This post was originally written for my wife’s blog addressing aspiring cake decorators. However, after I wrote it, I realized that it’s very relevant for any small business entrepreneur. So, I adapted it to address that broader audience.

Some of my examples are taken from the world of cake decorators. And yet, they are still very relevant to any small business owner. Also, in my tips, I refer to businesses that create and sell products. However, the word “product” can be simply replaced with the word “service” for businesses that provide a service.

My wife Veena is a very talented cake designer and decorator. Three years ago she decided to turn her passion and hobby into a small cake decorating business. Like every small business owner, she had to overcome many challenges and obstacles before her business started to succeed.

I’m a start-up founder and an entrepreneur myself. In addition, I have a passion for business strategy and marketing. Thus, I was happy to be able to assist her in overcoming some of her business hurdles.

Based on Veena’s experience, as well as my own, I would like to offer aspiring small business entrepreneurs three important tips.

1. Why Buy Anything? Or, what need are you trying to serve?

This is the most important step for any new business or product. IMHO, a good business model must address a real problem or a need that people have. According to a Harvard research, 95% of new products fail because no one really wants or needs them.

Therefore, before you start doing anything, make sure that you have a good answer to the above question. In addition, you should address these supporting questions: Who would want to buy your product? Why? What is their jobs-to-be-done?

This requires that you clearly identify who is your target customer. For example: are you targeting young mothers, or are you focusing more on brides? Once you’ve decided who is your customer you should get to know her well enough to understand why is she buying decorated cakes? What need (or job-to-be-done) does it fulfill for her?

2. Why Buy Mine? Or, what’s my Unique Value Proposition?

Not only should you understand what customer problem does your product solves, but you also need to convince them that your product does it better than any other alternative on the market.

To have a unique value proposition, your solution to the problem, or need that you’ve identified, must be better than any alternative solution. In order to verify that, you need to become familiar with your customer’s perceived alternatives and options. These include your direct competitors (other cake decorators and bakeries).

To do that I recommend you meet and talk with your target customers. Learn the process they go through from the moment they decide that they need a cake, through their selection criteria, to the actual ordering and buying process. This could provide you with insights and ideas on how you can make their overall experience better, and provide them with a superior offering.

For example: are you planning to offer more creative designs, healthier cakes, lower prices, or simply better service?

3. What is your business model? Or, how do you intend to create, deliver, and capture your unique value?

To be able to answer these questions you first need to decide what type of small business you want to build. Startup guru Steve Blank defines six types of startup companies. We can further narrow it down to three:

Lifestyle Startups: Work to Live their Passion
A lifestyle entrepreneur is living the life they love, works for no one but themselves while pursuing their personal passion. Examples include: surfers and divers who own a small surf or dive shop or teach surfing and diving lessons to pay the bills so they can surf and dive some more. Another example is a freelance SW developer or web designer.

Small Business Startups: Work to Feed the Family 
Today, the overwhelming number of entrepreneurs and startups in the United States are still small businesses. There are 5.7 million small businesses in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental workers. Small businesses are grocery stores, hairdressers, consultants, travel agents, Internet commerce storefronts, carpenters, plumbers, electricians, etc. They are anyone who runs his/her own business.

Scalable Startups: Born to Be Big
Scalable startups are what Silicon Valley entrepreneurs and their venture investors aspire to build. Google, Skype, Facebook, Twitter are just the latest examples. From day one, the founders believe that their vision can change the world. Unlike small business entrepreneurs, their interest is not in earning a living but rather in creating equity in a company that eventually will become publicly traded or acquired. Consequently, generating a multi-million-dollar payoff.

Define Your Long-Term Goals

Once you’ve decided on what type of business you want to have it’s important to also define your long-term goals. For example, if you’ve decided to build a small business startup, what’s your goal for annual income? Do you plan on remaining a small business for the foreseeable future? It makes a huge difference if your goal is to own the best café in your neighborhood or start a café chain that will cover the entire city.

Next, you should develop your business model. I highly recommend using the business model planning framework of Alexander Osterwalder and Yves Pigneur, called Business Model Generation.

In conclusion, I hope you found these tips to be helpful. I wish you all the best on your exciting, challenging and rewarding journey.