Starting A Business
Everywhere, it seems, people have a new idea that and they are starting a business. Which prompts the question: How do you navigate your way through this new era of start-ups?
Whether you're launching your own "dotcom" or starting the restaurant that you've always dreamed of opening, how do you make the right decisions? Should you hold on or let go? Find the right partner or go it alone? Stay small or learn how to grow?
You have to be sure you have the skills and knowledge you need for the business you have in mind, or know how to tap into sources of such expertise. You must be absolutely certain that your abilities and interests are closely aligned to those needed by the type of business you have in mind.
It will also help if you can prove that a profitable market exists for your products or services.
The easiest way to succeed is if your business is clearly focused on at least some of the following!:
- Cost reduction and economy. Anything that saves customers money is always an attractive proposition. Lastminute.com’s appeal is that it acts as a ‘warehouse’ for unsold hotel rooms and airline tickets that you can have at a heavy discount.
- Fear and security. Products that protect customers from any danger, however obscure, are enduringly appealing. Can you provide information that will help a nervous market? Do you have a piece of knowledge that anyone would pay for?
- Greed. Anything that offers the prospect of making exceptional returns is always a winner. Competitors’ Companion, a magazine aimed at helping anyone become a regular competition winner, provided the inspiration to ensure success with this sentence: You have to enter competitions in order to have a chance of winning them.
- Niche markets. Big markets are usually the habitat of big business - encroach on their territory at your peril. New businesses thrive in markets that are too small to even be an appetite wetter to established firms. These market niches are often easy prey to new entrants as they have usually been neglected, ignored or ill-served in the past.
- Differentiation. Consumers can be a pretty fickle bunch. Just dangle something, faster, brighter or just plain newer and you can usually grab their attention. Your difference doesn’t have to be profound or even high-tech to capture a slice of the market. It might even be that you are open when other businesses are closed.
Starting A Business - Are you Ready?
- Analyze your business idea by doing a SWOT analysis
- Assess your strengths and weaknesses as an entrepreneur
- Establish business and personal goals
- Assess your financial resources and identify potential sources of funds
- Identify the financial risks
- Determine the start-up costs
- Decide on your business location
- Do a thorough market research
- Identify your customers
- Identify your competitors
- Develop a marketing plan
- Select a lawyer and an accountant
- Choose a form of organization (proprietorship, partnership, or corporation, for example)
- Create your business (register your name, incorporate the business, etc.)
- Prepare a business plan
- Select a banker and set up a business checking account
- Apply for business loans and grants (if applicable)
- Establish a line of credit (if possible)
- Select an insurance agent and obtain business insurance
- Prepare corporate brochures
- Build a web site
- Set-up corporate e-mail accounts
- Get business cards
- Obtain a lease
- Line up suppliers (if applicable)
- Get furniture and equipment
- Obtain business licenses or permits (if applicable)
- Get a federal employer identification number (if applicable)
- Get a state employer ID number (if applicable)
- Send for federal and state tax forms
- Join a professional organization
- Choose a starting date
- Prepare and deploy your communication / marketing strategy
Creative thinking requires tools such as the brainstorm and the affinity diagram. Brainstorming is simply listing all ideas put forth by a group in response to a given problem or question. In 1939, a team led by advertising executive Alex Osborn coined the term "brainstorm." According to Osborn, "Brainstorm means using the brain to storm a creative problem and to do so" in commando fashion, each brainstormer audaciously attacking the same objective." Creativity is encouraged by not allowing ideas to be evaluated or discussed until everyone has run dry. Any and all ideas are considered legitimate and often the most far-fetched are the most fertile. Structured brainstorming produces numerous creative ideas about any given "central question". Done right, it taps the human brain's capacity for lateral thinking and free association.
A brainstorm starts with a clear question, and ends with a raw list of ideas. That's what it does well - give you a raw list of ideas. Some will be good, and some won't. But, if you try to analyze ideas in the brainstorming session, you will ruin the session. Wait. Later, you can analyze the results of a brainstorm with other quality improvement tools. In particular, affinity diagramming is designed to sort a raw list, using "gut feel" to begin to categorize the raw ideas. It is most often the next step beyond brainstorming.
Before beginning any effective brainstorming session, ground rules must be set. This doesn't mean that boundaries are set so tightly that you can't have fun or be creative. It does mean that a code of conduct for person to person interactions has been set. It's when this code of conduct is breached that people stop being creative.
