When starting a new business it is vitally important to know what your ultimate aims are.

Entrepreneurs tend to fall into five types, depending on their personal psychology and what type of business they want. However, personal satisfaction is often more important to them than growing a major company or brand. You need to sort out the psychology first and stick to it.

A well-known acronym for these five types of startup entrepreneur is SMILE.

S is for System. They are usually happy to buy into a proven idea, such as a successful franchise where everything is provided and the franchisor takes care of advertising and much else as well.

M stands for Money. If cash in the bank is your only goal — and why not — then you should know that this is the measure of your success and avoid all distractions and constantly bear down on costs.

I is for Innovator. New ideas and developments are your prime concern. Make sure you are equipped with the technical skills for the task, or be prepared to hire them.

L is for Lifestyle. Such would-be entrepreneurs often want to exploit their hobby. This can be very successful, but make sure there is a demand for your product.

E is for Empire builders who want to create a brand and spread it widely around.

Bear in mind that you might fall between two, or even more, of these categories. That is not a problem provided you create the right mix of ideas.

A New Series on Business Startups — Part 11

Many startups plunge into the marketplace on a wing and a prayer. The young, inexperienced hopefuls have great expectations, but little knowledge of the complexities of the business they are getting in to.

The problem with this approach is that, except in rare instances, the new entrepreneurs will be forced into mimicking what’s already out there, including their main competitors. They will be competing directly with hard-bitten professionals and mature operations. They don’t stand a chance.

One way round this head-to-head gambit is to set up the enterprise initially as a hobby project, rather than a registered business.

The advantages of this alternative approach are many:

* You can win your spurs without too much financial drain or loss of face.
* You can gain expertise by copying the market leaders with little comeback.
* You can mature in the job and branch out from your competitors.
* You can gain respect in the market before making big investments.

This path is especially easy on the internet because entry costs are so small. Syntagma Media was started in this way, first as a tentative hobbyish project to test the waters, then as a semi-commercial enterprise with all profits reinvested for growth. Finally, as a registered business earning good returns for its owner.

Where entry costs are low, it’s always best to reach the comfort zone before fully committing yourself to a real business with all its overheads and legal headaches.

After all, you may not like it once you’ve tried it out for yourself.

A New Series on Business Startups — Part 5

From time to time in this series, we’ll slot in a case study to add a sense of reality to the often academic nature of the learning curve of starting a business. Here’s one from the UK.

While still a student at West of England University, Jamie Murray Wells used his student loan to start Glasses Direct from a disused stable block on his father’s estate. He negotiated deals with the spectacle-frame manufacturers which allowed him to undercut the high-street chains in the UK, like SpecSavers, by a substantial amount.

James Murray Wells, 23, now runs a multi-million pound internet company, which sells a pair of specs every eight minutes. He has netted sales of over £2.5 million ($4.8m) in less than two years

Jamie says: “It’s an exciting time. There’s an army of people wearing my glasses every day, and that’s an incredible feeling.”

Until this young entrepreneur turned his gaze on the industry, the £2.5 billion market was dominated by four giants: SpecSavers, Vision Express, Boots and Dollond & Aitchison. Needing a new pair of glasses while revising for his English finals, he was shocked at the price.

“I couldn’t believe there was nothing cheaper than £150 ($290) for what was essentially a piece of wire and two pieces of glass.”

He began contacting glazing labs to try to get a cheaper pair direct. He was told that the cost would be around £7 and that the process was done automatically in under 20 minutes.

“The mistake of high-street opticiancs,” he says, “is that they subsidize eye tests in the hope of clawing back margins on dispensing glasses.”

He used the last £1000 ($1,950) instalment of his student loan to develop his idea.

But time doesn’t stand still in the rarified air of this entrepreneurial eagle. Looking ahead a few years he sees himself as a billionaire buying himself an island.

“I didn’t grow up dreaming of being an optician, so it’s not going to be long before I move on and attack other industries — knock the bottom out of the property industry or pharmaceuticals, or whatever.”

Go to Part 6.

What happens when a successful startup goes wrong and the original founders are dispensed with for no apparent fault of their own?

This is the entrepreneur’s ultimate nightmare — to lose control of your creation in the expansion process then find yourself dumped by incomers.

And that’s the cautionary tale of JPG Magazine, an online and print business that morphed into 80/20 publishing and subsequent disaster for its founders.

The story is told at some length by Derek Powazek (pictured), who describes himself as a thinker, designer, and writer in San Francisco.

His conclusions from the experience are :

If it’s any help to other entrepreneurs, here’s what I’ve learned.

1. Make no assumptions when it comes to roles and responsibilities. Like my dad says: “Someone’s gotta call quittin’ time.”
2. Communication between partners is mandatory. And you cannot communicate with someone who is not communicating with you.
3. Decisions aren’t decisions if you have to keep making them. Set on the course and stick to it. If you keep talking about things that have already been decided, nothing will ever get done.
4. When someone says one thing, but acts in a contradictory way, you have a choice between believing their words or believing their deeds. Believe their deeds.
5. Never let anyone tell you what you want. When someone says, “You don’t want that,” what they really mean is, “I don’t want you to have that.”
6. Don’t stay where you’re not wanted, respected, or happy. Even if it’s your company.

Read the full story here.