How to Start a Small Business Six Parts:Setting Out the BasicsWriting a Business PlanCovering the Legal SideManaging Your FinancesMarketing Your BusinessLaunching Your Business Are you one of those who dream of owning your own business? Youll be your own boss, and the captain of your destiny—–maybe even a captain of industry. Is it hard? Without a doubt. Is it challenging? Absolutely. Do you have to be wealthy and well-educated with a lengthy resumé? Not at all! Can you do it? As the magic 8-ball says, All signs point to yes! So how do you do it, and make it work? Plan, plan, plan! There are some tried and true ways head down the path of creating your own business, and there is no time like the present to get started! Part 1 of 6: Setting Out the Basics 1Have an idea. It might be a product youve always wanted to make, or a service you feel people need. It might even be something people dont know they need yet, because it hasnt been invented! It can be helpful—–and fun—–to have people who are bright and creative join you for a casual brainstorming session. Start with a simple question like: what shall we build?. The idea is not to create a business plan, just to generate some ideas. Many of the ideas will be duds, and there will be quite a few ordinary ones, but a few will emerge that have real potential. 2Define your goals. Do you want financial independence, eventually selling your business to the highest bidder? Do you want something small and sustainable, that you love doing and want to derive a steady income from? These are the things that are good to know very early on. 3Create a working name. You could even do this before you have an idea for the business, and if the name is good, you may find it helps you define your business idea. As your plan grows, and things begin to take shape, the perfect name may come to you, but dont let that hinder you in the early phases—–create a name that you can use while you plan, and dont mind changing later. For a bit of fun, take a cue from the Beatles, who often use fun names for a song before it is finalized, like Yesterday, which had the working title of Scrambled Eggs. 4Define your team. Will you do this alone, or will you bring in one or two trusted friends to join you? This brings a lot of synergy to the table, as people bounce ideas off each other. Two people together can often create something that is greater than the sum of the two separate parts. Think of some of the biggest success stories in recent times include John Lennon and Paul McCartney; Bill Gates and Paul Allen; Steve Jobs and Steve Wozniak; and Larry Page and Sergey Brin. In every case, the partnership brought out the best in both sides of the equation, and every one of them became billionaires. Is a partnership a guarantee of being a billionaire? No, but it doesnt hurt! 5Choose wisely. When choosing the person or people youre going to build the business with, be careful. Even if someone is your best friend, it doesnt mean that you will partner well in a business operation. Start it with a reliable person. Things to consider when choosing your co-leaders and support cast include: Does the other person complement your weaknesses? Or do both of you bring only one set of the same skills to the table? If the latter, be wary as you can have too many cooks doing the same thing while other things are left unattended. Do you see eye to eye on the big picture? Arguments about the details are a given, and are important for getting things right. But not seeing eye to eye on the big picture, the real purpose of your business can cause a split that may be irreparable. Be sure your team cares about the and buys into the purpose as much as you do. If interviewing people, do some reading on how to spot real talent beyond the certifications, degrees or lack thereof. Peoples innate talents can often be somewhat different from the conventional education streams theyve pursued (or failed to) and its important to look for click (you get along with them) and latent talents as much as paper credentials. Part 2 of 6: Writing a Business Plan 1Create a business plan. A business plan helps to define what you think you need to launch your business, large or small. It summarizes the sense of your business in a single document. It also creates a map for investors, bankers, and other interested parties to use when determining how they can best help you and to help them decide whether or not your business is viable. There are seriously good books available on writing business plans that cover many chapters, and you should avail yourself of at least one of these as a guide (bookshops, libraries and online are good places to find these). In a nutshell, your business plan should consist of the following elements: 2Come up with an executive summary. There will need to be several basic parts in your business plan. The first is the executive summary. Describe the overall business concept, how it will be monetized, how much funding you will need, where it stands currently, including its legal standing, people involved and a brief history, and anything else that makes your business look like a winning proposition. 3Write your business description. Describe your business more specifically, and how it fits into the market in general. Who will you be selling to, and how will you deliver your product? If you are a corporation, LLC, or sole proprietor ship, state that, and why you chose to go that route. Describe your product, its big features, and why people will want it. 4Come up with some marketing strategies. You must know your market if you are to be successful, so spend a great deal of time analyzing just who it is that will want your product, and how you plan on appealing to them to take cash out of their bank account and give it to you. What is the size of your market, will there be opportunities to expand the initial market, and what are your sales potentials? When you understand these variables, you want to sell them to the person reading your business plan. 5Do a competitive analysis. As you develop the above sections, you will learn who your key competitors are. Find out who is doing something similar to what you are planning, and how have they been successful. Just as important is to find the failures, and what made their venture fall apart. 6Write your development plan. How will you create your product? Is it a service that you are offering, or if its more complex—software, a physical product like a toy or a toaster—whatever it is, how will it get built? Define the process, from sourcing raw materials to assembly to completion, packaging, warehousing, and shipping. Will you need additional people? Will there be unions involved? All of these things must be taken into account. 