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The $100 MBA Show
MBA2443 Don't Start These Businesses as Your First Business
00:17:54
Hey newbie! Eager to kick off your first business but feeling a bit lost on which ventures to avoid? Want to set yourself up for success right from the start? Well, get ready for some killer tips on diving into your first business venture.
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- [00:00]
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- [00:30]
Ramp Representative
Got a 7am meeting on a Monday expensing breakfast because it's in policy wasting all afternoon submitting an expense report for that breakfast. If your company used Ramp, you could submit expenses with just a text.
- [00:49]
Omar Zenhom
Yay.
- [00:52]
Ramp Representative
Free your team from expense reports today.
- [00:54]
Omar Zenhom
Switch your business to ramp.com hey, welcome to the $100 MBA show, helping you grow with our practical business lessons. I'm your host, your coach, your teacher, Omar Zenholm. And in today's lesson, you will learn what businesses you should never start as your first business when you are new to entrepreneurship, when you're starting your first business, there's a lot of things that you need to learn. A lot of skills. You need to take on a lot of mindset shifts. It's a whole lot of stuff that you need to adapt to regardless of what kind of business it is. Whatever you're selling, whatever the market you're in, you're going to need to learn things like finance and management and hiring and leadership and marketing and sales and productivity and time management and a whole bunch of other skills so you can do this business thing. So there are certain businesses that are a whole lot easier to start than others. So you want to make sure you steer clear from these businesses. In today's episode as your first business, of course there are going to be some exceptions. I'm going to talk about those as well. But if you want to have the highest likelihood of success in your first business, then you're going to want to listen up to this episode. And it's really important to really get that momentum in the beginning is to start your first business. Get some wins, taste success, get some profits, get some money in your pocket, learn the ropes. And then after you have one solid business experience under your belt, you can start to venture and think about some other options out there. So let's get into it. Let's get down to business. There's so many different kind of business ideas and different business models that you can start. But today I want to share with you three major business models business types that a lot of people like to start as their first business. And I say, no, don't do this as your first business because you're really making it harder for yourself than it needs to be. And then later, at the end of the episode, I'll share with you my favorite type of first business to start. This is what I recommend to a lot of people that want to start their own business, want to have their own income, want to be their own boss and want to be successful with it. I'm going to give my recommendation for how to increase that likelihood of success with choosing the right business type. So the first business type or business model that I do not recommend as your first business is an E commerce or physical product business. I know that a lot of people are going to be like, really? Yes, really. I ran an E commerce business for many years. I had my own clothing line business called Zenim Design. It was custom tailored clothing for men. I know the ins and outs of the physical retail business, E commerce. I had the whole thing. And it wasn't my first e commerce business either. I had other e commerce businesses off ebay and all kinds of stuff. And the reason why I say this is not a great business to start as your first business is for a couple of reasons. The first thing is margins. E commerce physical businesses where you actually create the product. I'm not talking about dropshipping here. I'm not talking about buying something off Alibaba and then selling it on Amazon. I'm talking about where you actually create the product yourself. The margins are often very thin. A lot of people when they start e commerce businesses, they say, oh, I can create this product for $20 and I can easily sell it for $60. That's an incredible margin. No, that's not how it works. There's so much more involved in running a business. There's so many other costs involved. So you have to actually factor in those other costs, like shipping, like warehousing, like picking and packing, like returns, like your website, like customer support, like insurance, like payroll. There's a whole bunch of other things you're going to have to incorporate in the cost of putting this product out there. And the reason why a lot of people choose this business as a first business is because it's kind of what they're used to as a buyer. We're used to shopping and buying products, physical things. So we think I can create something myself and sell it. But it's a whole lot more work. And if you look around your neighborhood, if you look around your town, you look around your area where you shop around, you'll either see very high end products, physical products doing really well. They never go out of business because their margins are so high. I'm talking about, about products like Tom Ford and Gucci and Louis Vuitton, Apple, Ferrari, right? These products have such high margins because they're in the luxury market. Or you see huge companies, giants like Target and Kmart, who are on the other side of the spectrum. But because they're doing such massive quantities, they're able to stay afloat. So where does that leave you? Don't fight a battle you can't win. Okay, so most people