We often hear that a high percentage of new businesses fail. The odds are stacked against startups. The million-dollar mark is notorious in the business industry. It represents a milestone in business growth and is the dream of every entrepreneur.
The process of starting a business, especially on your own, can be complex and daunting. In a world with so much competition, it is a dog-eat-dog world. You are fighting for survival, and the only way to survive is to grow. It is not easy.
So, imagine a world where a simple guide could lead you to growing your business idea into a million-dollar business. With a little luck, and following certain guiding principles when making business decisions, this may be possible.
Lesson 1: 80-20 Principle
The 80-20 Principle, more formally known as the Pareto principle, states that for many outcomes, roughly 80% of consequences come from 20% of causes. In other words, a small number of causes have a disproportionately large effect.
The goal of the 80-20 principle is that you should identify inputs that are most productive and prioritize them. You can apply the concept to any field or industry, but it is most commonly referenced in business.
Turning to your own business, this translates to identifying factors that are critical to building a successful business and focusing in on them. In other words, focus your energy on the best assets to efficiently use them and optimize their value. In short, focus on results with the most promise. It seems logical enough.
You can implement the 80-20 rule in various ways. You can use it to prioritize tasks you must complete throughout your day. You can create a decision-making metric to optimize decisions during problem solving. If there are multiple causes to a business problem, you can prioritize solutions.
Lesson 2: The Compound Effect of Wealth
For those who have not heard of the Compound Effect, the idea behind Darrin Hardy’s book “The Compound Effect” is that we overestimate what we can produce in a week but underestimate what we can produce in a year as a result of sustained compounding activity.
Compounding can have a profound impact on the results from small, sustained effort. Because business growth is a long-term goal, compounding can have a very significant effect, outweighing mediocre bur immediate options for return.
However, the biggest problem is that small steps seem insignificant in the moment. Inevitably we, as business owners, give up, lose our focus and shift our efforts to what can yield more immediate benefits. The challenge is how can you stay the course with small steps that compound. This is what Hardy identified as a common characteristic of most successful people.
So, how can you apply this lesson of focusing on small steps that bring compounding benefits to your business?
One option is creating a business development habit. Every week, block one hour to create actionable goals. You can also invest that hour to come up with ideas for a prospect to take their business to the next level. This is just one example of how dedicating one hour of your time every week, although not changing your business overnight, may be promising in terms of delivering compounding gains.
The lesson here is not to overestimate what you can produce by making a consistent effort and generating momentum.
Combining These Lessons:
The 80-20 Principle suggests that you should focus on growing your business by focusing on the top, most profitable causes. The Compound Effect warns that you should not overlook seemingly passive moves that may add up, for front-heavy returns, because business growth takes years.
Keeping these philosophies in mind, we look to concrete examples of business strategies that you can use to grow your company.
1. Keep Costs Low
The first thing you should think about if you want to make a profit is keeping costs low. In the profit-making equation, expense mitigation is the overlooked half and less glamorous counterpart to revenue generation. There are several ways to do this.
We live in a digital era. One of the best ways to take advantage of this as an entrepreneur is to go virtual. This eliminates the need for office space, rental, equipment, and personnel. Often, virtual offices are sufficient for startups. As your business grows, you can invest in necessary costs, but this is a massive cost to pay upfront when your business has not even taken off yet.
You can also hire overseas, as it allows you to expand faster. Whether your business is growing internationally, or maybe you would like to attract top talent from across the world. In either case, hiring workers from abroad can help grow your business and enhance your diversity.
2. Minimize Taxation
In theme with keeping costs low, you also want to minimize taxes. As a result when you make a profit, you can save more of your money. Similar to the idea of compound wealth, compound taxes can have a substantial effect on your business profits. Taxes are continually increasing, especially in the United States.
Reducing your tax rate from about 40% in the United States to even 5% can have an enormous impact, especially when you consider the power of compound interest. You can then take the money that you saved in taxes and re-invest it into your business.
3. Investing In Marketing and Sales Strategies
The second part of increasing profits is by increasing revenue. To do this, businesses must focus on increasing their sales rate.
To get people in the door, you need some form of marketing. Online options such as YouTube are some of the easiest options. For one, they can be inexpensive, or even free. For another, they can hit a large target audience. And lastly, it is a very low-effort form of advertisement. You can simply start to create content and add value to your business immediately.
Another strategy may be to focus on your services. While other businesses waste time perfecting their sales department, you can focus on improving your service. Do research, improve your knowledge, and know your business. Build a reputation as the most well-informed in your industry and let your high-quality service speak for itself. Word of mouth can be one of the most powerful marketing tools available to you, and it costs you nothing.
Don’t Just Take Our Word for It!
Creating a successful, multi-million (or even billion) dollar company from the ground up is possible. Examples of startups that have turned into successful, world-renowned businesses and people that have turned themselves into self-made millionaires include:
One of the most inspiring startup success stories is, without a doubt, Airbnb.
Founders Brian Chesky and Joe Gebbia first launched the website in 2007. This was shortly after the pair moved from New York to San Francisco and noticed a shortage of hotels during conferences held in the city. This problem needed solving, and Chesky and Gebbia saw it as an opportunity. The concept of Airbnb was born.
It is important to recognize that even a great and unique business idea like Airbnb did not become an overnight success. It took years for the company to receive funding and make a profit. This requires a massive amount of resilience in the meantime. It is in this time period that the founders undoubtedly capitalized on every strategy possible to grow their business, even inconspicuous and passive opportunities with long-term returns.
Today, Airbnb has a market capitalization of US$ 73 billion. It is a testament to resilience.
In contrast to Airbnb, Uber’s success story is one of rapid growth. It doubles as an inspirational story for new entrepreneurs trying to break into the market. The idea for Uber was developed by Travis Kalanick and Garrett Camp in 2008 after failing to find a cab one night in Paris. They designed a ride-sharing app, but more importantly, a solution for their own problem.
In 2009, Uber officially launched and quickly became the world’s largest startup. Today its market capitalization sits at US$ 61 billion. It has also since purchased several of its competitors.
Instagram also experienced rapid growth from the start. The founder Kevin Systrom started Instagram as a photo-sharing application under the name Burbn. The app gained 25,000 users in its first day.
Part of the reason for this initial growth is that Systrom was able to secure venture capital funding early on during his business in order to launch the app. The business idea, a photo-sharing app, was also new and exciting at the time.
When Burbn changed its name to Instagram, and pivoted its business model, the business began to see real growth. Instagram received over 1 million users in less than two months. The key was in recognizing a missing element to rival businesses with social media applications at the time. Instagram launched on iOS to access a bigger market. As the first company in history to do so, it hit the jackpot and took off running.