Last year, 310 out of 100,000 people on average created new businesses each month in the U.S., according to the 2017 Kauffman Index of Startup Activity. Most entrepreneurs start businesses out of opportunity rather than necessity.
We asked investor, philanthropist, and member of The Oracles, Tai Lopez, for his take on how to capitalize on an opportunity and launch a business. If you’re unfamiliar with Lopez, he advises many multimillion-dollar businesses and is a social media marketing expert. In the last year, his Facebook following has grown from 600,000 to over six million.
“Thanks to modern technology, it's possible to go from idea to paying customers within a short amount of time,” Lopez explains. “But most never get started because it's overwhelming.”
Here’s how to get started:
1. Pick an idea that works for you
“Most people think they know what they’re good at,” wrote Peter Drucker in Managing Oneself. “They are usually wrong.”
“That’s the most important principle I ever learned,” says Lopez. “A lot of entrepreneurs can't figure out why their business is failing. But you can only build on strength. ‘Doing what you love’ usually only works for hobbies. Don’t build a business around your weakness.
“I love basketball, but I’m not good enough to play professionally. If I tried to pursue it as a career, I’d fail financially. So, I play basketball as a hobby but build businesses around things that come naturally to me: public speaking, making videos, and social media marketing.”
Lopez says take the time to become more self-aware. “If you're talkative and like asking questions, maybe start a podcast or host events. If you’re organized, becoming a virtual assistant can be lucrative.”
2. Spot trends
Another reason why startups fail, according to Lopez, is because the founder ignores trends.
"For example, small businesses struggle with social media. More adults are ditching college for jobs. People want practical skills to get paid immediately. So, I created a multimillion-dollar business that teaches people how to manage social media for small businesses.
“View problems as opportunities to help people out. You’ll earn money as a reward for your solution and get paid in proportion to the problems you solve.”
3. Launch quickly
Lopez shares what his first mentor, Joel Salatin, told him at 19 years old: “Tai, sometimes good enough is perfect.”
This philosophy means building prototypes that are just good enough versions to test in the market. “The biggest mistake new entrepreneurs make is creating something that no one wants to buy.
“By using prototyping, you focus on creating something that people will pay for, quickly and cheaply. ‘Speed of launch’ combats procrastination. We procrastinate because of perfectionism about the initial launch. Then we lose interest, and the project never gets off the ground.”
Never forget: Good enough is perfect.
4. Pivot around what customers want
Lopez explains how entrepreneurs can learn a lot from Apple and Kodak. The iPhone has continually evolved from user requests and continues to dominate the smartphone market.
Conversely, although Kodak was the top photography brand for over a century and once "sure bet" stock, they ignored early warnings and didn't pivot fast enough for the digital world. By 2012, the company went bankrupt.
“When it comes to growing your business, don’t fall in love with your idea. The idea gets you started but be willing to change. Improve your idea through experiments and tests. Otherwise, you'll fail.”
5. Optimize your pricing
“Most businesses get their pricing structure wrong,” says Lopez.
“In the book 'Smart Pricing,' two Wharton professors analyzed all the things you can do for positive repercussions for your business. Optimizing price is first. Most businesses’ prices are way too low or high.
“If you study economics, it’s the study of allocating scarce resources. Unless you’re a Saudi sheikh, most people only have a limited amount of money.
“So, focus on testing different prices to ensure demand for your offer. If people won’t pay a penny, shut the business down or do a massive pivot.
“But if the product sells well—or you can charge a premium price over similar products in the market—you’re ready to scale.”
To scale, Lopez says you need two things: viral free marketing and paid advertising. But your product has to be good for it to work.
“The billionaire Charlie Munger said, ‘You can’t polish a turd.’ Some people try to advertise a turd idea. It doesn’t work.”
But you can polish a good idea. “If your idea is good, employ some controversy, humor, and drama in your marketing for free virality.” Lopez recently uploaded a highly provocative Instagram post to market his clothing line.
“Once you have a hit product that’s going viral, invest in paid boosting. Most people try to boost too early, which is an expensive mistake. You’re trying to boost something that people don’t resonate with.”
7. Use a trainer
Lopez recognizes that all world-class performers use trainers, coaches, and mentors. He applies the same principle to his own life. His basketball coach, Pooh Richardson, was an NBA pro basketball player for 10 years. His personal trainer is 2016 Mr. Olympia, Danny Hester. And his Brazilian Jiu Jitsu coach is Rigan Machado, widely regarded as one of the top competitors in the sport’s history.
“Regardless of the business you start, a mentor answers the stuff you can't find online. They’ll cut your learning curve by years. Their personal experience calms and guides you through.
“There are three options when getting trained: in person (the best), online or books (easiest), or none (avoid).”
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This article originally appeared on Entrepreneur.com. Minor edits have been done by the Entrepreneur.com.ph editors.