You just ate one of the best meals of your life with a friend.
As you leave the restaurant you’re chatting together about the food and the atmosphere. The conversation quickly turns to the business itself.
Your foodie friend who recommended the spot, starts telling you all the details about the owner, where she went to culinary school, her most unusual secret ingredients, and so on.
Then he says, “Oh…you want to know the craziest part? It started as a catering delivery business.”
Well, the simple truth most thriving businesses go through cycles of evolution, or more specifically, a refinement process.
To outsiders, this refinement appears inelegant or crude, but it’s an extremely valuable process. It defines the strength of a business’ foundation – and ultimately the brand.
Many entrepreneurs go through this by accident. Doing it intentionally is what I call the “Entrepreneur’s Revelation.”
The Challenge Every Entrepreneur Will Face
When you’re trying to figure out how to start a small business there are three questions you’ll ultimately face:
- Do I have the right idea?
- Do I have the timing right?
- Do I have enough resources?
Answering these is challenging…period. Answering them accurately is darn near impossible, especially for a first-time business owner.
Wrestling with these will result in variety of outcomes. Overestimation can result in a failure to launch. Going only on instinct and guessing at the answers can create recurring challenges, or growth inhibitors, in the future. Underestimating any one of the three could be fatal.
That unsettling for many of us. Well, here’s a few things to consider:
What if you suspended the intellectual wrestling match?
What if you conducted a simple test on 1-2 different ideas and let the data have the strongest voice?
What if you let basic performance give you the path forward?
That’s precisely where the Entrepreneur’s Revelation comes in:
To start a business by building a money machine first. Then, build a company around it.
You see, a lot of aspiring entrepreneurs get wrapped up in the details of starting a company: registering the LLC, all the tax filings, business licenses, signing up with vendors, finding a location, building it out…and the list goes on.
I’m not suggesting that they’re doing it wrong.
I’m suggesting that people with a business concept they’re interested in should get out there and test its core thesis before taking the big plunge.
Making sure demand exists, assessing marketing channels, practicing selling routines, understanding margins, or just to make sure it’s not too crowded of a space.
The good news is there’s a framework to walk any business concept through to demonstrate its viability.
We call it the 3 E’s to starting a small business.
The Three E’s Framework – How To Start A Small Business
An anchor tenet of the framework is starting small. The 3 E’s create a strategic progression of starting a small business from a core idea and transforming it into a company. The framework is to:
- Establish Your Beachhead
- Expand Your Offer
- Evolve Your Value
I’m going to walk through 3 different business types that progress through this framework: a retail business, a hospitality business, and a consumer services business. But first, let me explain a bit about what each of these stages actually mean.
Stage 1: Establish Your Beachhead
Wikipedia describes a beachhead well: “A beachhead is a temporary line created when a military unit reaches a landing beach by sea and begins to defend the area while other reinforcements help out until a unit large enough to begin advancing has arrived.”
The operative phrases here for a new small business – “temporary line” and “until a unit large enough to begin advancing.” Establishing your beachhead in a small business looks a bit like starting out with a core idea. Then, testing a few approaches to that core idea marketing channels before you fully commit. This is going to involve a some time investment and in most cases, a bit of money.
But, the beachhead isn’t just your idea, it’s also a performance goal. This is why we recommend building with the end in mind. Before you start work It helps to write down a goal statement like this one:
“In the next [insert # of days] days I’m going to spend no more than [$____] to sell [insert product or service] through [insert marketing channel ex. eBay, Craigslist, Facebook Marketplace, Facebook Ads, Google Ads]. I will know that I can shift this into a business when I [have sold __ items, break even, double my money, make $__]. I’ve decided to do this because [enter your personal ‘why’].”
Doing this sets up your next set of activities and helps anchor your thinking as you move conduct your test, but also when you move from testing into the next phase.
Stage 2: Expand Your Offer
Offer expansion can sometimes last the longest of the three. This is where the advancement part of the beachhead definition can really begin.
Expanding your offer has a lot to do with doubling down on what works and enhancing it. This often means applying the 80/20 principle or Pareto’s Principle. 80% of your profit is coming from 20% of the activity. Your job is to trim unproductive activities and enhance the productive ones. In order to recognize which, you must have data.
