Before You Start
Before you start a small business or contemplate going into business for the first time you must ensure you concentrate on certain areas to determine if your idea represents a real business opportunity and if you really know what you are getting into. Perhaps the most crucial problem you will face after expressing an interest in starting a new business or capitalizing on an apparent opportunity in your existing business will be determining the feasibility of your idea.
Getting into the right business at the right time is simple advice, but advice that is extremely difficult to implement. The high failure rate of new businesses and products indicates that very few ideas result in successful business ventures, even when introduced by well established firms. Too many entrepreneurs strike out on a business venture so convinced of its merits that they fail to thoroughly evaluate its potential.
The simple rules are:
- Make sure you communicate what the business / product / service does
- Talk in a language your audience will understand
- Communicate the core feature(s) only - the ones that really make you stand out from the crowd
- Be concise
Following these simple rules will help you make a good first impression on any prospective customer, which given the eternally competitive landscape, can be the difference between failure, mediocrity and success.
Before You Start - Try Before You Buy
The opportunity to try out your entrepreneurial skills without starting a business has never been greater.
Just try some of these;
- Get a free web-site and try and sell something, anything. We use a white tee-shirt as an example. Set up a web-site and sell white tee-shirts, think about how to do it, think about the problems with such a simple product. You will learn more in a week than you would believe.
- Write about something you know about. Life with your kids, gardening, getting your hair-cut at 43, eating pies, kissing someone of the same sex, your favourite group, team. Comedienne, fruit etc – and now sell it to someone.
- Get a stall at the local car-boot or flea market and sell anything. Spend an hour talking to anyone who passes, spend an hour only talking to women, only talking to men, only talking to kids.
- Go to the market and buy stuff – anything. Then get your own stall and try to make money
- Go to the market and buy old looking stuff and then spend a couple of week-ends trying to sell it to antique shops
- Make some food and offer it to local cafes and pubs
- Knit, sew, build, construct, nick something off of kids tv. Make something and sell it.
When you do these things ignore how much money you make. Do not judge success by money, make yourself spend 15 minutes, no more, and write down what you enjoyed, what you hated, what you learned, what confirmed what you already knew. Believe it or not – you have started writing a business plan.
Let me prod you, though not too much, about what you are looking to learn. Do not assume you are learning about how people react to you, how did you react to them. If you wrote a web-site or article how did you structure it? If you did not write anything, spend 15 minutes writing about your favorite food and why you like it. Re-read it, trying to make it interesting for someone else – that’s marketing.
- Selling. Do customers handle the negotiations or do you? What happens if you control it, what happens if they do? What do they want, the product, service, a friend, an accomplice. Keep a list and categorise – Men, Women, young, old, well-dressed, tall, short and see whether different people handle negotiations differently? What will you learn? Find out.
- Cash Management. Record everything. Make yourself do it. How much it cost you buy, where you got it from, cost of making it, time to write it etc etc. Make yourself record things – don’t like it, then don’t run a business
- Pricing. First lesson I’ll give you. People will tell you that the price isn’t right, do not assume they are telling the truth. Buyers are dishonest, you will never find out why people are not buying from you, but you can find out why they are buying. Ask. If more than half the people tell you, because the price is right, put your prices up – it’s only an experiment, see what happens. Make yourself spend a day sticking to your price, whatever it is, then spend a day taking any reasonable offer. When did you take more money, but when did you make most profits?
- Location. No-one goes there any more, it’s too crowded. Use the biggest market you can, send your writing to the biggest publishers / papers first. You do not want to run a small business, don’t act that way.
- Competition. Watch someone and then copy them. Do what they do, act like them, sell the same stuff with them. Did you do better or worse? It is easy to assume that other people can do it better than you or that I must be myself to succeed, actually the truth is in between.
At the top of your daily list write good or bad. Good day or bad day. Now try and read the lists for good and the lists for bad, it is easy to assume that you know why one day was good and one was bad – you might be surprised.
