Last Updated Jun 2, 2011 2:25 PM EDT
This story is part of a bigger MoneyWatch package on when to skimp and when to splurge. Click here to see other stories in the package.
There are few things in life as exhilarating as starting a business in your free time. Your day job may provide you with some satisfaction and energy, but it's nothing like the shot in the arm you can get when you focus your strengths and skills starting a business that gives you passion and purpose.
Starting a business "after hours" creates challenges because you don't have an unlimited amount of free time or money. To maximize your chance for success, you have to be prudent about how you invest your dollars and minutes. The key is to invest your limited resources on just a few things and disregard everything else.
Follow these tips when starting your new business:
Splurge on . . . Creating
What is the one thing your business must produce to succeed? Spend the majority of your time and resources creating that and getting it out the door. If your product is a book, focus on writing it. If it's a website, launch it. If it's a dog-walking business, market it. It's easy to become distracted by creating the perfect logo, business cards, company name, etc., but none of those things matter if you don't have a product/service to bring to market.
Skimp on . . . a Business Plan
Blasphemy! Am I suggesting you don't invest in a business plan? Yes. Don't spend countless hours (or dollars hiring someone) creating a detailed five year plan when your business and industry are changing every five minutes. Of course you should have an understanding of your product/service, the competition, and how you will capture the market, but you don't need to spend six months writing a 100 page business plan (trust me, I've made that mistake). Focus on creating and delivering, not financial projections in year four.
Splurge on . . . Relationship Building
The "what" of your business must be exceptional and it must add value, but that's usually not enough. Who you know can play a huge part in the success of your venture. A better mousetrap is not enough. A better mousetrap and knowing somebody at QVC might. Spend time building relationships with vendors, partners, and influencers in your industry.
Skimp on . . . Raising Money
If you can't launch your business without raising a substantial sum of money from investors and venture capitalists, I suggest starting a less ambitious business. Build a business that doesn't require millions of dollars on day one. Gone are the days when an idea on the back of a napkin gets funding. Start small. If you have some success, you then might be able to get funding.
Splurge on . . . Knowing Your Customers
Invest in getting to know your target market and what pain they desperately want to alleviate. What makes them tick? What issues do you keep hearing? Set up mini focus groups and use a service such as SurveyMonkey to create free online surveys. The better you understand your market and what they want, the better you will be at providing them with a product or service they can't live without.
Skimp on . . . Technology
Unless the focus of your company is technology -- say a website, iPhone app, or software -- don't fall into the trap of needing to have the latest technology. Be especially careful when it comes to building a website. Yes you need one, but you don't have to spend a fortune on something with the newest and most expensive features. Good enough is often good enough.
It's easy to get over exuberant with an idea and want to do everything right now, but if you do this you can waste a lot of money and time. Instead, focus on creating the product/service, building relationships, and getting to know your customers. If you do this, you'll boost your chance for success.
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