are trying to build an E Commerce brand, a product that's amazing. Their margins are just not there. The second reason why E commerce is not the best business to start is that there's so much to keep track of. It's very overwhelming as a first business. Remember, when you're starting a business, you are learning 24 7. You're trying to make up for all the mistakes you're making along the way. Whether it's finance mistakes, whether it's marketing mistakes, whether it's issues with team members and employees, you name it. And then you have to deal with other logistical problems with physical products, faulty products, production issues, customs, things coming from overseas, warehouse issues, unionized strikes, organizing your SKUs, making sure it all incorporates in your website. There's just so much to worry about when you're dealing with a physical product. Now I'm not saying an E commerce business is a bad business. There's a lot of very successful E commerce startups, but usually it's not their first business. Learn the ropes of business, get some wins under your belt, or at least a win with a successful business and then move on to one of these businesses, if you like that I'm mentioning today. So business number one that I don't recommend as a first business, E commerce, where you build or create your first product. Second business, I do not recommend as your first business, a software business. I know a lot of people are not going to like this, but I have been around the block for many years. I had a software business for nine and a half years before we had a successful exit and got acquired by ProProfs. Webinar Ninja got acquired just recently. But Webinar Ninja wasn't my first business, it was my seventh business. Okay? So I had a lot of experience of building businesses and even so, after all that experience, it was incredibly hard. Now, the only exception I would give this and this is like a really serious asterisk, okay, is if you are very good as a developer, as an engineer, and you're willing to learn the other aspects of building a successful business, like marketing and sales and all that kind of stuff. So if you're a really good developer, you're a really good engineer, then this doesn't apply to you. But if you are not a very good, if you're a below average software engineer, then I do not recommend this. Why? If you're starting a software company as your first business, this is like starting a restaurant as your first business. And you don't know how to cook when the main ingredient, when the main product itself. The reason why people come to the store, to the restaurant, in this restaurant example, is because of the food, right? They want great food, right? Obviously there's service and there's ambiance and all kinds of stuff. But if the food goes wrong or it's not good, then it's really a disaster. And as the owner and operator of the business, you should have some clue. You don't have to actually do the cooking in the kitchen, but you should have some clue of how to cook so that if the chef screws up, if the chef walks out on you, if the chef gets poached by another restaurant, you can jump in and save the day and continue your business. So obviously this metaphor is all about knowing how to do what the business is all about. And if you don't know how to develop, you don't know how to create incredible software, if you don't know how to code and your developer and engineer leaves you, you are in big trouble because there'll be bugs, there'll be fires, there'll be issues, and you will not be able to fix them. Obviously, you can hire somebody else, all that kind of jazz, but you should always be able to walk into the kitchen in this metaphor and tell the chef, this is how it's done. Now, I'm not a brilliant software engineer, but it wasn't my first business and I knew enough to hire the right people. So I didn't have the overwhelm of learning how to run a successful business and learning how to build a software. I was able to delegate that and I had full focus on the marketing and the sales, the operations, the leadership, the recruitment, all that other stuff. But it's incredibly hard to do this as a first business when you're learning the ropes. Software is one of the hardest businesses to run. A lot of people are just really over glorifying, you know, Startups and apps and software thinking that it's the holy grail. Like it's, you know, the golden ticket. It isn't. It's super hard. For every, you know, a hundred million dollar business you hear about on Instagram, there are a hundred businesses that just go out of business that you don't hear about, that just fizzle out, that run out of money, that lose motivation, that just don't have product market fit. Software is never ending, right? As soon as you release a feature, the customers want another feature, they want another update, they another improvement. It's a hamster wheel of improvement. So it's challenging and you're making it even more challenging for yourself if you're making it your first business. Now I know there's examples out there of entrepreneurs that started their first business and it was a software business, and now it's, I don't know, Facebook. Right. But these are exceptions to the rule, okay? For every Mark Zuckerberg, again, there's thousands of people that tried to launch a Facebook and it didn't work. But you don't hear about them because it's not newsworthy.
- [10:52]
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- [11:21]
Ramp Representative
Got a 7am meeting on a Monday expensing breakfast because it's in policy, wasting all afternoon submitting an expense report for that breakfast. If your company used Ramp, you could submit expenses with just a text.
- [11:41]
Omar Zenhom
Yay.
- [11:43]
Ramp Representative
Free your team from expense reports today.