Also if you want a window-cleaning business or a garage or anything you might be wondering how this help. Let me assure you, businesses are all the same, only products are different.
Before You Start - Can you explain your idea in a sentence?
- Your idea
- One sentence
In business the ultimate goal is to convince prospective customers, preferably paying ones, that your business is the one with which they should engage. In order to make that compelling case for your business, it is clearly necessary to make sure your customer and targeted market segment understand what you do and the benefits and value you offer.
Therefore, explanation is obviously important. However, where many businesses lose out is in their clarity of explanation. Simply state what your product or service is, and what it will do for the customer.
The concept you are describing is an idea. It is a concept; a notion; a form of value. Unless this is the central characteristic, it is not the execution of the idea that you want to get across. Your implementation of the idea - the 'employing engineers' part - adds nothing to the communication of the idea, which is intended to convince customers to buy from you.
So anything which really adds to the interestingness of your idea ought to be noted. If you maintain elevators using a pay as you go subscription model, which is an unusual revenue model for that industry, then be sure to mention it.
The idea here is to prevent you from waffling, adding in little nuances and details and long stories.
There is a well-espoused theory, called the Curse of Knowledge, which states that once we know something, it becomes impossible for us to imagine not knowing it. Why is this relevant? Well, you might understand and be terribly excited by your brilliance but the chances are your prospective customer will not. So if you were to, when asked what your company does, begin describing the loving care you provide, the chances are you will lose the interest of even the most forgiving listener.
So be brief.
Before You Start Checklist
This checklist should be useful in evaluating your business idea. It is designed to help you screen out ideas that are likely to fail before you invest extensive time, money and effort in them.
A feasibility study involves gathering, analysing and evaluating information with the purpose of answering the question: "Should I go into this business?" Answering this question involves a preliminary assessment of both personal and project considerations.
The first questions ask you to do a little introspection. Are your personality characteristics such that you can both adapt to and enjoy small business ownership/management?
Answer the following questions with a YES or NO.
Where the answer is NO, you have some work to do!
- Do you like to make your own decision?
- Do you enjoy competition?
- Do you have will power and self-discipline?
- Do you plan ahead?
- Do you get things done on time?
- Can you take advice from others?
- Are you adaptable to changing conditions?
The next series of questions stress the physical, emotional and financial strains of a new business.
- Do you understand that owning your own business may entail working 12 to 16 hours a day, probably six days a week, and maybe on holidays?
- Do you have the physical stamina to handle a business?
- Do you have the emotional strength to withstand the strain?
- Are you prepared to lower your standard of living for several months or years?
- Are you prepared to lose your savings?
Are you a suitable person to run the new business?
- Do you know which skills and areas of expertise are critical to the success of your project?
- Do you have these skills?
- Does your idea effectively utilize your own skills and abilities?
- Can you find personnel that have the expertise you lack?
- Do you know why you are considering this project?
- Will your project effectively meet your career aspirations?
The next three questions emphasize the point that very few people can claim expertise in all phases of a feasibility study. You should realize your personal limitations and seek appropriate assistance where necessary (i.e. marketing, legal, financial).
- Do you have the ability to perform the feasibility study?
- Do you have the time to perform the feasibility study?
- Do you have the money needed to have the feasibility study done?
Before You Start - General Project Description
Briefly describe the business you want to enter. _____________________________________
List the products and/or services you want to sell. ____________________________________
Describe who will use your products/services. _______________________________________
Why would someone buy your product/service? _____________________________________
What kind of location do you need in terms of type of neighbourhood, traffic count, nearby firms, etc.
List your products/services suppliers. ______________________________________________
List your major competitors - those who sell or provide like products/services. ______________
List the labour and staff you require to provide your products/services. ___________________
To determine whether your idea meets the basic requirements for a successful new project, you must be able to answer at least one of the following questions with a "yes."
- Does the product / service / business serve a presently unserved need?
- Does the product / service / business serve an existing market in which demand exceeds supply?
