Your decision to start a new business has been made. Now what do you do? Sometimes it’s a bit overwhelming to look at where to really start the process. Do you look for the location first? What about an estimate on how much it will cost? Should I secure the product agreements before I find the markets? Should I pre-advertise or just make an announcement? Who should I hire first, if anyone at all? There are hundreds of similar questions which confront the new business start-up.
After 30+ years of opening new businesses and analyzing existing businesses, I’ve put together a practical guide for the beginning steps to starting a small business. Whether you, as an new entrepreneur, buy an existing business, or buy a franchise or perhaps start a home based business, the business planning resources are the same. What is different are the business strategies, upfront costs, business opportunities and step by step instruction available to start a small business venture.
So lets get right to it. Everybody tells you to start the steps with a business plan. Well that’s all very nice, and you will need it for sure, but let’s get organized first.
*Step 1. Get some file folders and label them as follows:
– Product – Anything having to do with what your going to sell or service.
– Finance – Where’s the seed money coming from, cost estimates, where’s the money going.
– Receipts – Any money you spent thus far.
– Organization – Exactly what form is this new enterprise going to take.
– Ads & Marketing – Anything new ideas with generating revenue for the company.
– Government – Permits, license, new business tax info etc.
– Strategy – What is this new company all about and how are you going to do it.
– Locations – Are you leasing space, Realtor information – or DNS if Internet based.
– People – Who all is involved and what is their participation, partners, joint venture.
Use these folders to file every bit of information you’ve collected on starting your new business. If you need other categories, then make them up as needed. But try to think in terms of less files and not more. It’s easier to find and your mind will quickly adapt to the organization.
Once you’ve assembled the information the next step in starting a new business is due diligence – a legal term used to determine if everything that was offered is in fact, real. But the same practical approach taken when buying a business can be used when starting a new business. Use the information you’ve already gathered to lay out the realistic size of your market and the revenue you expect to receive on a monthly basis. If your income is sufficient to cover whatever costs you expect from running the business operation then you can continue to the next step. If not, then you need to expand your market, change your product, reduce your costs or start over. Let’s get real here. Be Smart.
Now you can put together a complete business plan which will include the following:
a. Statement of Purpose (some call this an Executive Summary)
b. Market Analysis – Expand this further using the information in step 2 and really get into the details of how you plan to approach the market for you new product or new service. You should also really get into primary and secondary competitive markets.
c. Business Description – What exactly are you trying to do and how do you plan to make money from your new start-up business? Layout a few paragraphs about the overall concept of your new venture.
d. Organizational Setup – what type of business are you going to do. Will it be a sole proprietorship, a corporation, a partnership? Who is involved, what are they going to contribute, and how much will they own? What will the management structure be like? Who answers to who? You need to get this stuff addressed in the beginning or else it will be a complicated factor later.
e. Sales and Marketing. The details here cover all areas, even those that are not practical the first year or two. You need a variety of methods to execute and sustain your sales. Make sure you know everything your competition sells and how they sell it as well.
f. Products. Layout all of the products or services that you are going to sell for your new business.The details (actual products names and sizes etc.) can be put into an addendum at the back of your new business plan. But the overall package of what your are selling should be justified.
g. Capital requirements – How much money is it going to take to start and operate your new venture less the amount of money you currently have available to put into the business. How do you plan on getting the rest of the money – if you need it? Many people start small by using their credit cards for finance. Don’t forget to include your living expenses for at least six months.
h. Financials. This is where all of the accounting and cost analysis for the new business is located. A break-even analysis, cost analysis and projections for the first 3 years should give you a performance standard to judge whether or not you are meeting your goals.
i. Addendum: This covers everything else that may be important for your business operation. Include lists, phone numbers, mentors, useful web addresses, accounting details etc.
Evaluate all of the information you’ve assembled. If the business venture looks viable, then give it to someone with experience in business or someone you trust, or perhaps your banker, accountant or attorney, and get a second and third opinion. Consider their suggestions and correct any errors. Use their expertise right from the beginning.
This is the just the beginning steps to starting a new business. There is a lot more to do, but once you get through this, I’ll have a lot more for you to do.
Now, should you decide to buy an existing business from someone, then you still need to go through all the beginning steps. The information will come a lot easier since there should be financials, trade secrets etc. readily available.
If on the other hand you decide to purchase a new franchise, the franchiser will provide almost all of the information in general terms. You will still need to get specific about your particular market.
The easiest and last option is to start business online. The costs are so inexpensive and the market so large, that the four step process will be shortened by about 70%. You still need to do all the steps, but because of the costs involved, the time frame is much quicker.
Refer to your business plan often to make sure that you stay on course. If done correctly, there is no reason for you not to be successful in your business operation.
* If you are starting an Internet business than create folders both on your computer under “name of the business”. The same goes for your email program. Any receipts, for instance, from purchases online can and should be kept together rather than scattered all over your hard drive. If you’re doing different projects, keep each in the same XL file, label and add “sheets” as needed.