7Plan your operations. Who will lead, and who will follow? Define your organization, from the receptionist up to the CEO, and what part each plays in both function and financials. Knowing your organizational structure will better help you plan your operating costs, and fine-tune how much capital you will need to function effectively. Keep in mind that your business will continue to evolve and that this will be a rough idea of who is needed to keep things functioning; as the business grows, youll likely make changes to the hiring plans to fit what is happening at the time. Also, in a number of cases, the staff is you and whomever you can consult, such as your lawyer and accountant. This is fine, as long as you show that youre prepared to pay for external advice and help until your business is ready to take on staff. 8Cover the financials. Succinctly, this describes how much you plan on spending, and how much youre making. Since this is the most dynamic part of your plan, and perhaps the most important for long-term stability, you should update this monthly for the first year, quarterly for the second year, and then annually after that. Part 3 of 6: Covering the Legal Side 1Consider finding an attorney or other legal advisor. There will be many hurdles to leap as you go from working stiff to overworked and underpaid small business owner. Some of those hurdles will be composed of stacks of documents with rules and regulations, ranging from building covenants to city ordinances, county permits, state requirements, taxes, fees, contracts, shares, partnerships, and more. Having somebody you can call when the need arises will not only give you peace of mind, it will give you a much-needed resource who can help you plan for success. Choose someone with whom you click and who shows that he or she understands your business. You will also want someone with experience in this area, as an inexperienced legal advisor could lead you to legal trouble or even fines and prison time. 2Get an accountant. You’ll want someone who can deftly handle your financials, but even if you feel you can handle your own books, you’ll still need someone who understands the tax side of running a business. Taxes with businesses can get complicated, so you’ll need (at a minimum) a tax advisor. Again, no matter how much of your finances they’re handling, this should be someone trustworthy. 3Form a business entity. You’ll need to decide what type of business entity you want to be, for tax purposes and hopefully to eventually attract investors. Most people are familiar with corporations, LLCs, etc., but for the vast majority of small business owners, you will need to form one of the following[1]: A sole proprietorship, if you will be running (not including employees) this business on your own or with your spouse. A general proprietorship, if you will be running this business with a partner. A limited partnership, which is composed of a few general partners, who are liable for problems with the business, and a few limited partners, who are only liable for the amount in which they invest in the business. All share profits and losses. A limited liability partnership (LLP), where no partner is liable for another’s negligence. Part 4 of 6: Managing Your Finances 1Cover your startup costs. How are you going to finance your business initially? The bank, venture capitalists, angel investors, Small Business Administration (SBA), your own savings: these are all viable options. When you start a business, be realistic. You will probably not roll out of the gate making 100 percent of whatever you project, so you need to have enough ready reserve to fund things until you are really up and running. One of the surest roads to failure is under-capitalization. Remember the four Fs for investment: founders (people who share your idea), family, friends and fools 2Have more than the minimum. You may determine it will take $50,000 to start your business, and thats fine. You get your $50,000, buy your desks and printers and raw materials, and then then the second month arrives, and youre still in production, and the rent is due, and your employees want to be paid, and all the bills hit at once. When this happens, your only likely recourse will be to pack it in. If you can, try to have the reserves for a year of no income. 3Pinch those pennies. Plan to keep purchases of office equipment and overheads to a minimum when starting up. You do not need amazing office premises, the latest in office chairs and pricey artwork on the walls. A broom cupboard in the best address can be sufficient if you can artfully steer clients to the local coffee shop for meetings every time (meet them in the foyer). Many a business start-up has failed by purchasing the expensive gizmos instead of focusing on the business itself. 4Crunch some numbers and plan ahead. Chart your way to financial success. What price do you intend to sell your product or service for? How much will it cost you to produce? Work out a rough estimate for net profit—factoring in fixed costs like rent, energy, employees, etc. 5Check out your competitors. Know how much are they selling a similar product for. Can you add something to it (add value) to make yours different and hence make it a more enticing price? For example, perhaps your company would like to provide an additional year of guarantee at no cost, or a repair part free-of-charge or an additional gadget with the initial item. Competition isnt just about the goods or services themselves. It is also about your social and environmental credibility. Consumers are increasingly conscious of the need to show that your business is concerned with labor conditions and isnt damaging the environment. Certification endorsements from reputable organizations, such as labels and stars, can reassure customers that your product or service is more aligned with their values than one lacking the certification. 6Manage your running costs. Keep a close eye on your running costs and keep them in line with your projections. Whenever you see something spent wastefully—like electricity, phone plans, stationery, packaging—look around, and estimate how much really need, and minimize or remove the cost in every way possible. Think frugally when you start up, including hiring items instead of purchasing them and using pre-paid plans for services your business needs instead of locking yourself into long-term contracts. 7Find a way to get paid. You will need to do something to get payment from your clients or customers. You can get something like a Square, which is great for small businesses since it requires the minimum amount of paperwork and the fees are minimal. However, if you feel uncomfortable with technology, you can go the old fashioned route and get a merchant account. A merchant account is a contract under which an acquiring bank extends a line of credit to a merchant, who wishes to accept payment card transactions of a particular card association brand. Previously, without such a contract, one cannot accept payments by any of the major credit card brands. However, the Square has changed that, so don’t feel locked in or limited to this option. Do your research. The Square is a card swiping device which connects with a smartphone or tablet and turns that device into a sort of cash register. You may have encountered this device in the businesses you frequent, as they are becoming common at coffee shops, restaurants, street food stands and other businesses (look for a postage-stamp sized plastic square plugged into a tablet or phone). Part 5 of 6: Marketing Your Business 1Get a website. If youre selling online, get your ecommerce in gear and either build a website, or have one built for you. Its your storefront, so anything and everything you can do to make people want to visit, and want to stay, do it. 2Hire professional designers. They may cost more initially, but a well presented and trustworthy site is essential. It needs to look professional and work with ease. If you are including money transactions, invest in security encryption and check that your money transfer companies are sound and reliable. 