1. Things To Consider Before Getting Started
1.1 Is there a market for what you want to sell?
If you see there are a lot of businesses doing the same thing you want to do, it could mean there is a high demand for this product or service. It could also mean the market is saturated.
If that’s the case, you will have to demonstrate what you offer is unique or you could target a segment of the market that is not being served. Your town or chamber of commerce should have information about other similar businesses.
You will have to decide if it is a good thing to be located near competitors or detrimental to your effort to snag market share. For example, some restaurants do not mind being near others because the area is designated as a restaurant district and customers will park and stroll downtown to find a place to dine.
If you have a service or a product that is similar to others, you will have to think of a way to distinguish what you offer. This means researching your competition by understanding all they do, how they market themselves, and what they charge.
Most of this information can be obtained with research on the web, but it’s also okay to check them out personally or have someone pose as a customer for you.
Business owners should always know their competition. Don’t forget, there may be a competing situation, like Do-It-Yourself.
If your potential customers are struggling with doing something on their own, they may need your service to help them.
1.2 Can you make a living at this?
You know how much money you need to make a living. Running a business means covering the overhead and then paying yourself.
It will be important to keep your business income and expenses separate from your personal bank account, so you have a clear idea of your costs and whether you’re making a profit.
In the startup stage, a business will not likely cover all its costs at first and you’ll need another source of income until you begin to breakeven and then show a profit.
The costs to consider are:
- One- time startup costs, like equipment such as a computer or a vehicle
- Direct costs or costs of goods sold, such as inventory or other hard costs that go with every sale
- Operating costs that accumulate even though no sales are coming in, like rent and advertising.
It is difficult to figure out all the costs involved with running a startup, but a business counselor can help you crunch the numbers.
You may be disappointed to discover if you price your product or service competitively, you will not make enough to make the living you desire. At that point, you will have some decisions to make.
Will you charge more, but offer something added to justify the higher cost? Can you reduce your expenses in the beginning?
Many businesses start small with no employees and launch from home until increased sales cover the cost of an office or retail space.
Above all, don’t commit to contracts, leases or loans before you’ve tested out your business, refined your offerings and settled on a plan that you know will build a business that gives you the income you need.
1.3 What makes your idea unique?
Have you come up with an idea for a product or service that you think has potential to become a business? Have others encouraged you to make your hobby into a moneymaker?
It’s tempting to run with an idea, get a business license, print up some business cards and get out there before anyone else steals your idea. Entrepreneurs are go-getters. That’s why it’s important to balance that enthusiasm with hard, cold research.Is there anyone else out there doing something similar? How much do they charge? How successful are they?
It’s important to understand all the costs associated with creating your product or service so you can determine if you’ll actually make money with your business idea.
Separate your ego from the idea and evaluate it critically. Put yourself in your customer’s shoes. Your idea should be a contribution to the marketplace; a way to improve the lives of your customers. Once you’ve figured out how that happens, you’re on your way.
1.4 Do you have the stamina and personality to be self-employed?
Sometimes people start a business because they are tired of working for someone else. They dream of “being their own boss” with no one telling them what to do. While the desire to call your own shots can be a motivation for self-employment, it can’t be the primary driver.
Most business owners work many more hours than they did working for someone else. Instead of having one boss, you have many bosses, your customers.
You cannot walk away from a business they way you can quit a job. Running a business takes a commitment to see it through the many challenges that will arise like equipment failures, changes in the economy, and tough competition.
Family and friends may not understand the physical and mental demands small businesses require. It’s important to get their support if you decide to become self-employed.
Running a business requires energy, creative problem-solving and a stick-to-it personality, rare qualities among the general population.
If you have a market, can make a living, and have the personality to see it through, you’ve got the basics to see success for your vision.
1.5 Managing People
If you’ve been running a business on your own for a while, it’s understandable you may be reluctant to let go of the reins and hire someone.
The rules for hiring, payroll, and safety can be daunting, but they are readily available to anyone who needs to know. What might take some thought and perhaps training, or counseling is developing effective management skills.
If you’ve managed people in the past, you have a head start over most people running their own businesses with no employees. Of course, communication is key, as is knowing your employees and knowing the means it takes to motivate them.
