So You Want to Start an Engineering Business?

Or, Are You Sure You Want to Quit Your Current Job to Work for That Start-Up?
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Let’s talk about what it takes for a successful business. Because engineers (and maybe you) think about running their own business. Also, as an engineer, you are likely to be asked to join a start-up, and it would be good to know if that’s a good risk to take.
I’ve run my own business, been involved in a number of start-ups, formally studied the theory of starting a business in a Master of Entrepreneurship and Innovation, published in business journals on analysing start-up risk prediction, and kept up to date with the topic ever since.
Having done all that, I’ve come to realise the core needs (and common mistakes) when starting a business. And that’s what I will share with you here – in case you have indeed been thinking about your own business.
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The Big Mistake
Confusing technical expertise with the essentials for commercial success.
In The E-Myth and The E-Myth Revisited, Michael Gerber explains how people who are good at something are often told they should start a business. He shares the case of a woman who opened a pie shop after everyone praised her baking skills. But there’s a lot more to running a profitable business than simply making a great product.
You need to understand how the whole system will work, and from that ensure it’s efficient enough to actually make a profit. Many never master this second step. That’s why so many businesses fail, and why people who work for themselves, on average, earn less than those who work for others.
So what makes for a profitable business? A demographer has the answer.

The Two Laws of Business Success
Let’s talk about Bernard Salt – the demographer.
Because he’s a demographer, he hasn’t simply run a few businesses and drawn conclusions from his own experience. He has looked at the data across all businesses, providing insights that are far more objective and complete than you will get from anyone else.
And what does Bernard say?
The laws of business do not care how smart you are or how hard you work (this is a shock to many). Instead, Bernard tells us that they only care about two things:

1. Your business model
2. Your location

Note how this follows on from what Michael Gerber says. It’s not about the skill; it’s about the way your business is set up.
So how do you know how to set up your business? You have to ask the right questions of your customer.

Finding the Right Business Model
That brings us to Tony Ulwick’s Outcome-Driven Innovation (ODI), summarised in his book What Customers Want. ODI focuses on the tasks people want done. By doing this, you create a business around the things that make life easier for people — helping them achieve their goals with less cost, whether that’s time, effort, or money.
Once you understand this, you can fine-tune (or maybe redesign if needed) your offering (product or service) and how you present it to potential customers.
It also helps you innovate.
Consider the anecdote — which is untrue, by the way — that Henry Ford once said: “If I asked customers what they wanted, they would have said faster horses.”
This is often used to argue that customers don’t know what they want. That’s not the case. It’s more that we often don’t ask in the right way. When you understand what people need done, and then find a way to make that easier for them, you’ve taken a big step toward having the ideal business model (and, the right location) that is the foundation for success.

The Takeaway
I do want to see you succeed regardless of the path you take, so I hope the above helps you to:

1. Avoid leaving your day job for a venture that’s unlikely to succeed.
2. Guide you toward success in any venture you do start.

What are you thinking now? Are you now less certain about starting your own business? Are you thinking about tasks you can help people with? Are you thinking twice about that start-up your friend asked you to join?
I am always keen to learn more about innovation. If you’ve started your own business or come across great insight from others, then tell me in the comment what you’ve learned?