This article gives you a glimpse of what you can learn with Shortform. Shortform has the world’s best guides to 1000+ nonfiction books, plus other resources to help you accelerate your learning.
Want to learn faster and get smarter? Sign up for a free trial here .
What does it take to build a million-dollar business? Should you sell or scale a business after it hits success?
Reaching a point where your business is valued at a million dollars is an entrepreneur’s dream. Getting there from scratch requires passion, innovation, and delivering what the customer wants.
Here’s how to turn your idea into a million-dollar business that’ll just keep growing.
How to Build a Million-Dollar Business
Starting from very little is one of the hardest parts of building a business. There may be times when you’ll feel discouraged if your product doesn’t sell. But, with these steps backed by entrepreneurial experts, your business could head in the million-dollar direction.
Create an Innovative Product Customers Want
The first step to building a million-dollar business, and more than likely the most important step, is building a product. Your product should stand out against the competition in the market, and solve a problem consumers have.
According to 12 Months to $1 Million by Ryan Daniel Moran, to create a winning product, you must first identify the audience you want to sell to and then specially design a product that meets their wants or needs—it should solve a problem your specific niche audience has. Developing a product that speaks to a distinct group of people ensures you have something that people will be interested in buying and allows you to tailor your product to their needs better than other products that cater to everyone. This allows you to build a brand with unique value that will have loyal, repeat customers.
Moran recommends several steps for creating a product by starting with your audience:
1. Identify your audience. To do this, Moran suggests you start by thinking about what communities you belong to or are familiar with. For example, if you enjoy hiking with your dog, you might focus on dog owners who enjoy doing outdoor activities with their dogs.
2. Find out what’s on their shopping list. Once you’ve decided who your audience is, list three to five products they typically buy. This can give you ideas for the product you want to create. You can find out what your audience typically buys by researching online shopping platforms, forums, and so on. For example, you might discover that outdoorsy dog owners buy GPS collars, leashes, bowls, and so on.
3. Decide what your first product will be. Select a product from your list that your audience typically purchases first—the first step to achieving their goals. Your first product should hook customers and make them interested in buying other products from you in the future. For example, you could decide to focus on GPS dog collars.
4. Research audience opinions. Once you’ve settled on your first product, research what opinions your audience has on similar products. What do they like, dislike, or wish was different about these products? Their opinions can clue you in as to what current products on the market aren’t offering that you can consider offering with your product. For example, you might discover complaints about GPS dog collars being faulty and too bulky.
5. Find a solution with your product. Once you’ve researched problems about similar products, use that information to come up with a product that addresses one of these problems for your specific audience. Moran writes that your product doesn’t need to be dramatically different from other products, it just needs to be tailored to your customer. For example, you might plan to create a collar with reliable GPS technology that’s slim and weatherproof.
6. Plan the other products in your line. Moran writes that your other products shouldn’t be add-ons, accessories, or variations of your first product, but new products that help them achieve the same goal your first product achieved. This ensures you’re creating a brand that will have long-term customers interested in buying more from you down the line. For example, other products that help your customer enjoy the outdoors with their dogs might be a cooling vest, a backpack, and a collapsible dog bowl.
Example: Apple
Steve Jobs is a great example of a person who found out what people needed and made a million-dollar business out of it because he was innovative.
In Steve Jobs, Walter Isaacson claims that what set Jobs apart as a technological pioneer wasn’t any skill as an engineer or programmer but his ability to imagine the future before it arrived. His mindset was fostered by the anarchistic counterculture of the 1960s and ’70s, in which rules and norms were routinely circumvented. Jobs embraced the counterculture’s emphasis on spiritual growth, which led to his belief that intuition is more powerful than intellect. His confidence in the strength of his own intuition let him see possibilities that others would miss.
To illustrate Jobs’s forward-looking imagination, when he was first shown Xerox’s graphical user interface, he didn’t just see it as a clever new system. Rather, says Isaacson, Jobs immediately intuited what all computers of the future would look like. And, at Apple, he developed the Graphical User Interface (GUI) concept far beyond what Xerox had created into the point-and-click interface we all use today.
Isaacson makes it clear that Jobs wasn’t a perfect oracle, but, when he misstepped trends in computing, his response was to take the next leap ahead. For instance, Jobs failed to anticipate the popularity of burning music to CDs in the early 2000s—the iMac included a CD-ROM drive, but not with the ability to make music CDs. Instead of redesigning the iMac, Jobs moved forward to the next stage of music, the MP3 player. The launch of the iPod quickly made user-created CDs obsolete.
Isaacson shows that, instead of resting on the iPod’s success, Jobs was still looking to the future, particularly toward the cell phone market. Cell phones already had built-in cameras, and he knew that, as soon as they incorporated music players, they would kill the market for the iPod. Therefore, Jobs chose to get there first with the iPhone. Coupled with the iPad tablet, which came out shortly after, Jobs helped steer the digital age away from PCs as the primary computing devices of choice.
But, Jobs didn’t see these as separate devices. According to Isaacson, Jobs envisioned an information landscape in which a desktop computer would serve as a “hub” for all of a user’s devices. This allowed for seamless integration from one device to another—an album or ebook bought on your iMac would instantly transfer to your tablet or phone. Toward the end of his life, Jobs believed that the hub for a person’s devices would no longer be their PC at all but that it would move into the cloud.
