How to Start a Business
More people than ever are choosing to start their own business these days rather than being subjected to the corporate rat race, what with concerns over job security and the inevitable job hunt should things go south. There are three basic ways to go into business - start something from scratch, buy an existing company (or become a partner in one), or purchase a franchise. Whichever path you take, starting a business can be one of the most challenging things you’ll ever do. Here are 10 tips on starting a business the right way.
1. Build up your cash reserves
Save as much money as you can before exercising your entrepreneurial spirit. While most circumstances will require you to borrow funds in order to start a business - covering such things as licenses, fees, professional services, and startup cash - it’s unlikely that your business will start to turn a profit right away. Even in situations where you’re buying an existing company with active customers, having a nest egg that covers your living expenses will free your mind to concentrate on building a successful business.
2. Start small
Starting a business that’s small is easier on both the mind and the pocketbook. If you’re able to keep your full-time job while starting something on the side, so much the better! Don’t hire employees until you truly need them, since this adds a highly complex level to your new business that goes far beyond simply paying someone else a wage - think scheduling, personnel issues, taxes, and tons of paperwork to fill out.
3. Don’t be a loner
While this tip might seem to negate the one you just read, we’re not advocating employees as much as advisors. You need a strong support system when starting a business, including professionals to help you navigate the intricacies of regulation (CPA, attorney, banker), as well as people who will provide honest feedback on your marketing ideas and goal setting. People buying franchises have a ready built support system; if you’re going a different route to start a business, you should attempt to duplicate this process as much as possible.
4. Map out your path to profit
Know your costs, understand the market in which you are engaging, identify your client base, and then “do the math.” Having a firm grasp of your monthly expenses - rent, inventory, taxes, payroll, marketing and sales, and so on - allows you to instantly compute how much you need to sell in order to cover those costs and move toward profitability.
5. Create a business plan
Even if it’s no more than five or six pages, everyone starting a business should have a formal business plan in hand prior to opening their doors. Business plans are vital if you’re looking for funding, but they’re even more important as a roadmap to success. A worthwhile business plan will contain cash flow projections, profit and loss forecasts, and the basic ideas behind your marketing campaign - both short and long term concepts.
6. Outthink the competition
No matter what sort of business you plan to start, someone else is already serving the people or businesses you’re hoping to reach. Create concepts that give you a competitive edge, and then strive every day to improve upon them. React quickly to changes in the marketplace, stay on top of your industry by reading trade journals and attending conferences, and keep an eye on that place across town that’s your biggest competitor.
7. Market early and often
Most experts agree that new businesses that start marketing immediately - or even before they’re open to the public - do far better overall than those that wait. Start with strong ideas, seek out professional feedback, and keep track of what works and what doesn’t. Then jettison the under-performing concepts and come up with new ones.
8. Hire responsible people
When the time comes to finally add staff, make sure you hire truly excellent people. Treat everyone with respect, reward your workers when the company does well, and keep them informed regarding all major corporate developments.
9. Stay focused on your core competencies
As businesses evolve, owners are often tempted to branch off into somewhat unrelated areas. Pizza restaurants take on a breakfast menu; home cleaning services try to break into the commercial market; shoe repair shops decide to sell them as well as fix them. Some expansion ideas are good, but others may cause you to lose touch with what made you profitable in the first place.
10. Pay your bills on time, if not early
Pay everything you owe as early in the process as you can. This will gain you trust, build positive credit standing, and provide a margin of error if something unexpected comes up. Many suppliers even offer discounts to early payers.
Starting a Business
If you have decided to start a business and plan to follow the steps outlined above, think seriously about a buying a franchise or acquiring an existing company. With these two options, much of the work is already done or underway, and there is a terrific safety net immediately at hand - a former owner who wants you to succeed (in the latter example), or an entire corporation (in the former example).
Since starting a business from scratch is so difficult, why not spend your money more wisely on a franchise or an existing business?