competitor. Let’s take a look in more detail.
CONTROL – You need to be in control of your business. This means that there cannot be a 3rd party who has the ability to completely end your business.
For example, if your business does the majority of your sales online through a site like Amazon or eBay, you don’t have control of your business. If Amazon decides that your product violates their Terms of Service and removes it, your sales are instantly cut off.
As another example, you create a new and improved foam roller. It’s your own clever design and invention. You’ve successfully landed a deal to get your product selling in Targets across the world. Life is good and business is booming. Then Target decides that they want to replace your product with another one. Overnight, sales go from boom to bust.
Even if it hasn’t happened to you yet, if you don’t fully control your business then you’re at risk of having it taken away from you.
ENTRY – There need to be barriers to entry in your industry. If it’s incredibly easy to get started and launch a business similar to yours, you’re at risk of getting overrun with competitors. Consider the following example:
Your city decides that there is a lack of Mexican restaurants in your city. They offer a stimulus plan to create more. For the next year, they will pay all start-up costs associated with starting a restaurant. Everyone who has ever had a dream of owning a restaurant rushes to take advantage of this great situation.
By the next year, there are now 100+ Mexican restaurants in your city whose population isn’t that big. There are not nearly enough customers to go around to support all these restaurants and most of them fail.
We aren’t saying that it’s a bad idea to start a Mexican restaurant. We’re saying that you should stay away from businesses that have low (or no) barriers to get started because they will be saturated. In this example, a better business to start would be a restaurant supply company.
Examples of businesses with low barriers to entry:
- Starting a blog
- Selling non-unique products on Amazon
If anyone who wants to could get started in your business, you should probably find another business.
NEED – This is by far the most important step in the CENTS Framework. If your business does not solve a relevant need then it’s probably not going to stay in business very long. When thinking about your business, you should be able to succinctly and firmly state what value you bring to your customers.
If you struggle to pin down the value you bring to the market that’s a problem. Additionally, the more value that you bring, the more money your business will generate. Companies that solve massive world problems are the most successful. Look at a few examples of the world’s most successful companies:
- Apple – Create amazing electronics that make people’s lives easier in multiple ways.
- Nike – Were early innovators in athletic wear. Their products gave athletes an edge over other brands.
- Google – Google maps, Google Earth, GMail, Google Search. The value that Google provides is ingrained in everyone’s daily lives.
If you take anything away from this post, it should be to solve a need. Focus on solving problems and creating value for your customers and money will gravitate to you.
TIME – Businesses definitely take a ton of time. However, you want to make sure that the time you put into your business is front-loaded. This means that you should be putting in long hours every day for the first few years. However, once your business starts to take off, it’s important to separate yourself from the day-to-day aspects of the business.
Know how to effectively separate your business from your time. This is beneficial for two reasons:
- You can’t do everything. As your business grows, inevitably it will grow too large for any one person to handle. When that happens, you’ll most likely need to hire additional employees.
- By separating yourself from the day-to-day aspects of your business it will allow you to focus on the bigger picture. You’ll still need to be involved and help make important decisions.
If you’re unable to separate your business from your time, you’ll inevitably be overrun by it. What started as a fun hobby will turn into a death sentence.
SCALE – The last piece of the CENTS Framework is scale. How to approach this piece depends on your exit strategy. If you want to grow your business as big as possible then you need to design your business so that it can grow.
Your business should theoretically be able to handle 1,000 orders as easily as you’d handle one. If your business isn’t optimized to be able to scale easily, then you may also find that your growth (and profits) get stifled.
Examples of businesses that can scale easily:
- Online businesses – You don’t have to work any harder when your website is getting 10,000 views per day than when it’s getting 1.
- Franchises – Your business doesn’t need to be online to scale. Franchising has created some of the worlds biggest companies (McDonald’s, Subway, Starbucks).
- Marketplace Businesses – Think Amazon, eBay, Fiverr, etc.
Now, we say that this depends on your exit strategy because you may not want to grow your business as much as possible. However, if your exit strategy involves growing, set your business up from the start so that it can scale.
We hope that you found this valuable on your journey to start, grow, or maintain a business. One thing to remember is that most businesses figure things out as they go. There is no blueprint or guide to running a successful business. It’s something you must learn for yourself. If you’re interested in reading more, please subscribe below!