Offer expansion has a variety of meanings here. It could be ‘bolting on’ an accessories or service business to your core business. It could mean ‘adding to’ a digital-only business with a brick-and-mortar physical location. Or, it could also mean adding offer hooks like “Risk-Free Trials” or “Money Back Guarantee” or even “Credit for old for switching to us” to your marketing and selling routines.
Either way testing and data are both key contributors to the success of this phase.
Stage 3: Evolve Your Value
Evolution means transformation. Transformation can be tricky to navigate. Think of Netflix when they went from shipping DVDs to streaming original content and changing the pricing. Tons of customers were very upset. I know a few that refuse to subscribe to this day because they hated the ‘price-hike’. But, most of us have really enjoyed the direction…just sayin’.
Evolution comes from a recognition of what makes you great and building a new narrative. This will take attention to the detail and a bit boldness. The biggest thing to keep in mind is that stages 2 and 3 can happen multiple times throughout the life-cycle of a business as it grows.
Since many of the readers of our site are small businesses, let’s think of a few ideas that progress to some of these stages in a matter of months…not years. Here are three unoriginal but unique business idea cases broken down into the stages.
Case 1: Retail Business – Drone Sales
Establish Your Beachhead: Selling long flight-time drones to young hobbyists and videography enthusiasts
1. Go on Alibaba and find a few drones (maybe buy 24 of these for $720)
3. Run ads through Instagram and Facebook to this particular audience with 5-10 ad sets, plus re-marketing ads.
4. Sell all 24 in your first order within your original timeframe. Try to make 100% gross margin ROI less your ad spend and your Cost of Goods.
By The Numbers:
- 24 Drones ($720) + Repair Kit ($136) + Shipping ($37) – $893
- Tool Cost – $97/mo x 2 Mo = $194
- Ad Spend – $600
- Per Unit Sales Price – $139 x 24 = $3,336
- Shipping Cost – $11/unit x 24 = (-$264)
- 1 Return – (-$139)
- Profit: $1,419 (97% Gross Margin)
Progress: You have the beginnings of a money machine and picked up some new marketing and sales skills.
Expand Your Offer: Add On Products and Enhance the Message
1. Add two specific drones to your marketing promotions.
- A racing drone that you resell again from a great find on Alibaba.
- Long flight-time drone with a camera that you manufacture using a contract-manufacturer.
2. Create 2 sales pages with videos of the drones in action and previews of the training.
3. Offer a free 20-minute flight training video that you deliver via email as the user awaits the arrival of the purchase.
4. Add social proof of verified customer purchases to bolster additional sales.
5. Consider selling on more than just your own pages. How about Amazon and using Amazon FBA (Fulfillment by Amazon)?
Progress: You developed a new set of skills: manufacturing and logistics.
Evolve Your Value: Become a known authority
1. Start buying more expensive drones that retail at $2500 – $7500. Negotiate a bulk-buy of 5 or more to get 15-25% off.
2. Offer premium drone rentals nationwide using your logistics prowess to ship.
3. Create a drone flight certification course which you sell for $35, you offer insurance on the drones.
4. Create a YouTube channel and Instagram channel to promote your authoritative drone content. Speaking Engagements at $5k/per engagement.
Progress: You gain authority and media attention as a premier drone expert. This creates digital word of mouth that gives you much more than paid media traffic; oh and it converts better as well.
Case 2: Hospitality Business – Foodservice Delivery
Establish your Beachhead: Sell “In-Office Meal Plans” of creative fusion food to busy professionals catered from your home kitchen.
The ‘cubicle nation’ is busy. They’re sitting in their office and wondering what to eat today. What if you brought great food right to them? Allow them to tell you what they want via email. Offer Meal plans with delivery:
- 1/wk plan – $45/mo
- 3/wk plan – $120/mo
- 5/wk plans – $180/mo
You want a high density of orders to come from clusters near one another to help you with logistics.
Focus on a few different office complexes. Walk into the office and ask to speak to the ‘Office Manager’. Tell them what you do and give the a decent one-page that has pictures and prices. Offer to cater at cost for an office event in exchange for them allowing you to display your “In-Office Meal” plans. Your goal is to pitch 5 offices and try to close 1 that you pitch.
Display your plans at the event and offer a ‘first meal is free promo’. As you deliver each meal include a $20 OFF Coupon for them referring a co-worker.