While it can’t be said that Jobs created these trends, Isaacson illustrates Jobs’s uncanny ability to intuit future shifts in computing and position his company ahead of its competitors.
Hire Exceptional Employees
Another crucial aspect of a million-dollar business is employees who go above and beyond, which is highlighted in entrepreneur Elon Musk’s success story in the biography by Ashlee Vance.
Vance believes much of Musk’s success stems from his ability to find and hire exceptional people. He has an eye for talent, and he appreciates people who are hard workers and critical thinkers. These employees are also efficient, and they can do the work of multiple people. When every employee is doing exceptional work, the combination of their efforts results in something exceptional as well.
Musk expects employees to be accountable for their work by taking complete ownership of their specialty and project as well as the process required to complete it—Vance contends he wants each employee to be the CEO of her own project. Musk’s employees each work as an independent unit, completing their work fully and to the best of their ability.
When every employee takes accountability for their work, it eliminates inefficiencies like asking for permission, filling out forms, or waiting for requests to be processed or approved. At SpaceX and Tesla, this approach allows employees to act independently and in the best interest of the company.
Vance explains how Musk often talks to employees about a project and asks them, “Can you do it?” This forces employees to take responsibility for their work because they willingly agree to do it rather than completing tasks they were ordered to do.
If an employee is developing a rearview mirror or coding a new command, Musk expects her to put her full attention and effort into the task. Whenever developments are delayed, Musk is known to ask for regular updates about the status of the hold-up, why the task is taking longer than anticipated, and what’s required for the employee to complete the project. Employees eventually realized that they should come to Musk with potential solutions to problems, rather than coming to him with problems. This is a more efficient process, and it allows Musk to focus on other tasks rather than walking employees through problems they’re qualified to solve.
Avoid the Sunk Cost Fallacy
The Voltage Effect by John A. List advises that, as you scale your ideas up and your business grows, you should take steps to avoid succumbing to the sunk cost fallacy. The sunk cost fallacy is the human tendency to invest additional time and resources into failing projects in an attempt to salvage resources that have already been invested in the project. In these situations, you should pull out of the failing project, as doing so minimizes your losses and maximizes the time and resources you’ll be able to invest in more fruitful projects.
Here are a couple of things you should do so you can move toward a million-dollar business instead of falling back because of the sunk cost fallacy:
- Don’t be afraid to give up. To prioritize your best ideas, you need to recognize when an idea isn’t scaling and give up on that idea as quickly as possible. When you’re able to quickly give up on failing ideas, you minimize your losses and free up resources so that you can successfully pivot to another project.
- Identify diminishing returns. Diminishing returns are a phenomenon in which profit margins per unit decrease as production scales up. For an idea to scale successfully, the cost per unit needs to decrease as the business scales. Instead of focusing on your average profit margin, List recommends that you calculate the profit margin on the most recent unit sold. If it’s lower than your average margin, you may be experiencing diminishing returns. If this is the case, it may be time to give up.
Develop Strong Customer Relationships
As you work toward building a million-dollar business, you must foster strong connections with customers. You should depend on customer relationships to sustain and grow your business because, without them, you wouldn’t make any revenue. Here are two of Paul Jarvis’s suggestions for having beneficial customer interactions from his book Company of One.
- Be an educator. Teach people about your product or service, including how to use it so it best serves them. Being an educator requires transparency, clearly demonstrating the strengths of your product or service. When you can show your product’s unique strengths, you’ll stand out against competitors.
- Prioritize quality over quantity. Jarvis argues that a company should prioritize creating high-quality, long-term relationships with customers, rather than concentrating on acquiring a greater quantity of customers. This means focusing on providing the best quality service and products possible for each person you serve.
After You Hit Success
Once you’ve launched your entire product line and reached $100,000 in sales per month, you have a million-dollar business, according to Ryan Daniel Moran in 12 Months to $1 Million. So, what’s next? We’ll look at a couple of things you could do to grow and sustain your business once it hits that million-dollar mark.
First, you can start paying yourself. Up until this point, you’ve been working hard and reinvesting your profit into growing your business. Moran suggests you pay yourself enough to work on your business full-time.
Next, you have two options for what to do with your business: you can keep growing it or sell it to another company.
If you choose to keep growing your business, you should focus on transforming it from a sales machine that depends on your constant involvement to a sustainable business that can operate without you. To do this, Moran suggests you reinvest your profits in advertising your brand, creating content, improving logistics, and hiring team members. This frees up your time and energy so that you can focus on expanding your business.
If you choose to sell your business, Moran suggests you focus on your long-term goals. You’ll likely retain a minority stake in your business and receive payments based on how well it performs, so he advises that you don’t settle for a quick payout and sell your business to someone who will treat it poorly. Instead, find a buyer you trust and are willing to work with. By selling it to someone who’ll treat your business well, you ensure that your business thrives and that you’ll continue to reap the rewards of your hard work.
Final Words
More than likely, your business isn’t going to earn you millions immediately. It’ll take time and perseverance to get to a point of immense success. Don’t let this discourage you, though—you may just be the next million-dollar business story that’ll inspire future entrepreneurs.
What are other ways to build and sustain a million-dollar business? Let us know in the comments below!
Want to fast-track your learning? With Shortform, you’ll gain insights you won't find anywhere else .
Here's what you’ll get when you sign up for Shortform :
- Complicated ideas explained in simple and concise ways
- Smart analysis that connects what you’re reading to other key concepts
- Writing with zero fluff because we know how important your time is