- Can the product/service/business successfully compete with existing competition because of an "advantageous situation", such as better price, location, etc.?
Before You Start - Do you know the answer to every one of these question?
- Why will this business succeed?
- Why is this product or service useful?
- What will the product do for the user?
- What is the expected life cycle of the product?
- How do advances in technology affect your product and business?
- What is the product liability?
- What makes this business and product unique?
- Does the product meet a specific need or perceived need of the customer?
- Does the product have brand-name recognition?
- Are there repeat uses for the product?
- Is this a high quality or low quality product?
- Is the consumer the end user of the product?
- Are there any substitutes for your product?
- Do you lease or own the property/facilities?
- What are the terms of your lease?
- How much do you owe on the mortgage?
- Are the facilities adequate for future expansion based on your business plan?
- Will the expansion require relocation?
- Who owns the patent?
- What licensing arrangements have been made between you and the patent company?
- Does anyone else have a licensing arrangement? If so, how does this impact your company?
- Why does this business have high growth potential?
- What makes this business situation special?
- Does this product have mass appeal or single large buyers?
- How large is the customer base?
- What is the typical demographic of your customer base?
- What are the current market trends?
- What are the seasonal effects in your industry?
- What advantages does your competition have over you?
- What advantages do you have over your competition?
- Compared to your competition, how do you compete in terms of price, performance, service and warranties?
- What is the lag time between initial buyer contact and the actual sale?
- How does your company and product fit into the industry?
- What are the keys to success in your industry?
- How did you determine total sales of the industry and its growth rate?
- What industry changes most affect your company's profits?
- Who is your competition?
- Do your competitors have an advantage due to equipment?
- What makes your business different?
- Why will your business succeed when it must compete with larger companies?
- How do you expect the competition to react to your company?
- If you plan to take market share, how will you do it?
- What are the critical elements of your marketing plan?
- Is this primarily a retail or industrial marketing strategy?
- How important is advertising in your marketing plan?
- How sensitive are sales to your advertising plan?
- How will your marketing strategy change as the product/or industry matures?
- Is direct selling necessary?
- What is the capacity of your facility?
- Where do you see bottlenecks developing?
- How important is quality control?
- What is the current backlog?
- Is the product assembly line based or individually customized?
- What are the health and safety concerns in producing this product?
- Who are your suppliers and how long have they been in business?
- How many sources of suppliers are there?
- Currently, are there any shortages in components?
- How old is your company's equipment?
- What is the yearly maintenance costs?
- What is the current research and development?
- What is the annual expenditure on R&D?
- How does R&D impact future sales?
- What type of business experience does the management team have?
- Are the members achievers?
- What motivates each team member?
- Can the team accomplish the job outlined in the business plan?
- How many employees do you have?
- What is the anticipated need in the immediate future?
- Where does the labor supply come from?
- What is the employee break down, i.e. full time, part time, managerial staff, support staff, production/service?
- What is the cost of training?
- Is the labor force primarily skilled or unskilled workers?
- Is there a union and what is the company's relationship?
- What are your capital requirements over the next five years?
- For what will the capital raised via the plan be used?
- What is the exit strategy? (How will investors get their money out?)
- What return on investment can the investors expect?
Many are painfully aware of weaknesses that hold them back and yet, surprisingly, they are unaware of their strengths. Focusing on our weaknesses while ignoring our strengths can be a source of discouragement and failure.
Of course glorifying our strengths while ignoring our weaknesses can be equally unproductive!
It is only when we give equal weight to our strong points and faults that we can realize our potential. Also note that we must choose our employees, colleagues and partners carefully because each relationship nurtures our strengths and weaknesses. That is, we will grow better or worse, depending on whom we spend our time with.