By The Numbers: You gain one office with 10 plans:
- 6 on 1/wk = $270/mo (24 meals delivered)
- 2 on 3/wk = $240/mo (24 meals delivered)
- 1 on 5/wk = $180/mo (20 meals delivered)
- Revenue: $690 (remember that’s per month)
- 80% Margin (food cost, delivery expenses, packaging)
- Gross Profit: $552
- Less $175 for office catering of 35 people (try to 10X your Revenue from your customer acquisition cost)
- Less $30 in flyers
- Profit: $347 for first month
Progress: Keep pitching offices until you get 1 new office per month and you’re adding 3 NET-new people per week per office. In the first year revenue is $74K and with an 80% margin your profit at month 12 is $8,624/mo.
Expand your Offer: Begin offering to families around the office area and offer plan options.
You might also consider using DoorDash to deliver orders from your home or designated pickup location.
Progress: You gain a different audience that get used to eating your food regularly. You get logistical scale.
Evolve your value: Finally open a restaurant in and around the area where your home and office customers are.
Come up with unique daily menu items and a happy hour menu they can’t order from the delivery plans.
Progress: You’ll have built a loyal base of customers who already know you and are used to recommending you.
Case 3: Consumer Service Business – Landscaping
Establish your Beachhead: Target homeowners looking and sell subscription mow and blow services.
This one is interesting because your margins can be very high. Once you’ve acquired the equipment you’re just paying for fuel and repairs. You can go door to door or target neighborhood Facebook groups to get started. You can also ask for friends and family recommendations.
Offer “one month free” with a 1-year agreement. Communicate via email with MailChimp or ActiveCampaign to let customers know when they are scheduled for service as well as referral incentives.
By The Numbers: Start in Spring or Summer with 3 neighborhoods and book 3 clients per week.
- 3 New Clients/wk @ $119/mo (+12 yards/mo)
- Revenue: $1,428 (remember that’s recurring)
- 95% Margin
- Gross Profit: $1,357
- Less $850 in mower, edger, and blower
- Less $100 in flyers
- Profit: $407 for first month
Progress: You’re building a hyper-local referral base and have some good marketing skills with email chops. First year revenue is $129K and with an 95% margin; your gross profit at month 12 is $17,635/mo.
Expand your Offer: Fertilize, aerate, and re-seed services as an upgrade to your plans.
As you communicate with customers via email and in-person, let them know you now offer seasonal aeration and re-seeding services as a plan upgrade. Consider adding a total protection guarantee. You’ll fix whatever happens as a result of your service.
Expand to neighborhoods adjacent to the one you targeted in your first stage. Ask the homeowners if you can put a sign in their yard that states: “This Yard Is Maintained & Protected by __________”.
Progress: You add a margin to each visit as you consolidate your trips. Plus, you’re selling people’s time back and their peace of mind. These are things they end up talking about with others.
Evolve your value: Offer irrigation installation and maintenance, also add garden installations as a landscape architect.
This is where you’ll likely have a team working with you. Have someone dedicated to revenue generation and potentially another to customer service. This is imperative to keeping the remote teams accountable and your recurring revenue base of customers happy.
Split the maintenance team and the installation team’s up. Start to post all the beautiful things that you build and maintain on Instagram and Facebook. Ask customers to post of your behalf and create fans and advocates.
Progress: You have a machine now. A customer advocacy machine is a powerhouse. Your job will evolve, but you’ll be able to train staff because you’ve done it all. And just in case no one told you today…Great work!
Now To Build a Company
Hopefully these examples got your wheels turning. Now that you’ve progressed through the 3 E’s it’s time to wrap your ‘money machine’ with a company.
When you think about a company it’s the really the people, the process, and the technology that really brings its value to life.
The refinement that you went through to get to this stage caused you to pick up certain attributes or traits that make your business unique. Own them. Put them on display. As the old saying goes, “don’t despise the day of small beginnings”. This is humility to embrace what makes your business special.
I’ll leave you with one final thought.
At the end of the day you started a company for your own personal ‘why’. Your vision and mission. As you invite people to labor with you in the business it will help to articulate and revisit your vision, mission and values. Those should be at the center or your people and your process. Executing well on that builds a great brand with the potential to perform year over year.
If you’re curious how you can move forward with your own business, here is a must-have e-book. It’s called, “Starting A Business: The First 5 Steps.”
Download it for now for Free.Download eBook