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Posts Tagged ‘idea’

If you are considering opening a small business, you may not have any idea where to start. Keep in mind that the first step with any business is the idea. If you are considering opening a small business, you probably have the idea, but need to know what the next steps are.

A good place to start is to create a business plan. A business plan is a written plan of your business and is needed to obtain financing, through financial institutions or investors. Business plans generally contain three different sections of information. The first section is the business concept. In this section, describe your business, its structure, its products or services and your plans, as the business owner, regarding how you will make the business successful. The second section is the marketplace section. In this section, describe who your customers are, who your competitors are and what sets your business apart from others. The third section is the financial section. This is where you will predict your revenues and expenses. You will create pro forma financial statements as well as financial ratios using your best estimates. Pro forma statements are statements that contain predictions of financial information. Many people starting a business will create a pro forma income statement, balance sheet and cash flow statement.

To create these statements, many companies use business software. Business software is a valuable thing required to start a business anyhow, so it’s often a good idea to invest in this software during preliminary planning stages of the business. As a business owner, you are likely to have employees. With employees come paychecks. To handle this, you must also purchase payroll software. Iris Software is one brand of payroll software that is highly recommended for business owners, and people beginning new businesses.

Continuing with the business plan; this plan will help you outline details of the business and make important plans. It is vital that you create it as realistically as possible and that you complete it prior to opening the business. A good business plan can help you attract investors, and can also help make the financing go through.

When starting a business, there are many other factors to consider and decisions to make. Many of these things must be done prior to making a business plan. For one, you must choose a location for your business. As you look into locations, keep in mind several things, but primarily the convenience factor. Look at several locations and decide if it is strategically located for customers to easily see it and come to it. Is there enough parking? Can you afford the rent? Choose the best location based on these, and other, factors.

We have all heard the statistic that 70% of businesses will fail within the first two years, however different sources may rate this higher or lower, 50-80% in five years. Whether this seems high or low to you there are definitely things that business owners can do to avoid being just another statistic. The best way to do this is to learn from the mistakes of others.

Wrong delivery system:

Many business professionals claim that businesses fail due to lack of capital. I would disagree after having bootstrapped my own business several times and then building it up to millions. I will however agree to this, what lack of financing creates lack of a solid delivery system exemplifies. So you have a great product? That’s not enough. It’s how you deliver that product that makes all the difference. Companies like McDonalds and Starbucks have an almost flawless delivery system. We are surrounded by perfect models of winning systems yet some still choose to “do it their way”. I am not suggesting that we become carbon copies of Starbucks or McDonalds, but why not start with the things that are working instead of re-inventing the wheel? Try reverse engineering. Instead of starting with an idea and working from there, try imagining yourself ten years down the road with a successful business. How would you be doing it?

Satisfying needs vs. wants:

In our experience as consultants here is another way we find to short circuit our success. We mistakenly believe that we have discovered a need and all we need to do to get rich is get our solution to market. Here is a newsflash-no one needs a gold chain, fur coat or Prada wallet. In our experience it is an idea that addresses what people want that has a competitive advantage. What people need they must be talked into UNLESS they need it to get what they want in the form of an outcome. Even if something is a need people are still sold on the benefits. Proprietary tools are needs that are really wants (save time, save money, go faster, do more) so even a need must be fuelled by a want. Give people what they want and you will be rich.

Wrong location:

Location, location, location! Enough said? It is always better to choose a smaller location in the perfect spot over a larger, cheaper location that is out of the way. The best example of this is when Sir Richard Branson build the first Virgin Records store inside a cobbler shop just to be on Oxford Street. The lesson here is it worked! Hmm it worked out pretty good for him. Make sure you give your business the best chance from the start and choose the right location.

No marketing knowledge:

After working with many different businesses around the world it is evident that most businesses have no understanding of marketing. For example, marketing based on price requires volume. This is not a good method for startups unless they are deeply financed. Use some common economics and accounting principles when making marketing decisions. You can get rich by selling on price, but there are much easier ways to accomplish this. If you are selling a service rather than a product, then start at the high end of the spectrum. This will allow you to see clearly your competition if there is any at all. When the sales start rolling in you will realize greater cash flow right away.