The best way to have meaningful ground rules is to have the team create their own. Try performing a mini-brainstorming session around creating brainstorming ground rules. It should provide a nice opportunity to practice the skills necessary for an effective brainstorming session. This also allows the team to take ownership of acceptable and unacceptable behaviors. Only if the team hasn't addressed the key ground rules should you (as the facilitator) add to the list. Once the ground rules list is generated, be sure to gain consensus that the session will be conducted according to them, and post them in a highly visible location in the room.
Brainstorms help answer specific questions such as :
- What opportunities face us this year?
- What factors are constraining performance in Department X?
- What could be causing problem Y?
- What can we do to solve problem Z?
However, a brainstorm cannot help you positively identify causes of problems, rank ideas in a meaningful order, select important ideas, or check solutions. To conduct a successful brainstorm:
- Make sure everyone understands and is satisfied with the central question before you open up for ideas.
- You may want to give everyone a few seconds to jot down a few ideas before getting started.
- Begin by going around the table or room, giving everyone a chance to voice their ideas or pass. After a few rounds, open the floor.
- More ideas are better. Encourage radical ideas and piggybacking.
- Suspend judgment of all ideas.
- Record exactly what is said. Clarify only after everyone is out of ideas.
- Don't stop until ideas become sparse. Allow for late-coming ideas.
- Eliminate duplicates and ideas that aren't relevant to the topic.
Starting A Business - Eliminating The Risks
Starting a business is risky at best; but your chances of making it go will be better if you understand the problems you'll meet and work out as many of them as you can before you start.
Here are some questions and worksheets to help you think through what you need to know and do. Answer each question with a YES or NO. Where the answer is NO, you have some work to do.
Before You Start
- Are you the kind of person who can get a business started and make it go?
- Think about why you want to own your own business. Do you want to badly enough to keep working long hours without knowing how much money you'll end up with?
- Have you worked for someone else as a foreman or manager?
- Have you had any business training in school?
- Have you saved any money?
How About the Money?
- Do you know how much money you will need to get your business started?
- Have you determined how much money of your own you can put into the business?
- Do you know how much credit you can get from your suppliers -- the people you will buy from?
- Do you know where you can borrow the rest of the money you need to start your business?
- Have you figured out what net income per year you expect to get from the business?
- Count your salary and your profit on the money you put into the business. Can you live on less than this so that you can use some of it to help your business grow?
- Have you talked to a banker about your plans?
How About a Partner?
- If you need a partner with money, do you know someone who will fit - someone you can get along with?
- Do you know the good and bad points about going it alone, having a partner, and incorporating your business?
- Have you talked to a lawyer about it?
How About Your Customers?
- Do most businesses in your community seem to be doing well?
- Have you tried to find out whether stores like the one you want to open are doing well in your community and in the rest of the country?
- Do you know what kind of people will want to buy what you plan to sell?
- Do people like to live in the area where you want to open your store?
- Do they need a store like yours?
- If not, have you thought about opening a different kind of store or going to another neighbourhood?
- Have you found a good building for your store?
- Will you have enough room when your business gets bigger?
- Can you fix the building up the way you want it without spending too much money?
- Can people get to it easily from parking spaces, bus stops, or their homes?
- Have you had a lawyer check the lease and zoning?
Equipment and Supplies
- Do you know just what equipment and supplies you need and how much they will cost?
- Can you save some money by buying second-hand equipment?
- Have you decided what things you will sell?
- Do you know how much or how many of each you will buy to open your store with?
- Have you found suppliers who will sell you what you need at a good price?
- Have you compared the prices and credit terms of different suppliers?
- Have you planned a system of records that will keep track of your income and expenses, what you owe people, and what other people owe you?
- Have you worked out a way to keep track of your inventory so that you will always have enough on hand for your customers but not more than you can sell?
- Have you figured out how to keep your payroll records and take care of tax reports and payments?
- Do you know what financial statements you should prepare?
- Do you know an accountant who will help you with your records and financial statements?
Planning A Business
Planning A Business
Buying a Business Someone Else Has Started
- Have you made a list of what you like and don't like about buying a business someone else has started?
- Are you sure you know the real reason why the owner wants to sell this business?
- Have you compared the cost of buying the business with the cost of starting a new business?
- Is the stock up to date and in good condition?
- Is the building in good condition?
- Will the owner of the building transfer the lease to you?
- Have you talked with other business owners in the area to see what they think of the business?
- Have you talked with the company's suppliers?
- Have you talked with a lawyer about it?
- Have you decided how you will advertise? (newspapers -- posters -- handbills -- radio -- mail?)
- Do you know where to get help with your ads?
- Have you watched what other stores do to get people to buy?
