Many businesses are started with great planning and meticulous attention to detail in relation to strategies, time-frames, financing and goals. Others are started as hobbies or interests and these flourish into profit making companies.
The first thing we would like you to consider is if you would actually like a business or not. Here are some of the pros and cons:
Pros and Potential Benefits
- Be your own boss
- Work times that suit you
- Work in an area or discipline that you are fond of
- Have the respect of being a business owner
- Control your own destiny
- Learn about business, financing, strategies, accounting and more
- If you are successful, your income could be huge
- Have the potential to ‘exit’ and retire early
Cons and Careful Considerations
- You must be successful to make profit
- Running a business can be stressful
- Where will the finances (cash flow) come from to start the business?
- How do you promote your business?
- How do I create a business plan?
- How do I get investment?
- Liability considerations
- Insurance costs
- Overheads such as premises, utility costs, staffing, stock, IT equipment, vehicles etc.
Now that you have considered some (and certainly not all) the benefits and negatives of running a company, now you must consider your strategy. If you are planning to grow your business, we suggest that you create a business plan. There are several companies that can do this for you. The complexity and level of detail needed depends on your business, the niche, your personal circumstances and whether external investment is required. External investors often like to see a well-prepared plan so that they know that you have thought of most factors that impact on your business as well as clearly seeing projections so that they can make an informed decision about their return on investment.
Many very successful businesses start as side-line ‘bedroom business’ that often run alongside a standard job until they have matured into a venture that can sustain itself and a wage that will cover the bills. We (and many others) actually recommend this approach for people thinking about business. Never overwork yourself, but having a side-line that you can run as a hobby that may explode into a profitable business can be a great way to spend some of your free time. This way, there may be less up front monetary risk than starting a company that you plan to be considerably profitable from its early days. Also, as you experiment, there will be less need for a complex business plan, at least until you are at the stage that you wish to grow your business.
We cannot go in to every business type here, but there are several simple business skills and models that can be applied to most start-ups.
Look at the market. Consider the market size.
How many people or organisations would use your service or purchase your items. Are these people still using/buying or has the market already been satisfied/saturated? Is there a gap in the market than could be filled? If so, conduct a SWOT Analysis to analyse the strengths, weaknesses, opportunities and threats before making a decision.
What is the current exchange value of your products or services?
This means how much is your market willing to pay for your products or services. If you are too expensive, the market may seek more cost-effective solutions, if you are too cheap, you may lose out on a margin that results in profitability. You may choose to have a higher price, but this must be matched with a premium service or a unique selling point (USP) that differentiates you from your competition.
How much does it cost to supply your products or services?
This is an aspect that is often overlooked. Considering physical goods, the costs of storage, packaging materials and shipping fees can eat into your profits. Always have realistic projections here. Also, if you provide a service, what costs are associated? You may think that it is great to charge $400 per day for your service, but if a hotel is needed and travel costs are incurred, what is the resulting reimbursement for your time/service.
How much does it cost to market and create awareness of your product/service?
Advertising and awareness is usually an essential part of marketing most service and retail firms. Consider costs associated with online marketing, newspaper adverts, adverts in local publications, TV, radio advertising etc. Marketing often consumes a huge amount of a company’s revenue.
Is your company brandable or will branding be irrelevant? If brandable, how do you create a brand?
If you make one-off sales or provide a service that does not require any aspect of loyalty, a brand may not be your primary focus. If you would like (and relay on) repeat customers, a brand may be something to consider early on in your business planning stages. Brands can be anything from your name, your companies name, trademarks (registered or not), logo etc. A brand is something that is recognizable to your venture. There are two main types of brand, which are symbolic and functional. Often an overlap of symbolic and functional may be required. Designer clothing brands are often symbolic because they create a premium based on their symbol and all the glamour/positives associated with that symbol. There may be an element of quality associated, but most designer clothes do not serve a daily function beyond brands that are not considered designer (unless you are a model or in the fashion industry etc.). Other brands convey an element of functionality above symbolic attributes. This may be applicable to brands in the construction industry or motor industry for example (although there are also many symbolic brands in the motor industry – sports cars for example – were thinking more tools used in the motor industry). We do not want to mention brands specifically, but we are sure that most readers can use their imagination to think of examples here.
What are the logistics costs e.g. getting the product or service to your customer?
Do you need transport of large goods? Are their varying costs depending on the location of your customer? How can these costs be charged or absorbed? Even if the item required simple shipping, these costs can soon mount up and everything needs to be considered thoughtfully.
What is the supply chain process? What needs to be in-house and what can be outsourced effectively?
How are the input goods or requirements for you to provide a service converted into what the customer receives? What are the costs involved? How many stages are there and how many other companies may be involved? Is there a chance that one link of the supply chain may fail or become a bottle neck – what would you do to manage this? Do you need your own transport facilities or can you use the services of external logistics teams to cost effectively supply customers?
How do you deal with returns and complaints? Also, what are the legalities (e.g. distance selling acts etc.).
Returns are bad. Complaints are bad. However, both are to be expected and will likely happen. Always be professional and try to resolve these to your customers satisfaction (or advantage). This is especially important if your business relied on repeat custom or there is a chance that a review may be seen by others.
What are the resources to help you?
Use search engines to find business help and articles. You could also enroll onto a business course to help you. This may not be a MBA, but all business help could be beneficial for you. Check out this resource for business information. Find out of there are local initiatives (sometimes government or local authority supported) to help you start your business. Do not be afraid to ask for help. Knowledge has value and you gain knowledge from others who have had past experiences that may be applicable to your venture.
Also, read books. There are many books for sale that help you with advertising, business start ups, understanding web platforms etc. Some second hand books can be available at little cost. Modern practices have changed, but many fundamentals of finance and accounting have not. Do not be afraid to purchase some books second hand. The more knowledge you have (as long as it is from a legitimate and relevant source), the better.
This article aims to make you think about some of the aspects relating to starting a business and whether it is right for you and whether there is a good possibility of it being viable. These are by no means exhaustive and we recommend that you look at the resources mentioned and consider other resources available to you before making any decision. Talk to people that have business and test your ideas among close friends (without disclosing any intellectual property that needs to be kept secret until the business starts of course). Never take any action without first checking that it is suitable. Businesses can lose money as well as gain money and you should always be prepared as necessary. Risks are often part of business, but never take risks that may be severely detrimental to yourself. Ask an experienced business owner, accountant, adviser or other professional before taking actions that may be detrimental.
Thank you for reading thus super useful stuff about business start-ups. This is not intended to replace professional advice, but has hopefully made you think about your next steps and the appropriate placed to seek assistance before making your next move.