Imagine a friend took you to a casino to play craps. (Hey, this is Vegas; it’s just another Tuesday.) The problem is, you’ve never played craps before, and your friend didn’t tell you the rules of the game. Now they’re asking you to bet your entire life’s savings on your first roll. Would you do it?
Of course not. That would be insane. But people frequently take that kind of risk when they open businesses without doing their due diligence, according to Kegan McMullan, a new licensing manager in UNLV’s Office of Economic Development.
McMullan previously worked for the Nevada Small Business Development Center (SBDC) at UNLV; holds an MBA; and has managed, owned, and founded several Las Vegas-based startup companies. He knows business.
Here, he shares some tips on what new and wannabe business owners should do before launching a new venture.
Do Your Research
The No. 1 most important thing anyone who wants to start a business needs to do is research, McMullan said. Research the feasibility of your idea: Is it a product or service? Research the market: Who are you trying to sell your idea to? Whom do you want your customers to be, and who are they actually going to be? Will enough people like what you’re doing enough to pay for it?
“At the end of the day, if nobody is buying what you’re selling, you don’t have a business,” he said. “Understand the industry and your target market. Know the value that you’re providing. Research, research, research, and understand as much as you can.”
Know Your Business Model
The SBDC had a client in rural Nevada who wanted to open a restaurant and even had a space picked out — a space where another restaurant had just failed.
McMullan wondered why this client would want to open the same kind of business in the same space where one just failed. The SBDC did some financial projections and determined that for the business to recoup its costs and break even, it would need to serve 1,000 people every single day … in a town that had a population of 2,000.
“If you would have to serve 50 percent of your town’s population every single day just to not lose money, your business won’t succeed,” McMullan said.
So know your business model. How will your company make money? What will your expenses be? What’s your break-even point? And how much would you need to sell in order to actually profit?
Ask People for Help
A lot of learning how to open and run a business is leaning on others who’ve been there, including UNLV’s SBDC counselors, whose services are free and confidential.
“Learn from the people who have done it,” McMullan said. “Learn from the people who have already made the mistakes and learned from them so you can hopefully gain the wisdom without the pain.”
Their experience will also help business owners figure out what they need to learn. “A lot of entrepreneurs will ask themselves, ‘How do I know what I don’t know?’” he said. “And the short answer is, you don’t. But in today's day and age, the problem isn't a lack of information; it's a lack of being able to sift through and find the right information.”
McMullan also advised people to learn about the members of their team — the banker, accountant, lawyer, or even employees (if new companies have those from the start).
“Get help in areas you’re not comfortable with or proficient in,” he said. “Business is a skill you learn, just like anything else. Neurosurgeons don’t just wake up one day knowing how to operate on brains, and business owners don’t wake up one day instinctively knowing how to successfully run a company.”
Find the Value in Failure
Finally, McMullan encouraged entrepreneurs at all stages not to fear the inevitable failure, whether large or small.
“You can learn from your mistakes, and you can learn from other people's mistakes,” he said. “If you approach failure the right way, it will help you ultimately overcome your challenges and be successful.