A big challenge for new business owners is often taking what you’ve learned about running a business and creating procedures to guide employee training. Every employee wants the chance to do a good job and a clear job description and expectation for performance helps make that happen.
Take the time to prepare for your first hire and seek help with improving your management skills.
1.6 Increasing Sales for Small Businesses
Most likely, your marketing plan needs an update as you may not be seeing the business growth and sales you were expecting. Are you pursuing a different kind of customer?
For example, you may have only provided services to homeowners, but you want to try selling business to business. This requires an entirely different marketing approach and an understanding of the type of B2B industry you want to service.
You’ll have to consider the needs of the new market, your competition, and the environment that affects your customers and your ability to successfully sell to them.
Another option is selling to government agencies. These contracts can be lucrative, but you need to invest the time to get in the system and expand your marketing to this unique customer base.
2. Starting Your Journey
2.1 Create a Business Plan
A business plan may feel like a luxury for busy business owners, anxious to get off the ground and receive income.
Business planning may seem like an academic exercise or an overwhelming undertaking. But thinking through all aspects of your business helps you identify where you have strengths and need advice.
It helps you avoid unpleasant surprises that come from mistakes like learning you’ve priced your product too low, or you’ve signed a lease before you have enough funds to breakeven, or spent so much on inventory, you won’t make any money for months.
The good news is there are a number of books, software platforms, workshops, and business counselors available to help you pull together a motivating and viable plan. Check out the resources provided here to help you with the exciting task of creating a business plan.
2.2 Find the Right Legal Structure for Your Business
Choosing a legal structure is one of the first considerations when starting a business. This decision must be completed before filing for licenses and permits, hiring employees, or paying taxes.
Almost everyone needs guidance in selecting the proper business structure. This process defines the ownership, the owner's liability, and how taxes are paid.
Whether you’re choosing to be a sole proprietor, work with a partner, start a nonprofit, or choose one of the various types of corporate structures, get help from an accountant, a lawyer, or a business counselor for this important step of your process.
2.3 Required Registrations, Licenses, and Permits
If you’ve been operating informally by selling to family and friends to get an idea whether your idea has the possibility of success, it may be somewhat intimidating to make it official by filing a business license or getting the permits needed for your particular industry.
It’s always advisable to first have a business plan sketched out and make sure your business name is something you can live with for the long term.
Sometimes new owners fall in love with a clever name, get a business license, then after preparing a plan, find the name won’t work.
One step at a time.
Before going legal with a business name on licenses and permits, make sure that name will stick. Once you file a business license with your city office, for example, this process may trigger notices from other government agencies that need you to register.
A business counselor can help you determine what business licenses, permits, and registrations are necessary for your particular business at this start-up stage.
2.4 Marketing Your Business
How will you get customers?
Don’t be fooled into thinking everyone will flock to you once you hang your “open” sign. You can’t afford to advertise to everyone, but you can afford to target your marketing to a specific customer type who will buy from you repeatedly and refer you to others.
You need to understand why they would and should choose you over the competition.
Do they search on the internet? Then a web presence is critical. Do they find your store or restaurant while shopping downtown?
Location and signage would be key. Study your competition to see how they get customers. Experiment with different marketing methods then select the method that brings in the best customers.
Check to see if there is an association in your industry that has information on how to build your specific model. The first year usually involves experimenting with different marketing methods.
Create a plan, put it into action, then invest in what drives customers to your door.
2.5 Business Financials
Financial Statements are the checks and balances you need to see if you’re making money. If you’re reluctant to look at the numbers, you’re not alone.
Most business owners are interested in producing and promoting their products or services. Taking the time to examine whether the business is on the right track is often put aside till later, sometimes much later, until it’s too late.Financial statements can be a gold mine of information. An analysis of a cash flow statement can tell you when you need to tap into the line of credit.
A comparison of budgeted items with actual expenditures can show where you need to adjust your spending. The balance sheet and the profit and loss statement are the key documents needed to apply for business credit.
You don’t have to know everything about bookkeeping, but you do have to have an appreciation for how important it is for decision-making.
Hire a bookkeeper, buy a good bookkeeping software, or take a workshop in business finances, do what it takes to become knowledgeable about this important aspect of running a business.