Starting your own Business
So you want to start your own business? Sounds simple, right? You have an idea, product, or service and all you have to do is just find customers and eureka!!, you’re a business person and on the road to financial freedom. Sounds silly and shallow doesn’t it? But that’s how a lot good intention men and women set out to start their own business. I’ve seen far too many very smart people who are eager and energetic take a leap of faith without a parachute and knowing where they might land.
This blog post will examine eight of the basic and essential elements of starting a small business
1. Find your passion. I remember talking to a young woman several years ago who asked my advice on starting a day care in her home. During the course of our discussion she revealed to me that she really didn’t like children that much and has little patience for whiney children, but she knew this was a good way to make money. I immediately went into red flag mode. This was a recipe for disaster. She had no passion for the very service she wanted to perform. I advised her to not open the day care, she did not listen to my advice and it closed in three months. You must have a passion for your product or service and an insatiable thirst to achieve for quality for your customers.
2. Write a business plan. A business plan is a blueprint for your business. It includes a mission statement, description of your company, defines your product or service, marketing/sales, legal identify (sole proprietor or LLC), funding request (if applicable), and financials. Even if you are not using a business plan to present to a lending institution for a business loan, every smart small business man or woman will develop their business plan and keep it as a working document that changes as their business chances and economic conditions change
3. Know your customers/market How does a successful business like Embroidea Custom Embroidery continue to grow and find customers? Z knows who her customers are and how to take care of them once they seek her services. Without an idea of who your potential customers are your business will fail. So you must do some level of market research. Talk to friends, family members, anyone who you feel might be a potential customer. Discuss with them about your product/service and create a market plan that defines your customer base. Think in terms of age, gender, location, and income. As you grow your business you will tweak and expand your potential customer base. But do not go blindly into a business without knowing who your potential customers will be and how you will reach them. Finally, know your competitors too. How many similar business are located in your community? Where are they located? What can you do to stand out from them. What can you offer that they can’t or want.
4. Seek knowledge
You may be a master carpenter but if you do not know the first thing about running a business you better find someone who does that can assist or you better seek knowledge. Take a college or community education class in basic finance and record keeping. Attend seminars for small business owners. Talk to individuals who are a success at running their own small business. Visit your local Chamber of Commerce and ask for their assistance. Google is your friend. There is a plethora of information available on the web providing tips on operating your own business.
5. Licensing and permits
You will more than likely be required to apply for a business license and local permits in order to operate your business. The types of license and permits will depend upon state and local laws and the type of business you operate. SCORE has an excellent reference on this issue: http://www.score.org/bp_12.html
6. Initial Financing/Capital
I always recommend that before someone starts their own business even if it’s a part time endeavor, that they save as much money as possible. If you or your family have no other sources of income you will need money to live on for the first year, or more. Most business need to grow before they show a profit and can begin to pay yourself. Before you calculate the initial financing you will require, you have to know your start up costs . Within your business plan calculate your initial “one time” cost and then the recurring cost to operate your business for a year, preferably 24 months. Perform due diligence and be as accurate as possible with this calculation. Many business fail because they do a poor job of estimating their startup costs and thus are not adequately financed. Contact entrepreneurs in the same or similar business, contact trade associations, business message boards, etc. and seek the advice of individuals who have “been there done that”. Based upon these numbers you can determine how much you need to begin your business. From there you will need to decide the source of initial financing. Possible sources of funding are: personal funds, loans from banks, loans from family and friends, equity loans from venture capitalist, individual investors, and other small business loans.
8. Record keeping, record keeping, record keeping
Let me be clear, if you don’t maintain the necessary financial records your business will fail. Your records will identity your assets, liabilities, income, expenses, cash flow, and more. It will assist you or your accountant in preparing necessary federal and state tax forms. A business without good records is an airplane with an navigation system. You will know you’re flying but no idea where are you or where you are going. Even if you hire an accountant to prepare your financial reports, it’s important that you or someone in your business take the responsibility for maintaining and organizing your business records. In future blog posts I will talk in more detail about the essentials of record keeping.
These eight elements to consider when starting a small business are not all inclusive. But should give someone an idea of the most important things to consider. It’s a complicated yet very rewarding process. Do not be intimidated nor let any of these elements intimidate or dissuade you from pursing your dream. You don’t have to go it alone. There are tons of resources and assistance to help you on this journey. Good luck!
“The secret of joy in work is contained in one word – excellence. To know how to do something well is to enjoy it.” –Pearl Buck
