AI tips + entrepreneur’s insights for a smooth ride
In the US, an average of 4.4 million businesses are started every year, and there’s been a major year-on-year increase since the pandemic. From the one-person company to the full-fledged startup, many people realized they can’t afford to rely on a single paycheck from their boss every month, so they’ve looked into starting their own business to be more in control of their finances.
Yet it’s one thing to start, but it’s another to keep going. The US Small Business Administration reports that 50% of new businesses fail within their first 5 years, regardless of their size. That’s a lot, and it shows that making money on your own and keeping a business afloat is not easy. But what exactly is the difference between a successful business and one on the brink of bankruptcy? Is it the founder, the industry he/she picked, the hours put in, or how organized employees are…?
To help me answer these questions, I asked ChatGPT, my new favorite AI assistant, to come up with a few answers to the question:
I wanted to see if the ginormous amount of knowledge and information the AI has access to would teach me something I didn’t know as an entrepreneur myself (3 years in the making), and I thought it would be a great way to share my own insights too.
Note: Each of the 5 section titles of this article is generated by ChatGPT. Each part starts with the AI tips (in quotes), and I then add my insights based on my experience as an entrepreneur and business owner.
“Many entrepreneurs jump into a business idea without fully understand the market, the competition, or the needs of their potential customers. Conducting thorough market research can help you identify gaps in the market and avoid investing time and money into an idea that won’t be successful.”
As an entrepreneur in the blogging world (like myself), nailing down your niche (aka industry) and who you’re going to target with your content is paramount to success. When I started writing online, I just tried a bunch of different stuff, and as I kept experimenting, I found I always tended to get back to the same topics:
- Time management
As my following started to grow around those topics, I focused more on writing only about these, and then I identified the niche that could work for me, one that encapsulated all those topics at once: entrepreneurship. Once I focused on that topic, my following grew over the years, I was able to build a strong audience, and my readership increased by a lot. To this day, I focus solely on this niche, whether in my articles, videos, or online courses.
Of course, depending on what industry you’re in, your niche-finding process might look different, but one thing that will remain for sure is this: learning through experimentation is the best way to identify your target audience. Many business owners fail to experiment with different offerings, and different ways of bringing their product/service to their customers, so they find themselves in a constant race to catch up with their competition, not realizing they might be chasing the wrong target. It’s much easier to win the race when there are fewer players involved, or when you know you have a headstart because you spent years experimenting on the field.
“Cashflow if the lifeblood of any business. New entrepreneurs often underestimate the amount of cash they will need to cover expenses and manage their cash flow. It’s important to have a realistic financial plan and manage your cash flow effectively.”
When you’re a blogger like me, you don’t need much to get started: a laptop, a notepad, and you could be well on your way to earning a nice chunk of cash without putting money upfront (although a huge investment in work will definitely be necessary).
I recently wrote about the time I asked my banker for a $10,000 loan to grow my business, and his answer was rather straightforward:
“Don’t borrow money. You’ve started to make some great “side hustle money” last year, and yes, it could turn into something bigger. But it also couldn’t, and with the current economic context you don’t want to take the risk of having a failing business and owing money to us at a 5% to 10% interest rate.”
As Mark Cuban says, in times of crisis, cash is king, even if it loses value with inflation. Nobody wants more debt than they already have given the current inflation rates around the world, so owning a one-person company that makes money is a chance that shouldn’t be underestimated.
For “real” companies with employees, revenue targets, and maybe even investors, having a steady cash flow will be a make-or-break factor when a crisis hits. My previous CEO founded his Saas company around online employee engagement 8 years ago and sold it for $30 million right in the middle of the coronavirus pandemic. At the time, our cashflows were not looking great, and I’m convinced that without a buyer, the company didn’t have much time left to live.
Too many entrepreneurs always look to set up the next funding round when the cash starts to dry up. This thought process has been enabled and even encouraged by over a decade of Silicon-Valley-funded wannabe Unicorns, companies burning through billions of dollars of investors’ money in the hope of hitting it big one day. The result is a huge deficit for most of them, and an unrealistic valuation while still bleeding cash every quarter for a few others. As an example, here is how much Snapchat, a company valued at a ludicrous $17 billion, has made every quarter since its inception:
Far away from this billion-guzzling nonsense, there are companies like Basecamp, which are not listed on the stock market, and have been profitable every year (in the millions) since they launched in 1999. The difference? They focus on creating a great product people will be willing to pay for every year, and therefore build amazing cash flow.