The Prices You Charge
- Do you know how to figure what you should charge for each item you sell?
- Do you know what other stores like yours charge?
- Do you have a plan for finding out what your customers want?
- Will your plan for keeping track of your inventory tell you when it is time to order more and how much to order?
- Do you plan to buy most of your stock from a few suppliers rather than a little from many, so that those you buy from will want to help you succeed?
- Have you decided whether you will have sales clerks or self-service?
- Do you know how to get customers to buy?
- Have you thought about why you like to buy from some sales clerks while others turn you off?
- If you need to hire someone to help you, do you know where to look?
- Do you know what kind of person you need?
- Do you have a plan for training your employees?
Credit for Your Customers
- Have you decided whether or not to let your customers buy on credit?
- Do you know the good and bad points about joining a credit-card plan?
- Can you tell a deadbeat from a good credit customer?
Starting A Business
Starting A Business
Starting A Business - Concentrating On The Right Things!
Whether you're an investor, a company owner, or someone strategically trying to figure out what to do in a business, you need to pay more attention to employee motivation and human relations.
The challenge is to find great people and then to inspire and empower them. The skills that it takes to start a company are not the same skills that it takes to keep a company going. In the beginning, you need to inspire a small team of people to meet deadlines and to deliver results. You need to micromanage -- because a lot has to happen, and you're responsible for all of it.
Later on, as the company gets bigger and the strategic challenges get broader, you have to be able to delegate. You need to bring in lots of good people, to give them responsibility -- and then to leave them alone.
Ultimately, in the world of start-ups, most consolidation occurs less for financial reasons than for management reasons. You'll hear a lot of people saying, "We've got this absolutely great company, with a great product, but there's no one to run it." There's an important point here: Consolidation doesn't necessarily mean failure. It's part of the natural order of things.
The key to a successful start-up is networking -- both personal and professional.
Money is just money. Who invests is more important than how much is invested. The questions that you should ask are all about networks: How connected is the investing company? Does it have connections with large companies, sources of money, or channels of distribution? Have the founders maintained relations at their old companies? Do they have the right connections with companies that can provide talent? Leveraging other people's assets is important when launching a start-up. Look at how Yahoo! depended on Netscape.
That alliance happened early.
Networks are the steel of the future. The global telecommunications industry is spending $1 trillion to update both analog and digital networks, because that's the new infrastructure. Ultimately, you have to build infrastructure. Look at Amazon.com. It's buying warehouses, software companies, and networks.
You have to assume that you're in business for the long haul. That belief will drive you to build value.
When founders bring in an outsider to run a start-up, they need to be very clear about what they want that person to do. If they want somebody to come in, build the company, and take it to the next level, then they've got to relinquish control.
But in your haste to put your spin on the place, you have to be sensitive. If you're not, you'll slow down the transformation process. As the new person, you need to spend time socializing throughout the business. Put more nurturing into it.
Don't start a business unless you have enough money to invest in the business yourself and enough money to live on for a year. You're not going to be profitable for at least that long. How are you going to pay your rent in the meantime? And when you do take money from other people, be selective. So many entrepreneurs come to me and say, "It's no longer the business that I started." That's because they lost control. Control doesn't come with the title of CEO; control comes with cash.
You don't need to have a million dollars in the bank. Be creative, and understand how to get money. In the beginning, venture capitalists will not want you. After all, being a financial educator for the poor isn't very sexy. Here are our tips for starting a business.
- Make your idea your idea -- legally. Get the paperwork done for patents and trademarks.
- Know your market. And don't just focus on traditional demographics, such as white males, ages 35 to 45. Dig deeper: What are the buying habits of your customers? What are their families like? Getting that kind of information takes time and money. So partner with universities to do market research.
- Develop an exit strategy from the get-go. Go beyond strictly financial considerations. What is your personal exit strategy? You're not going to want to run the company forever. Step aside when the mission has to change, or when the market need shifts to involve something that you know nothing about. Otherwise, you're going to run your company into the ground.
Starting A Business - Last Few More Questions
- Have you figured out whether or not you could make more money working for someone else?
- Does your family go along with your plan to start a business of your own?
- Do you know where to find out about new ideas and new products?
- Do you have a work plan for yourself and your employees?
- If you have answered all these questions carefully, you've done some hard work and serious thinking. That's good. But you have probably found some things you still need to know more about or do something about.
- Do all you can for yourself, but don't hesitate to ask for help from people who can tell you what you need to know. Remember, running a business takes guts! You've got to be able to decide what you need and then go after it.
A Great Business did not just happen.
It was planned that way.
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