Before You Start - Identify Your Weaknesses
We all want to be powerful. By powerful, we do not mean ruling over others, but ruling over ourselves. How can we reach our dreams unless we first master ourselves? This is why understanding and managing our weaknesses is so important. The first lesson, then, is to remember that weakness means the absence of power. The question we have to ask is not "do I want to overcome this weakness?" but "do I want to be powerful or powerless? "
Weakness is nothing to be ashamed of; it is part of human nature. We are not dealing with a moral issue, but a practical one. That is, we want to know what works. What will help us reach our goals? It is not weakness but strength that will take us where we want to go. So, we need to identify our weaknesses and overcome or manage them.
Yet, we also have to realize that we will never overcome all our weaknesses, nor should we want to. For weaknesses are important. They help each of us to become a unique individual. You see, it is not only the strengths of others that make them appealing, but their weaknesses as well. We relate to their flaws and root for them because we, too, are imperfect. And as we open up and expose our weaknesses to friends, we develop intimacy, strengthening our relationship.
Although we are painfully aware of some of our weakness, we fail to acknowledge others. Yet, the first step in overcoming any weakness is to become aware of it. So, how do we detect character flaws that are hiding in the background? A good way to start is by monitoring your negative emotions. Are you angry, vengeful, resentful, jealous, envious...? They all point to weaknesses that you can work on.
What should you do after finding your faults?
Change those you can. The important thing is not overcoming them, but the strength we gain in doing so.
- Accept those you cannot change.
- Regularly come back to the ones you can't change, for what you can't do today, you may be able to do tomorrow.
- Embrace those you cannot change because it is what makes you unique. If everyone were perfect, everyone would be the same, and we would live in a dull world.
- Use your weaknesses to develop compassion. Since others have to tolerate your faults, it is only fair that you tolerate theirs. Also use your flaws to learn new coping skills and strategies. In other words, use your weaknesses to find new strength.
Example weaknesses (in case you are struggling to find any!)
Envy. If you envy (or admire) someone, that is useful information. It points to the person you would like to become. So make that your goal. You can even ask the person you admire how you can become more like them. They may not only be happy to help, but may develop into an important friend.
Anger and resentment - "confront the dark parts of yourself, and work to banish them with illumination and forgiveness. Your willingness to wrestle with your demons will cause your angels to sing. Use the pain as fuel, as a reminder of your strength."
Ingratitude. Failure to be grateful for what we have prevents us from being happy, weakens relationships, and blocks more good from entering our lives. Live with a grateful heart and you will live a long, happy life.
Arrogant. People who think they know it all weaken themselves because they stop learning. They are also easily hurt by the criticism of others. The paradox is they become weak because of their fear of appearing weak.
Gullibility. To accept as true whatever one reads or hears without questioning the facts may leave one misinformed, ignorant, or open to manipulation by others.
Insecurity. To be uncomfortable with insecurity is to be uncomfortable with life, for insecurity is the nature of life. If you need to satisfy your hunger for security, rest with the assurance that although you cannot count on others or the world, you can always count on yourself. So, use your feelings of insecurity as a catalyst to develop self-reliance.
Failure. Failure is not possible unless one stops trying. Its cures are perseverance, patience, commitment, flexibility, creativity, and solution-oriented thinking. "There is no failure except in no longer trying. There is no defeat except from within, no really insurmountable barrier save our own inherent weakness of purpose."
Boredom. Boredom is a lack of interest in doing anything. It's equivalent to feeling life isn't interesting. Whenever you are troubled with boredom, rather than asking yourself why you don't feel like doing anything, ask what you should be doing. Why? Because what you should be doing is what you really want to do. The reason why you're not doing it is not because it isn't interesting, but because your subconscious has created a wall of resistance that is blocking you. .
We all have strengths. But we cannot just smugly sit self-satisfied like a cheshire cat. Rather we need to further develop our strong points because it's a matter of using them or losing them.
"Our real problem, then, is not our strength today; it is rather the vital necessity of action today to ensure our strength tomorrow."
How strong is an ant? Scientists in Krakow, Poland were astonished to see an ant holding a dead bird in the air weighing 500 times more than the ant. That would be equivalent to a 200-pound man holding 50 tons in the air. You, too, have enormous power at your disposal, but it is often overlooked and neglected. I'm referring to the power of commitment. With it you can make the 'impossible' possible. People do not lack strength; they lack commitment. And if you cultivate it, you will be laying a firm foundation for success.