3Discover your inner publicist. You might truly believe in your product or service but it wont fly unless everyone else believes in it too. If youre new to advertising and marketing or you dislike doing the sales pitch, now is the time to overcome such feelings and put on the publicist persona. You need to develop an excellent short pitch to convince people they need your product or service, one that reflects the value, purpose and potential of what your business is offering. Write down this pitch in many ways until you find one that you feel satisfied says it all and is something you can say readily. Then practice it like crazy! Have interesting, eye-catching business cards printed. 4Spend time developing an excellent social media presence. This can be done well before the business is ready, increasing anticipation. Use Facebook, Google+ and Twitter, and any other social media you participate in to build excitement and spread the word. You want to build a buzz so that people will begin following your progress. (Be sure to choose business accounts for your business and keep your personal accounts separate. The messages you send should be tailored differently, depending on which account youre sending from.) 5Implement your marketing and distribution plans. With your product being built or services developed, and a reasonable expectation on when either is ready for selling, begin marketing. If you will be advertising in periodicals, they will need copy or images at least two months in advance of publication. If you will be selling in stores, get pre-orders sold, and shelf space allocated. If you will be selling online, get that e-commerce site ready to sell. If youre offering a service, advertise in appropriate trade and professional journals, newspapers and online. Part 6 of 6: Launching Your Business 1Secure space. Whether its an office, or a warehouse, if you need more space than your garage or your spare bedroom, nows the time to get that. If you dont generally need an office beyond your home, but may occasionally need meeting space, there are often places downtown that can address those needs. A quick Google search on business meeting rentals [your city/state] will deliver plenty of rental options in your area. 2Build your product or develop your service. Once you have the business all planned, financed, and have your basic level of staffing, get going. Whether thats sitting down with the engineers and getting the software coded and tested, or getting materials sourced and shipped to your fabrication room (aka garage), or purchasing in bulk and marking up the price, the building process is the time during which you prepare for market. During this time, you may discover things such as: Needing to tweak the ideas. Perhaps the product needs to be a different color, texture or size. Maybe your services need to be broader, narrower or more detailed. This is the time to attend to anything that crops up during your testing and development phases. Youll know innately when something needs tweaking to make it better or to make it less like a competitors stale offerings. Getting feedback. Friends and family make great resources for asking questions and getting feedback––dont hesitate to use them as your sounding board. Needing to increase the size of your premises. This happens more often than expected. Once the stock starts piling up, you may find it ends up in your living room, bedroom and the garden shed. Think rental of storage premises if needed. 3Launch your product or your service. When the product is all built, packaged, coded, online, and ready to sell, or when your services are fully worked out and ready to go, hold a special event to launch your business. Send out a press release, announce it to the world. Tweet it, Facebook it, let the word resound to all corners of your market—you have a new business! Hold a party and invite people who can spread the word for you. It doesnt need to be pricey––purchase the food and drink from bulk discount stores and get family and friends to help with catering (you can give them a product or service in return). Ad Always provide value and service to those who may be your customers, even if they are not currently. When they do need your product, you want them to think of you first. With the advent of the internet, online businesses are probably the easiest way to start and very much less expensive in terms of start-up cost than an offline counterpart. Keep learning, and be adaptable to change. Find buddies, mentors, local business-related organizations, Internet forums, and wikis to discuss the daily details of running a small business. Its much easier for everyone to perform their core businesses well and prosper when they dont waste time and energy reinventing the wheel on housekeeping. A franchise is a great idea although the start-up capital is way too high for most people. Most direct selling companies have low start up capital compared to a traditional brick and mortar business. You can also break even rather quickly compared to the traditional business. You can also consider trading on eBay or Overstock. It is ok to start small with one or two products and then add more and more great ideas as you go! Dont be afraid to experiment with prices. You should determine the minimum price for your product or service to break even, but experiment with low-price or premium-price variations. Warnings Beware of people who ask for money before giving you business. Trade leads to prosperity through mutual gain,[2] so a business should be willing to pay you to work for it. (A franchise store or home-sales business may have legitimate start up costs, but they should reflect a reasonable cost of getting you started in the business so the managers would make money through your success, rather than just by getting you in.) Beware of business propositions that seem to offer something for nothing. They probably involve taking something from somebody—usually you. There are innumerable variations, some more polished than others. Examples include pyramid schemes[3] and advance-fee fraud.[4]
Posted on: Fri, 09 Jan 2015 07:10:59 +0000
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