Do you want to start a business? Going out on your own is exciting, romantic, and rewarding. Why haven’t you started yet? Maybe you simply don’t know how, or you would like some advice so you can avoid the pitfalls that other people commonly fall into. Maybe you have already started and want to make sure you’ve covered your bases.
This article discusses some central goals and directions that you will need to establish and some simple tasks that you should complete before you start a business to keep you from being one of the many small business owners that fail.
Take out a couple sheets of paper, or better yet, your “ideas” binder or spiral notebook, and write down your thoughts about each of the areas listed below. You may think you know the answers, but having it in writing will be a powerful tool to aid you as you work on your new (or mature) business.
Choose a Core Competency
Core competency is a fancy way to say, “what this business does.” What are you going to do? What service are you going to provide? What product are you going to create?
One of the most important questions to choosing a central skill for your business is “how am I going to do this best?” How are you going to perform your service better than anyone else or create a better product? What will make your business unique? This is important because it is the key to the long term survival and profitability of your business. If you can consistently perform a great service or provide great (and improving) products, people will continue to purchase from you.
After you have written down a handful of different ideas for a core competency, choose one. Just one. You’re not allowed to have two until you can ask people around you, “What does my business do best,” and have them answer with the core competency you’ve focused on. Laser-like focus is what is required to succeed at your core competency. Don’t believe me? What is Walmart’s mantra? What does Mercedes-Benz represent in the car market? See? Choose one, and when you have it down, you may be able to add a second competency. But not ’til you have it down pat!
Go on a Mission
Why are you doing this? What are you trying to accomplish? Go ahead and write down that you are running a business to be your own boss and to become fabulously wealthy. Then keep thinking about your reasons for owning a business. The most successful businesses are inspiring to people – they serve a higher good than simply creating a better widget. They give people pride in their work. They have a noble purpose that infuses extra energy and strength into the business. You may make better bicycle spokes, but you make them to improve each rider’s bike riding experience and recreation time. Write down a noble purpose for the existence of your business.
Decide Who Will Own Your Business
Of course you will. But will your business be a sole proprietorship? A partnership? A limited partnership? One of several forms of corporations? You must determine who will share the ownership, responsibility, risk, and profits of owning the business.
Enlist the Support of Family and Friends
Even if your family and friends aren’t going to own the business or work with you or for you, you should still rely on them for support and encouragement. Let people know that you are starting or running your own business. Tell them about how it’s going (without revealing trade secrets, of course) and where you’re headed. They will help you revel in success and press forward through the hard times. They may even know someone who can help your business, or people who could become potential clients or customers. You and your family and friends support each other in all sorts of other important ways, so why not in your work?
Determine Your Business Model
Simpler put, how are you going to make money from your core competency? Are you going to charge for the installation of your new and improved bicycle spokes? Do riders pay for materials? Do they subscribe to your spoke replacement program from year to year? Will you charge hourly? Will you bid for spoke-replacement contracts? Will you give spokes away for free, but place advertising on the spokes? Will people buy spokes online, or will they come to your store? Will you have “spoke parties” where a representative will extoll the virtues of the Wonder Spoke™? Write down every possible way you can think of to earn money from what you do.
Set Specific, Measurable Goals
Goals are absolutely necessary to your success. You will need specific goals so that you can measure your progress as your new business grows. Goals are the only way to hold yourself and your employees accountable for progress. You cannot simply say, “I want to make a lot of spokes.” You have to say, “I want to sell 15,000 spokes by the end of 200X”
One of the scariest parts of specific, measurable goals is the numbers. You have to have numbers – specific amounts, quantities, percentages, statistics, and time periods – in order for there to be any basis for evaluation and comparison. You will not know if you are successful at making 15,000 widgets if you don’t know how long it was supposed to take. You won’t know if you made good widgets if you don’t establish criteria for what makes a quality widget.
Think about how you want to measure the success of your core competency and business model even before you get started. Write down specific goals as soon as you can. Post your goals where you can see them. Review them often – daily, if necessary. Make new goals after you have evaluated your success in accomplishing the old ones. Goals will be the cheerleading squad (or the task master!) that will keep you and your business on track.
Create a Brand Identity
I’m a marketer, so creating a brand identity for my businesses is one of my favorite things to do. Create a brand identity to give your business personality.
A brand identity is closely tied to your core competency. If you are the cheapest provider of bicycle spokes, it may not make sense to show luxury spoke ads.
Your brand identity should evoke a particular superlative adjective in the minds of your customers – funniest, cheapest, funnest, most comfortable, best quality, best value, safest, most durable, etc.
Pick some colors that will represent your business. Stick with them – don’t use different colors in you advertising, business cards, signs, uniforms, anything, unless you have a very good reason.
You will also want to develop a logo. It can be simple or complex, cheap to create or expensive, hand-drawn or computer-generated, as long as it matches your core competency and the rest of your brand identity. Chance are that you will want a professional looking logo, and you may have to invest some money in having one created. Don’t go into the designer’s office blind, though – take a list of ideas about your company with you. If you have a list of adjectives, some colors picked out, and an idea of the overall feel you want for your brand, you will make the designer’s job much easier and you will be more likely to get an appropriate logo.
How Will You Finance Your Business?
Every business plan is a pie-in-the-sky dream until there is at least a little starting investment capital – even if you plan to start with the cheapest web hosting for an Internet business with no physical product! You have to have at least a couple bucks.
Sit down and make your best estimate of what it’s going to cost to get started and then continue working from month to month. You need to raise that amount of money to have a business that will survive. You should also add at least 15% extra to your estimate as a safety measure – there are always unexpected costs, and you have no way of knowing what they are. This buffer zone can be a business saver.
Think Ahead About How You Will Manage Growth
If you’ve done good work planning everything else and you work hard following your plans, chances are you will be successful. The strangest thing is that success often kills a small company. Demand goes up, and costs start rising as extra capacity is needed and investment levels increase to meet the demand. There is almost always a time gap between investment and return, and if you can’t pay the bills while you wait for the bigger returns to come in, you’re out of business.
You need to think ahead about controlling growth. How many employees are you going to hire? How quickly can you grow? What responsibilities are you going to hand over, and which are you going to continue to perform yourself?
One of the hardest things is being honest with yourself – you won’t be able to do it all yourself. If you try, you will get stretched until you break. As your business grows, tasks that you could perform reasonably well when you started will need more skill than you have. Pick and choose what you want to do – focus on the things you love and on the things you do best. Leave everything else to the people you hire.
Plan Your Escape: What is Your Exit Strategy?
Most experienced entrepreneurs think about the end of their venture at the same time they think of the beginning. They plan how and when they are going to leave their businesses behind – at retirement, when they can sell them for the right price, after they have received a certain return on their money, etc. How long are you going to stay with the buiness? Who will you turn it over to? What constitutes success? What will you use the profit and/or experience from this venture to do next? If you begin with the end in mind, you are more likely to reach it.
Now What Do I Do to Start My Business?
Now that you have pages and pages of notes about each of the important areas listed above, put them aside for a while. Work on some other tasks, get a sandwich, play a round of Internet pool, whatever. Come back later and look over your notes. Revize anything that needs to be changed. Maybe put them in a word processor and print them out.
After you have polished your principles and ideas for running your business, put them into practice. Get on with the “chores” and tasks and to-do lists and the implementation of all your ideas. Just let all the things you’ve decided and outlined guide you in your business each day. Look over them frequently and make revisions if you have to, but make sure that your business is being guided by your plan. Focus your efforts on achieving what you have set before yourself. And enjoy your business!