- [11:46]
Omar Zenhom
Switch your business to ramp.com foreign. Okay, so what's my third business that I recommend you do not start as your first business. And then what do I recommend? What do I think you should do as your first business? And here it is. It's a high compliance business. There are certain businesses that require a lot of compliance, whether it's legal compliance, whether it's financial compliance, whether it's health and safety compliance. Some people make their life even harder and have software apps that are also in a high compliance, you know, area, like an app for the healthcare industry. As a first business, this can be incredibly hard. Why? Because it takes a long time for you to actually get traction, to actually start making some money. Because you have to make sure you're completely compliant and doing everything on the up and up before you can make your first dollar. And that can take years sometimes. Now, there are of course exceptions to this rule. If you are in that industry and in the compliance of that industry, for example, let's say one of the co founders of the business is a financial compliance expert and you're doing a financial app or investing app, then this makes total sense. You guys have actually a secret weapon in this case to get you moving quicker, faster, and you're going to be a whole lot more efficient moving forward. But if you don't have that main ingredient, somebody who's an expert in that area of compliance in your core team, it's going to be a very long slog. This is why you'll see a lot of, you know, lifestyle entrepreneurs start supplement companies, vitamins, protein shakes. Why? Because it doesn't require compliance. They're in the health and fitness industry, but they don't need any kind of approval for the most part. I believe in most countries you don't want to be in a situation where you work hard on a business for years, you invest your life savings, you invest your time, your energy and then you get shut down because somebody complains, because you are not compliant. And the reason, the main reason why I think this is not a great business to start as your first business is because like I mentioned before, momentum is key. When you're starting your first business, you need to get some wins under your belt. You need to feel the feeling of exchanging value for money back and forth, over and over, growing your business, reinvesting in your business, helping your customers out. And you need this as fast as possible and as frequent as possible. And if that doesn't happen in the first few days, weeks, months of your business, you can lose motivation, you can lose your will to keep going and you could run out of money, which happens to a lot of high compliance businesses. So keep that in mind, guys. I'm not a legal expert on this, but I've seen a lot of entrepreneurs who have crashed and burned because of all the different red tape and all the different legal and compliance issues they had to really uphold in their business. And they just couldn't keep on surviving to get through it all. So what business do I recommend you start as your first business? Well, I actually have two recommendations. The first one is a service based business. Providing a service is one of the best ways to learn the ropes of business. Why? Because you don't need any inventory, you don't need any stock, you don't even need to create a product, so to speak. One of my first businesses was to create websites for my clients. Clients wanted to have a blog, have a website. I would create it for them, they would pay me for it. I didn't have to create the website in advance and just wait for a customer. Right. Only had to do the work when I got the customer. And in that process of running that business, I learned about marketing and finance and economics and hiring and leadership and a whole bunch of stuff. I learned the ropes of how to run a business. I learned the ropes of how to manage my time, how to scale my services, how to price my products and my offerings and all kinds of stuff. So service businesses are one of the most fantastic businesses to start as a first business. It's also one of the safest, meaning low risk, because again, you're not putting a lot of upfront money to invest to get started. You can get started literally with a laptop and an email address. That's how I got started. I just emailed people and asked them if they wanted a refreshed website. I got referrals from friends that were copywriters that were writing blog posts for people that didn't have websites yet. Shout out to Justin Beaumont from prosemedia, who really was great at referring me customers. And I create websites and that's how I got paid. So a service based business, fantastic. First business. My next recommendation is an information or education media business. This is coaching services, this is online courses, this is books, these are guides, these are templates that you could sell. This could be starting a YouTube channel and making money off ad revenue. The cost or the barrier of entry is very low. Just requires your time, your creativity to create these digital products or digital media and put it out there in the world for people to consume and to buy. Servicing this business is very easy, doesn't require a big team. There's no inventory, there's no physical products, there's no warehousing, there's no excuse, there's no worrying about any of this stuff because it's all in the cloud and it's all saved and it's all digital. Now. Whether you're delivering the content or somebody else, in a lot of ways this is kind of a once and done thing. You create the course, you create the product, you create the ebook and then you could sell it forever. You can scale your sales in a big way. There's a lot of leverage in digital Products, meaning I create a product once and then I can sell over and over again versus creating a T shirt. I can only sell it once to one customer. So online products, information, education, media. An incredible business to start as a first business. There you have it, guys. Those are my recommendations when it comes to starting your first business and which ones not to start and which ones to start. I hope that helps. If you have questions about this, if you disagree, if you are not sure if your business falls into one of these categories as one of your first businesses, then go ahead and email me over at omar00mba.net. I answer all the questions sent to me via email personally, and if it's a great question, I'll answer it right here on Q and A Wednesday on the podcast. So go ahead and email me if you like omar00mba.net just a quick favor. Many of our listeners listen to the podcast. They love it, but they're not subscribers. Subscribe to the show. Do that right now. It's one of the best ways to support the show because it shows the different platforms that you listen on, whether it's Apple podcasts or Spotify or whatever podcast player you're using, that this podcast is worth listening to. It helps us grow. And when we grow, we continue to give you great content, great lessons every single episode. Thank you in advance for subscribing to the podcast. Before I go, I want to leave you with this. Regardless of what business you choose to start as your first business, it's going to be hard. It's going to be challenging, it's going to be difficult. It's going to be the hardest thing you've probably ever done in your life. But that's okay. That's how you grow. That's how you become better. And that's a rite of passage. There's nothing wrong with you. There's nothing wrong with the situation, right? I wish somebody told me that when I got started. It's just how it is, right? That's why not everybody becomes an entrepreneur. That's why most people have jobs. But if you want to have a business, if you want to go after it, which I'm sure you do, because you're listening to this podcast, then it's worth the struggle, it's worth the challenge. And the best thing about being a business owner, being an entrepreneur, is who you become through it, okay? It makes you a better person. It's one of the best personal development programs I've ever seen in my life, okay? So get excited, embrace the challenge, and accept the fact that, hey, there's gonna be some bumpy roads ahead, but I'm gonna learn, I'm gonna get better, and I'm gonna enjoy the process. Thanks so much and I'll check you in the next episode I'll see.
- [19:56]
Ad Voice
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