Step 1 for Starting a Small Business

Step 1 for Starting a Small Business: Identify Your Customers

A few years ago, a small business magazine asked a bunch of people thinking about starting a business what they needed to start their venture. Overwhelmingly, the people surveyed said, "Cash."

Thankfully, the magazine editors were smart enough to ask a bunch of experienced, successful business owners the same question. And this other group of veterans had a different answer. They overwhelmingly answered, "Customers."

I think there's more than meets the eye here. More than anything, what your business needs in order to be successful, are customers. Enough, in fact, to buy thousands, tens of thousands, and in some cases hundreds of thousands of dollars a month of the stuff or services from you.

Accordingly, your first step in starting a business should be to identify concretely the people who may become your customers. And you want as much detail on these people as possible.

You want to know (even if only approximately) the number of potential customers in your target audience. For example, if you're selling to businesses or homeowners in a particular area, you probably want to have a list of names and addresses. (These lists are available--and often for very modest costs.) Or, if you're offering a low-cost item to walk-by or drive-by traffic--say you're planning an espresso cart--you should at the very least have customer or car counts. (Yes, you might get this data by standing on a corner and counting pedestrians or vehicles.)

You also should know what amount people spend or might spend on your product or service. For example, if you're selling $3 specialty cups of coffee, you want to know or have a good guess as to how many people actually spend that amount most or every money.

After you complete the first step--and this is probably obvious--you want to have both comfort that there are people interested in buying what you will sell. And you want to have some confidence that enough people will buy what you sell.