So, you decided to start your own business. You might have an interesting product or service idea that you'd like to materialize, or know somebody succeeding in a business and simply want to duplicate their success.
If it's your first business or your previous attempts were unsuccessful, this article might help.
For many years of working as a business broker and business coach I've learned that some people will diligently scrutinize expenditure of $100 for a new pair of shoes, yet mindlessly invest $100,000 or more into new business venture without doing adequate research and planning.
Stop for a minute and think. You would never take a trip without knowing your route and destination point. If you're planning an investment, wouldn't it make more sense to try it first using "monopoly" money and learn how it works.
Do yourself a favor, sit down and write a decent business plan. Play your business on paper first, using "monopoly" money.
Start dreaming. Where you want to be in 5-10 years? Turn your dreams to goals and start describing how you are going to accomplish them. Don't try to conform to a certain standard format - this draft is for your eyes only. Think of many things involved in starting a business: competitive edge, location, staff, purchasing, marketing, exit strategy, and projected financial performance. Yes, don't look surprised; you have to think about your exit strategy before starting a business. All this should be thought through before you spend a single dollar.
The very first question you have to ask yourself is why people will be buying from you, rather than from the guy across the street. What is so special about your product or service? How is it different from other products on the market? How will you convince customers in superiority of your products or services. Bottom line, you don't want to open up another donut shop when already there is one across the street. You don't want to start competing with McDonalds and KFC because you won't be able to survive. Your product or service should have a well-defined distinctive features.
Start writing your business plan by describing your products or services and their competitive features. This section will benefit greatly from sharing your ideas with other people, preferably experienced in the field. If you'd be able to convince them in superiority of your product or service, there's very good chance that you can convince your customers to buy them. If you have hard time finding competitive edge for your products, consult with a good business coach.
What kind of place do you need? Retail, industrial, office... in what area, and what size? Go talk to landlords or property managers. Learn why seemingly similar spaces are priced differently. Talk to business owners in shopping centers or industrial parks that you're considering for your business. Ask their opinion about the landlord. What lease terms do they have?
Based on all collected information, make a decision where your business supposed to be, and what are your expected lease terms. If you plan having multiple locations, do your due diligence for all of them. What is the expected timing for opening consecutive locations? Enter the location information to your business plan. You just intelligently made an important business decision, supported by your study, without spending a penny.
Even if you start your business without employees, I really hope you don't expect to work this way all the time. Value of your business and quality of your life as a business owner greatly depends on staffing. If you find the right people, you'd be able to take vacations and have life, otherwise you're looking into 12-hour days, 365 days a year. Your business eventually should be able to operate without you being present all the time. It will allow you to work on a business, not in a business. Moreover, when you eventually decide to sell the business, it's value will be considerably greater with well-developed management structure.
Your business plan should contain a map of staff development. What are your initial employees? What responsibilities should they have? How are you going to train and promote them? At what point are you going to add more employees and what they will be doing? If you have problem envisioning your future staffing needs, good business start-up coach should be able to help.
If you will be buying raw materials for manufacturing or finished goods for resale, developing the right sourcing is critical to your success. Are you going to be buying domestically, or seek overseas supplier? Call for pricing, ask for free samples. If free samples aren't available, it's time to spend a few bucks. If you're considering overseas suppliers, try to find those that have manufacturer's representatives or distributors in the U.S. Don't forget to check the delivery terms and return policy. If you're going to buy in large quantities, consider visiting factories and discuss buying directly from the manufacturer. Ask for credit terms. Most likely you won't get them in the beginning, however it's nice to know for planning purposes.
Log all your findings to the business plan, specifying who you're going to buy from and why. Show how will your purchasing pattern will be changing with the business growth.
This is very important and sizable topic. Marketing is all about customers, you know that, don't you? You have to attract and keep them. Start with defining your target customers. Are they businesses or individual consumers? What is their geography: local, nationwide, worldwide? Are you targeting a particular age, sex or income group? What influences their purchasing decision? How can you control that decision? Answers to these questions will become foundation of your marketing strategy.
Enter your marketing research result into the business plan, set targets, establish the timeline and marketing budget. Specify who will be involved in marketing and what are their responsibilities. Challenging marketing decisions can be discussed with you business coach.
It may appear a little premature to discuss the exit strategy before even starting a business. However it isn't so. All steps related to all phases of your business should be well-thought and planned. When you're boarding a train, don't you know where you're exiting? Same common sense should be applied to a business, probably even to a higher degree. Exit strategy can include transferring a business to a family member, selling to key employee or outside buyer. If sale of a business is your exit strategy, the most logical time to sell is when your business has its highest value, hence you can get the best price. Don't repeat a mistake of many, many business owners by keeping running business to the point when it has no value. Business, like live organism, has period of growth, maturity and decline. You have to sell it before it starts declining.
Don't waste your sleepless nights and countless hours invested in the business - sell it high!
Your business broker can consult you regarding maximizing your business value and best time to sell.
Projected Financial Statements
After analyzing all aspects of your business operation, it's time to start working on projected income (profit and loss) statements. Review sample income statement. It shows inflow and outflow of money in the business. Details about financial statements go beyond scope of this paper. There are plenty of resources on the internet; check out this wiki article.
For your first year of operation compile monthly income statements, then prepare annual statements for the first five years of operation. All changes projected in your business plan shall one way or another be reflected in the financial statements. How much income do you expect making in the first month? What your cost of goods is going to be? What about the operating expenses?
After finishing with the first month, repeat projections for the second and all other months of the first year. Then project financials up to five years forward. Review your projections and analyze them. Try to be as realistic as possible. Keep making changes until you're completely satisfied.
Now you're ready to convert projected numbers into real money. Good luck!
Global Business Group is helping small business owners to successfully launching start-ups.