It is a sign of strength to be weak, to know it, and to manage it, but a sign of weakness to be unaware of our faults and mistakenly believe we are strong. Oddly enough, many people are unaware of their many strengths. It is important to recognize our inner resources, for until we do, we will fail to use them. The sad fact is a strong person unaware of his strength is no more useful than a weak person.
How can we make sure we are not overlooking our strengths? A good way to identify personal strengths you have overlooked is to ask yourself a series of questions, such as the following.
- Do I hunger for success?
- Do I set goals and am I eager to take action to realize them?
- Am I excited by life?
- Am I curious?
- Do I love adventure?
- Do I live courageously?
- Do I like to support others, lead others, or both?
- Am I patient?
- Am I a risk taker?
- Do I get along with others?
- Do I look at the pros and cons before acting?
- Can I depend on myself?
- Do I encourage others and offer praise where it is due?
- Do I respect and learn from others?
- Do I see the potential in others and in myself?
- Do I control my emotions or do I allow them to control me?
- Do I balance work and recreation?
- Do I look after my general well- being or do I neglect myself?
- Am I organized?
- Am I a visionary and see what others miss?
- Do I have a positive outlook?
- Am I a peacemaker?
- Do I empathize with others?
- Am I interested in what works and what doesn't?
- Do I embrace change or do I prefer the status quo?
- Do I love to learn and apply new things?
- Am I a thinker, planner, and doer?
- Do I always strive to do my best?
- Am I gentle and kind?
- Am I generous?
- Am I understanding and accepting?
Before You Start - Weaknesses Becoming Strengths
Once we become aware of our strengths, we need to regularly monitor them, for unless we are careful, they could turn into weaknesses and halt our progress. Here are some examples of what i mean.
1. Self-confidence is good, but when we are too confident, we stop learning.
2. When we are overly concerned about personal problems, we become blind to the problems of others.
3. It is good to be prudent, but unless we are willing to take risks, we cannot go very far in life.
4. Decisiveness is a strength, but guard against stubbornness.
5. Striking while the iron is hot is a positive trait, but acting rashly can lead to a downfall.
6. Self-discipline can lead you to expect too much of others.
7. Thoroughness is good, but it can turn into perfectionism.
8. It's good to be supportive, but not when you conform to every wish of others.
9. If you are too patient, things may never get done.
10. Diplomacy helps, but not when you allow others to take advantage of you.
11. Self-starters sometimes have problems working harmoniously with others.
12. Decisiveness is a strength, but not when you fail to consider other viewpoints.
13. Determination is a strong point, unless one is headstrong, one-sided, and aggressive.
14. Being a good speaker is an asset, unless one talks too much.
15. Enthusiasm is contagious, but enthusiastic people can come on too strong.
16. Creativity and an active imagination make some visionaries and others unrealistic dreamers .
Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help in preparing your cash flow and income statements and your balance sheet. Your aim is not to become a financial wizard, but to understand the financial tools well enough to gain their benefits. Your accountant or financial advisor can help you accomplish this goal.
There is one other obstacle which often kills an idea. Most people, when contemplating starting a business, manage to
convince themselves, or are led to believe, that it is necessary to have tens of thousands to invest in the new business.
Sometimes this is true, but most of the time it is absolutely not true.
Leaving aside businesses which require masses of specialist equipment, such as manufacturing widgets or airlines, funding only really affects the ability of the business to scale quickly. Funds might be able to launch a widespread marketing initiative, or pay teams of third-parties to develop the product in order to get to market more quickly, or generate more customers in a shorter space of time. But these are only factors of growth. They do not influence the actual starting of the business the first place.
Put it this way: more funding equates to higher expectations for bigger, earlier success. However, if you can lengthen the timeframe to riches, you can still create wealth and success on limited funds for most business ideas.
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