“A lot of new entrepreneurs focus too much on short-term gains and fail to plan for the long-term success of their business. It’s important to have a solid business plan and set achievable goals for growth and sustainability.”
When I decided to take writing online seriously, I told myself I would write every day for 6 months, and post at least 3 articles a week. After 6 months, I checked in with myself, and decided to keep going and turn my writing into a business. 3 years later, I’m still at it.
In a video published by SnewJ where he interviews millionaires in various affluent neighborhoods, a retired entrepreneur who used to work in the wholesale business (making $500K+ per year) gives great advice on long-term thinking:
“Don’t look for the quick dollar, it’s not there. You have to work hard. The problem with the younger generation is that they want the big buck, right now. And some people make it, but the best is to begin with solid, hard work. It’s a journey.”
Yes, some people make it big very quickly, and some work hard for 10 years and don’t grow as much. But it doesn’t mean your time won’t come, and the only way to create a strong business is to think long-term. People who make it big fast get in part lucky, and here are 2 things you should always remember about luck:
- You should always acknowledge it’s out there and you might run into it but never rely on it
- The harder your work, the luckier you get (that’s from Gary Player, one of the greatest gold players of all time)
“Marketing is crucial for getting your business noticed and attracting new customers. Many new entrepreneurs fail to invest enough in marketing, which can lead to low sales and slow growth.”
You can have the best product/service in the world, but if you don’t let people know about it, nobody will buy from you. Especially in a time when the competition has never been so fierce in almost any industry, when people’s attention span has never been shorter, getting your business noticed is crucial.
In the case of the content creation industry, virtually every niche is saturated: from food blogging to self-improvement content, animal lovers’ youtube channels, or newsletters about stock market picks… There are dozens of successful businesses for each niche, so it’s really hard to get your stuff noticed when you’re starting out.
A lot of people with a big budget often turn to online ads to increase their reach. I myself have tried this approach in the past, but it never really turned into more profit. However, investing in marketing tools that make my life easier and automate the way I reach out to my audience (mostly via email) has been a game changer for me, and it also helps people discover more of my content, through my 3 main channels:
- Blog articles
- Online courses
No matter your industry, you need a way to communicate with your potential customers. Whether it’s through ads, emails, cold-calling, or even physical letters… it doesn’t matter. Without at least a bit of marketing, you’ll get a stalling business at best, and a failing one at worst.
“A business is only as strong as its team. New entrepreneurs often underestimate the importance of building a strong, dedicated team that shares their vision and values.”
I mentioned my CEO’s business earlier on, which he sold for $30 million. Years before the pandemic, we faced a different type of challenge: the team dynamics were terrible, and as a result, the company was bleeding money.
The sales team didn’t work well together so deals weren’t being closed, the product team was frustrated with a heavy workload and not enough budget to hire extra help, and the marketing team (which I was part of as a graphic designer) was dealing with very poor management skills from one of the VPs. On top of that, our turnover was crazy, with at least 2 people resigning every month, and nobody to replace them. This explosive cocktail almost killed the company.
Eventually, the CEO took charge, had to let go of a bunch of people, adjusted salaries of the most valuable assets, and announced we were going to completely rethink the way things got done at the company. Amongst other things, we implemented the OKR strategy (short for Objective Key Results) which was a huge game changer (I’ve written about it here)
Especially when you’re launching a startup or a business with multiple employees, it’s critical to hire the right people. When you start off, you’re short on cash, you can’t afford to make too many mistakes, and mistakes are made by people. Recognizing the value in people goes through 3 main pillars:
- Getting good team dynamics, ensuring that personalities won’t clash too much and will create a positive synergy in the office (or online)
- Making sure people understand their responsibilities and how they relate to the mission/purpose of the company
- Rewarding people for their efforts and making sure they don’t feel left out financially
Regarding the last point, people almost always wish they made more money. The key here is to have an open discussion about what they think their “worth” is, how much you think you should pay them, and what you can afford to pay them. It’s exactly what my CEO did in times of crisis, and it always turned out for the better.