Taking the Plunge and Starting Your Own Business

successStarting Your Own Business – are you ready to take the plunge? Before you do, lets take a look at some things you’ll need and some other things you’ll need to think about.

Starting your own business (company) is what capitalism is all about. Pride, potential, control, ownership – these are all words that come to mind when we think of starting a business of our own. The question is – why do so many businesses fail? Answer: Poor planning.

Answer These Questions Before You Start:

We will list some questions that are generic to most start-ups, the answers are critical to your success.

1) What is the product or service you’re providing?

Is it in demand? Will people pay for it? I watched a few episodes of Shark Tank and noticed a recurring theme. Each of the investors are interested in one thing – making money. Doesn’t matter how interesting or unique the product is. The bottom line is there has to be revenue.

2) Do you have a Reputable Supplier?

Your supplier is just as important as your customer. Here’s the definition of a good supplier “A good supplier is one who meets all customer expectations, with respect to delivery time, quality of goods and dependability.” Now you need some impartial information to find reputable suppliers. You’ll have to do some digging; check with the BBB, online complaint sites, public financial statements. The way to protect yourself, in case your main supplier goes bad, is to do business with at least three suppliers.

3) What about Fixed Expenses?

Forget about positive cash flow for the first several months. Your fixed expenses e.g., utilities, rent, inventory, insurance, need to be accurately accounted for, plus 20 percent for unexpected expenses.

4) Have you calculated Start-Up Costs?

Starting your own business isn’t cheap. Lease deposits, utility deposits, permits, business license, equipment, building modifications (if applicable), insurance – these will be your major upfront expenses.

5) Legal Setup: Paperwork in-order?

You’ll need to seek legal help to decide if your business will be a sole proprietorship, partnership, an LLC, or a corporation. A sole proprietorship business is fairly simple to set-up, and it may cost a few hundred dollars for the DBA (doing business as) paperwork. If you’re selling goods where a sales tax is collected, then you’ll have to get a resellers license from your state. You can try to do the paperwork yourself for the other legal options, but in reality it’s well worth the fee to pay a professional to do it right the first time.

6) Do you have the Capital and Resources?

As mentioned, you need to accurately project your start-up costs and monthly expenses. The experts suggest having 12 months of fixed expenses handy when starting your own business. This should be cash, credit line, or both.

7) Do you know your Competition?

We knew an independent pizza maker who started his own business – he invested $50,000.00. He used top of the line ingredients and charged $35.00 for his pizza. Pizzahut, down the street, were selling pizzas for $10.00. He knew the competition, he knew their pricing, but he misjudged the market and wouldn’t adjust his product to be competitive. He thought people would pay for quality in that area- he was wrong. He went out of business in 14 months; he lost his $50,000.00. Do you have the mindset and flexibility to adjust to your competition?

8) Is your Product in Demand?

Product demand is a formula consisting of: quality, price, competition, and need/want. Simply put – does the product you’re selling meet the needs/wants of the customer your selling to? And is the price competitive with your competition? If your product is unique enough, then price may not be an issue.

9) Did you forget Marketing?

There are “Free” online marketing strategies you can use right now: Facebook, Twitter, and Google. And we emphasize Right Now because the online landscape is constantly changing. Talking in a general sense – testing is your best marketing strategy. Take a small portion of your marketing budget and do sample tests in different advertising venues. Compare the results, and then allocate more money to those avenues that provided the best results.

10) Did you make a website for your online presence?

Everybody Needs an Online Presence These Days. When’s the last time you used the yellow pages? The Internet has made it very, very interesting for business start-ups. With an online presence the World Wide Web will market you across the world. Customers will come to you – All to your website. Here’s an interesting article from Entrepreneur.com on why even the smallest company should have an online presence.

Here’s another reason why – people can test their idea(s) out online, before they take it to as they say “a brick and mortar” level. There are various tools and resources out there to help you keep your online marketing costs as low as possible, for example you can make website for next to nothing. Many aspiring-to-be business owners have started online, found success, and then proceeded to open a store or company offline. If things didn’t workout, then the costs were significantly less compared to signing leases and contracts…not a bad plan.

