Top Tips to Starting Your New Small Business

Research has shown that more than 50%  of new small businesses fail to make it to their first birthday.  Fortunately, you do not need to part of these grim statistics. 

Many people excitedly plunge into new businesses with reasonable expectations of success. 

While some succeed and build admirable business empires that grow to become the envy of many, most end up in loss and painful failure.. that could have been avoided if only they knew what you are just about to read.

In starting a business, regardless of how brilliant and outlandish your idea might be, it has to be practical to make business sense.  

To succeed, your business proposal must be critically and objectively assessed from various perspectives.

Let’s liken your business idea to a seed. 

To comprehensively appraise the to-be-formed business you must inspect the seed for viability. Viability refers to its ability to germinate. 

That’s not all.

After your business idea has germinated, it’ll require a conducive business environment to support its growth, maturity, and eventual fruition manifested in a sustainably profitable enterprise.

Your Business Idea: The Seed

This is the threshing floor that separates the “wheat from the chaff”. 

You will attempt as much as possible to objectively ascertain whether your idea has a realistic chance of germination in the marketplace.

Your proposed idea may be a thrilling pass-time activity that’s close to your heart. In such a case you deeply desire that it’s turned into some money-making enterprise. 

You are tempted to shield such an idea from objective scrutiny.  

That’s where the real danger lies. You are doing your best to preserve some sacred cows. Impartial judgment would have easily exposed how the idea was doomed to fail from the start but yo desperately wanted it to work. 

When going into business, follow your heart but do not leave your head far behind. Or else you’ll burn your fingers.

Objectivity demands some level of detachment to properly minimize bias in judging business viability.

Your assessment of business viability will be ably guided by observing the following four tips. 

These are a must-have. 

1. Product/Service Marketability

Is there an existing demand for what you’d want to sell? 

Is that demand commensurate with the degree of investment you’re contemplating? 

 

Can you describe that group of people that you believe will buy your product or services? Is the demand seasonal? Is the demand observable and possibly roughly quantifiable?

 

 Is the venture scalable; that is, does it present possibilities for future growth? You can’t project for big business in a sector where the entire present and projected demand will remain negligible, e.g. investing in a product or service that is becoming obsolete.

2. Competition

Won’t it be awesome to begin a business where competition is virtually non-existent or minimal? 

Of course yes. 

That’s what is referred to as a monopoly…or a near-monopoly.

In most cases, that’s a type of business that we can only wish for.

Monopolies are largely found in sectors that are highly regulated by the government, or where the initial capital requirement is astronomical. Such entry barriers are insurmountable to most businesses and only a few dare venture.  

These are sectors such as mining, oil prospecting, and exploration, or national distribution of power that might be regulated in certain countries. 

Back to the business idea you are ruminating. 

I guess it won’t be a monopoly or even a near-monopoly. The likelihood of cut-throat competition for your proposed business may be quite high. In fact, competition is inevitable.

But you can cheer up. It’s not all gloom and doom.

Competition, on the flip side, does confirm that demand exists for the product or service. With that said, you need to consider the degree of competition in that particular sector and postulate your chances of survival.

You’ll need to craft a  penetration strategy: What would you consider as a possible entry-point into the business despite the competition? Would you come in as a producer, distributor, wholesaler, or retail trader? 

What weakness can you spot in the competition and what can you do to gain a competitive edge? Is the weakness in customer experience, delivery mode, or product performance? 

This is extremely important; 

Weakness in the competition is an opportunity waiting to be exploited 

Do not underestimate the strength of your competition; be realistic. Don’t be overzealous.

Be open to the fact that at times, rather than compete directly with some huge company you could offer a support service to them instead. That way you can still do business by becoming part of their value chain rather than attempting the impossible. 

Healthy competition will compel you to innovate and improve your product offering and/or service delivery. And that’s the differentiating factor for any business; a key ingredient for growth. 

What’s the point in all these? Competition is good as it will make you better.

 

3. Sector-Specific Business Challenges

What are the main challenges and complaints in the business line you are considering? 

Do you have a strategy to overcome these challenges? 

What is the nature of these challenges? 

Are they general issues that cut across all other sectors or are deep sector-specific issues they are beyond your control, e.g. weather patterns or an unpredictable regulatory regime that is specific to the business you’re considering? 

Are the challenges financial-based? Do thin profit margins characterize that business line? Do you have a pragmatic cost-management strategy that will enable your survival?

Can you weather the storms and post a profit proportionate to your investment and effort?

One other critical point. 

