Starting your own business is not for the faint of heart. It requires a mix of passion, intelligence, patience and drive. You will notice that I left bravery off the list of adjectives. It is not because I don’t think bravery plays a role it is because an Entrepreneur at their essence is a doer and nothing including fear typically gets in their way. If you are thinking of starting a new company and you can feel that invisible hand pushing you forward you are well on your way. I know that feeling very well as I have started several new ventures some successful and others not so much but each teaching valuable lessons that I was able to apply to the next. Here are some points to consider when forming your new business venture:
1) Type of Business – We’re not talking about corporate structure such as, sole proprietor, (Limited Liability Company) or a Corporation such as an S or C. We’ll deal with those just a little bit later. Opening a business shouldn’t be a whimsical venture it should be carefully studied and your ideas and concepts created, revised and recreated before ever making the leap into actually opening your doors. The first step when starting a business is deciding what type of company you want to run. You need answer the following few questions.
- Will the business you start be a primary or secondary source of income?
- Is your new business going to be based on selling a product, a service or both?
- What expertise do you have in starting a company?
- Will your new business be Home Based, a Retail store or market,
2) Market Opportunity – do people want and need what you have to sell? A quick web search should give you a good idea of how popular something is. Let’s say in your new business you plan on selling wedding dresses in a retail store in Pittsburgh. First go to the yellow pages and look up dress shops and bridal shops. The go to Adwords.google.com and use their key words tools. This will give you a very basic idea of the demand for what you are considering.
3) Personal Skills – What do you like to do and what are you good at. It might seem like these two would go hand in hand but an honest inspection of each is important to understand your true strengths when starting a company. I’ve seen far too many people think they were good at one thing because they enjoyed it fail because they lacked the drive, discipline, or raw talent when times got tough, the competition got fierce, or the economy wasn’t in good shape. If you like talking to people and networking then a sales drive business might be good for you.
4) Partners – no doubt you’ve heard the saying choose your business partners like you’re choosing your spouse. Actually you should choose your partner or partners more carefully. When you start a business taking one or more partners adds an additional level of complexity. You may no longer have total control based on percentages of ownership and you will have to deal with opinions and personalities that may differ in a negative way from your own. Before adding any partners make sure that you have an actual need. Do you require their knowledge, special ability or their money? Do you need someone else to make the business a success? If the answer to these questions is no, you may want to think twice before bringing them in.
5) Business Plan – There are mixed feelings on business plans. There are those that believe it is unnecessary as no business is successful due to a piece of paper and there are those that believe it is a road map a mechanism to measure progress. I fall in the latter group. The business plan should act as a template for what your business will be, what goals you have established and how you expect to accomplish them, and provide timelines and milestones to benchmark progress or lack thereof. There are a myriad of books and advice for writing a business plan but my advice is start simple and build up from there. Begin by listing all the pertinent elements of what you want to business to be, what you’re going to provide and to whom, who is your competition, how will you be better than your competitors and how will you make money. Then as you begin to really dig in modify and expand those expectations. Add things like financial needs, a defined market, etc.
6) Sales and Marketing Plan – A sales and marketing plan is very different than a business plan yet so many businesses fail to have one and execute against it. Sticking with the Bridal shop idea let’s say you’ve uncovered an opportunity in a growing suburb that contains a high population of unmarried upper middle class women who are brides between the age of 28 and 35. Surrounding communities within a 30 minute drive have an even higher number of single women with a middle class income and upward financial mobility whose age range is 24-37 with median income of sixty five thousand dollars. How you decide to reach them is the imperative of a sales and marketing plan. You have several methods including the following:
- Store Front/Drive by
- Tradeshows
- Private Event
- Broadcast
- Internet
- Direct Mail
- Referral
Take each of these as they apply and build them out long before you open your business. Demographic research takes some time but can often be done using government data which is free and by obtaining advertising kits and circulation data for publications, radio and TV stations, and purchasing or renting mailing lists.
7) Legal Structure – Both you and your business will need legal assistance to make sure you have the proper corporate structure to support your business requirements and limit your liability as the owner. What you do need to know is are you going to be a Sole Proprietorship, a Partnership, an LLC, or some flavor of corporation. Make sure you understand both the legal protections and tax implications and filing requirements. You do not need to pay a legal firm to set up your business. In most states you can file your own paperwork online however I suggest using a legal firm because you will need their assistance in developing contract language and identifying what else is needed to protect your business from unfortunate events. Find a lawyer who works with companies like yours in terms of size and field. This will save time and money as are familiar with what you need. In order to do that you can check with other small business owners, local chambers of commerce, and trade associates that represent the type of business you plan on starting for suggestions.
8) Financial Needs – how are you going to pay for business expenses such as rent, insurance, employees, and any other items such as equipment or materials required to perform your work? It is good to start a relationship with a bank early. Find one with a strong history of lending to small businesses and perhaps even a specialized Small Business Administration lending focused person or department. Other things to consider is that odds are no one will invest or lend to you without a strong business case, a track record of success, and your ability to convincingly communicate the opportunity as the owner.
9) Budget – While budget is certainly part of financial need it warrants special attention. Too many businesses do not manage their flow of cash in and out of the business leaving them cash strapped. Get all your costs in line as you build you plan then anticipate a 15-20% over run in expenses. If it happens you’ll be ready and if it doesn’t you will be better capitalized and able to focus on growing the business rather than worrying if it can survive another 30 days. Build your financial plan and work it.
10) Time Commitment – Running a company is not like a corporate 9 – 5 job. You will have demands on your time before and after business hours. Balancing family and personal time is important but it is your responsibility to make sure the people in your life understand what you’re taking on and that they will have to make sacrifices as well. Failing to set the proper expectations will only hinder the other areas of your life and ultimately become distraction.
In future columns we’ll go deeper into each of these areas add other areas of thought and highlight a series of case studies outlining both successes and failures of new business ventures. There is little else more rewarding and comforting than knowing you are not only responsible but in control of your career.
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