Of course there are businesses that don’t fit the online mold, but this doesn’t mean they don’t need an online presence.

If you’re moving forward with taking the plunge and starting your own business keep these 10 tips in mind. They’ll help you succeed.

Photo by http://www.flickr.com/photos/rmgimages/

Comments

  1. These are all great things to think about. I’m in the process of starting a business and have been researching like crazy!

  2. Good post John! We went through many, if not all, of these things when we were considering starting our business. One other thing I would add, which is vital, is what are you going to do in order to set yourself apart. This is more than just knowing your competition, but the why behind why someone should choose to do business with you.

    • Very good point John! There are many ways to set one apart from the competition; some will work and some don’t so it’s important to carefully review the value of each.

  3. I started my first business several years ago with no clue as to what I was doing. Needless to say, I failed miserably. I lacked proper planning, capitol, and resources. One of the best free resources I would reccomend to anyone looking to start a business is get in touch with your local SCORE organization. They have mentors that will help you with planning and may be a great chance to network and obtain resources.

  4. All great points 🙂 I especially like the part where you ask, “Do you have a reputable supplier?” It’s a question that not everyone thinks of when they are developing their business plans.

  5. These are all great questions to mask when thinking about starting a business. Another question is “Do you have the time to commit to running a business?”. It is one that many don’t ask and then realize that a business takes a lot of time.

  6. A tip for completing the paperwork to establish the company as an entity – visit the Secretary of State’s website for the state where you will incorporate and look at what others have filed. I was consulting with a friend who is a lawyer and he disclosed that most lawyers do the same. I was prepared to pay him or Legalzoom a few hundreds for something so simple.

  7. I think the tip about suppliers is key and often overlooked. Even if your business is just a website, cheaping out can cost you in the long-run. I started out with a free host and a free subdomain. One day in May I woke up and the host was gone. 6 months later, I had the same problem with the subdomain. I lost more by being cheap than I saved.

  8. Great points! I believe people only think about the product they intend to sell at not about all the underlying factors of starting a business.

  9. As Grayson mentioned above the biggest thing people don’t realize is just how much time it takes to get things started. People think of that friend they know who takes four months of vacations every year runs his own business. They don’t know the amount of time he put in for 15 years and the numerous months in a row where he/she didn’t get paid in order to keep the company running. There’s often a lot of sacrifice involved in the short term for hopefully long term rewards.

    If you’re determined to make that plunge then the questions above are important to ask. The more you plan the better you are likely to do as you will be able to quickly adapt to new obstacles.

    I think the most exciting thing these days is how accessible it is to start a new business thanks to the internet. In a way it’s more daunting because building an internet based business means gaining a lot of new skills you likely don’t have but the advantages in terms of start-up costs, long term employee costs, management time, etc are huge.

  10. Nice, John. Sometimes the most important question to ask is about the demand. Helps to really figure out if your product “fills a gap” in the market. I’m in the process of trying it out myself…wish me luck!

  11. My advice is to take it easy when it comes to expenses. Unless, you have an incredible idea and tons of excess money sitting around you don’t mind losing, minimizing spending any money at all. This can give you the opportunity to test the waters a bit and see if what you are doing is actually something the market has an interest in.

    Obviously the best bet is some type of blog or helpful website, making use of advertising or selling eproducts. The problem though occurs when individuals get too greedy and sacrifice the prospect of a future for the pursuit of instant and monumental profits.

    Stepping off the online world, I would suggest targeting your best chance for success and using an ability you have that is rare. For example, the largest percentage of the population for the next two decades will be the Babyboomers. An example of an ability might be photography for a foreign language.

    If you run out of ideas or hit a road block, consider Kickstarter. If nothing more they are an excellent resource for getting ideas going.

    • Scott, you brought up some good points. It can be easy to waste money, and sometimes not even know you are. One might say you have to get this or get that to succeed when you could have gone a cheaper route.

Speak Your Mind

*