This can be your lifesaver;

 

Experience is the best teacher. But it’s only a fool who doesn’t learn from the experience of others. Talk to people who have previously done the business and closed shop to further appreciate the challenges in the sector. 

Find out why they failed. 

Of course, balance out heir experiences with those who are successful and have the potential to be your business mentors. The road to business success is paved with those who had the advantage of making informed choices.

Learn and fix your boat, ready to sail…or to make an about-turn as far as that sector is concerned.

 

4. Cash Required to Run the Business

This is where the rubber meets the road. 

For your glittering ideas to be transformed into a business enterprise you’ll need hard cash.

 

What are your cash requirements for business actualization? 

On your list remember to factor these costs;

  • Business registration, 
  • Premise Acquisition and renovations, 
  • Staffing costs, 
  • Purchase of stocks, 
  • A marketing budget 
  • Miscellaneous budget 

 

Do you have all the money needed? 

Explore other possible sources of cash if your finances are inadequate. 

Can you get stocks on credit? 

Banks and venture capital firms are other financing sources you may opt for.

Where financing is sought, are the repayment terms sufficiently flexible to accommodate your repayment ability? Will you have turned around your stocks into profit to be able to restock, cater for your subsistence, and pay back the loan? Do you have a back-up repayment source in case of unexpected eventualities?

You may want to read more on debt financing for your business.

Your Environment; The Person and The Plan

Having considered the seed i.e. the business idea, (you) the person “sowing the seed” into the field of business must possess certain competencies. 

Besides, a solid business plan is a non-negotiable tool to navigate your business cosmos.

  • Personal competencies
  • A business plan

The business will grow in an environment that is aptly described by the Business Plan. 

The plan will be executed by a person who ought to be sufficiently competent to ensure that the blueprint is pursued with diligence until the business begins to bring forth the goods. 

And you are that person!

3 Personal Competencies for Starting A Business

1.Business Acumen

This relates to a combination of soft skills such as communication, negotiation, analytical, and management skills. 

Since these skills are quite subjective there is a tendency of bias in assessing competence in oneself in these areas. 

These are mostly innate traits but you can cultivate and enhance them through association and careful observation. As a potential entrepreneur, you naturally possess these skills but the room for improvement can never be filled.

 

2.Knowledge & skills

Professional knowledge and expertise in the area of business are essential.  One must not be a complete expert to engage in a certain line of business. 

What you fall short of in terms of professional expertise may be compensated for by study, research from numerous on-line resources, reaching out to mentors, on-the-job learning, and employing those who can complement your competencies. 

Successful people have a habit of surrounding themselves with even more successful people. It’s only insecure people who want to shine alone. Good talent working for you isn’t competition against you. It’s your brand enhancement.

 

3. Passion 

One will obviously be more motivated to indulge in a business venture that goes along with their area of passion. You are naturally motivated when you run a business along the line of your passion. Such a business can easily grow as one doesn’t view their input as work but as a hobby.

However, other fundamental financial considerations such as business viability must be considered first. Remember the sacred cows we talked of earlier on.

The gist of business is primarily to make a profit out of a trading cycle and not just to have fun while doing it. It’s not just about you but about providing a solution for your clients. To grow as a business ensure they are just as happy as you are…they’ll come back for more.

A good example is a fitness enthusiast who runs a gym.

Business Plan

“Failing to plan is planning to fail.”

The importance of planning for your business can never be underrated.

Before you can begin operations you will require to plan. Most businesses fail, not for lack of enthusiasm and motivation, but for lack of a proper business plan.  

 

A business plan basically explains what business you intend to do, describing your target market, how you plan to get them to buy your goods or services (marketing plan), and how these activities will generate a profit (financial plan).

 

It explains your plan in a manner that can be communicated to potential investors and creditors. It also provides an opportunity to objectively assess the business feasibility of your idea. 

‘What’s in it for me?” You may ask.

You gain a certain level of credibility before creditors when you have a well-thought-out plan to turn your idea into a profitable venture. It provides them a fair basis for the analysis of your business so as to make an investment or credit decision…in your favor.

Moreover, a  proper plan attracts the right human capital that can produce the desired synergies to actualize it. It points out where and which human resources will be required and applied. 

Ensure you have a business plan before you start.

 

Conclusion

When starting out a new small business you need to make considered steps and take calculated risks before you begin to commit resources to an idea.

Regardless of how glamorous your idea is, you will thank yourself later when you look back to a trail of well-informed decisions based on sound judgment and solid business plans. 

The business environment is dynamic. 

That means that even with the best plans surprises and the unexpected will still happen, and even business failure may still occur, but you’ll be better prepared to handle the eventualities and forge into the future stronger.

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