Many people are worried about starting a business. Some believe that their only alternative is to start their own business, since the economic situation or the state of unemployment leaves them no alternative; there are those who have a great idea or product and would like to start their business; and there are also those who do not feel comfortable with their current job or boss and think they could do better work by their side.
The steps to follow to start your business.
Whatever your reason or motivation to start a business, there are certain steps that should follow:
First and very important is that they understand and learn what a company is with all its components as well as the advantages and disadvantages of being an entrepreneur, and the procedures to follow.
It is also very important that they research and learn everything they can about the business they want to undertake, starting with defining their market, in other words, who are potential customers and why they would buy from you the products or services instead of the competition , also investigate all the formalities, licenses and requirements to establish your company, in some cases a deficient investigation can cause great problems.
This reminds me of two cases of clients who came to my office for advice:
The first was an entrepreneur who opened her beauty salon in a small shopping center, had invested and worked very hard to modify and decorate the place that rento, and a few days after opening the doors closed the street to break the pavement and make some changes to the pipes or drainage, as you can imagine after this start without traffic of cars or many people is very difficult to build a business.
The other case that I remember is someone else who also made very strong investments to install a special equipment for his business, and when he wanted to get his business license the city refused it until he met certain requirements that he had not considered or that he he did not consider it necessary, these changes and plans that he had to present cost a lot of money, which he did not have, and after several months and having thought until he declared bankruptcy before opening his business, he could with much effort borrow money to pay the plans and make the modifications.
The only thing I want to point out with these examples is the importance of research before even signing or investing in something for our business, of course not all cases are like this, but I do want to emphasize that they should ask and plan their companies to avoid headaches and loss of money due to poor planning in initiation.
WHO SHOULD NOT START A BUSINESS?
On one occasion they asked me if anyone could start a business.
This was my answer: NO. Well, the truth is that YES, anyone can start a business, now that if you ask me “anyone can be successful in a business”, my answer would again be NO.
But before I go on, I want to apologize for sounding a little negative, but in my experience, as well as several years of experience as a small business consultant and especially teaching classes, seminars and courses for entrepreneurs, I have observed that many people start their businesses and fail before finish the first year.
A statistic by the government agency “Small Business Administration” (SBA) says:
“EIGHT of every ten people who start a business, FAIL in the first year.”
The Causes of Business Failure
Having collected information from the SBA agency, read books on how to start a business and talked to other small business consultants and in my own experience I have found that there are many causes why people fail. Here I mention some of them, the more general, as there are also specific causes of each type of business and even personal causes.
Among the most common causes we have:
- People do not have any idea that it is truly having a business
- They do not have enough experience in the business field they start. Sometimes they start a business because their uncle or friend is doing well.
- They advise people who do not have knowledge and experience, or rather are “poorly advised”
- They rush to start because they let themselves be pressured by someone, such as the one who is going to lease the premises or who is selling the equipment or a franchise
- They do not have and do not calculate the money needed to start and sustain the business.
- They do not have money to live in person.
- Do not create or have the money for an advertising budget.
- They believe that by opening the door people are going to snatch the products or services: they believe that with 1,000 fighters they put 300 people will be running.
- Over estimate sales and underestimate or mis-pricing expenses.
- They do not want to pay accountants, lawyers or business consultants, real tax experts (with all due respect not even all accountants actually know business tax) and then end up in trouble. Have you heard about “Cheap is expensive”?
- SOCIETY, well I can tell you, unfortunately the vast majority of these fail, no matter if it is between family or friends, if they do not have the same values, beliefs and are well, but clear the rules of the game and have not developed a contract between partners, this afternoon or early and it is almost always earlier that the problems and differences begin and then comes the “divorce.”
And other causes…
These are some of the causes why people should NOT start a business.
But do not worry, the solution is simple, it makes a GOOD business plan and a business plan.
Because someone can prepare a bad business plan and you will go wrong all over.
STEPS TO START A BUSINESS
First, the most important thing in the process of establishing a company, whatever it is, is planning. We should ideally develop a business plan before investing or signing any document or contract.
But what is a Business Plan?
The business plan is a writing, with all the information in an organized and detailed way, of the steps that we are going to follow, to achieve our goals, our dreams.
Here is the content of a business plan:
#1 PURPOSE OF THE BUSINESS
#2 TYPE OF BUSINESS
#3 KNOWLEDGE OF YOUR CUSTOMER
#4 LOCATION OF YOUR BUSINESS
#5 THE COMPETITION
#6 THE ORGANIZATION AND ADMINISTRATION
#8 PROCESSES AND PROCEDURES
#10 LICENSES AND PERMITS
#11 SUPPORT INFORMATION
PURPOSE OF THE BUSINESS
When we talk about the PURPOSE OF THE BUSINESS we must write a little about the dream we have, what we want to do or start, for example maybe we want to start a business selling children’s clothes, from newborns up to eight years, etc. here we should continue to describe everything we want for our business, with information in general.
The second point to develop is the TYPE OF BUSINESS, now we will start to put more detailed information about our business, such as:
#1 The name we want to use
#2 The products or services we want to offer
#3 The experience and knowledge we have in relation to this type of business
#4 The trends of this industry in general
#5 Existing opportunities and threats for these businesses
Some of these points may be answered by you and others should be investigated, perhaps through the Internet, libraries or by means of chambers of commerce, associations or publications, preferably related to our type of business or industry.
Once researched and analyzed these points we must have a good idea of the general situation of our business within the economic, social and political environment.
KNOWLEDGE OF THE CUSTOMER
All points contained in a business plan are very important, but one that should have more attention is the knowledge of its clientele.
All the services and products on offer exist because there is a need in the market for them, and those people who need and can purchase the products or services we want to offer are our potential customers.
Without these customers (market) our business literally can not exist: they are the ones who are going to give life and movement to our company; it is they who with their purchases are going to give us the economic support to pay rent, salaries, expenses and something extra which will be our profit.
For these reasons we must take special care in our customers and respect them to continue to acquire our products or services.
It is also very important to know who they are, where they are, what they do, why they need these services or products, etc., because without this knowledge we will not be able to serve them well and be efficient in our marketing processes and plans.
Now, you will wonder how you will get to know your customers if they still do not start your business. The truth is that it is a bit difficult, but if you want to be successful in your new business they will have to investigate and try to know your market before starting your company.
An example of what a client of mine did:
He wanted to set up a bakery, and to determine who his potential clients were, this is consumers, and especially to estimate how big the market (possible consumption) he visited all the supermarkets in the area where he wanted to market his business, talked and he asked the employees, owners and customers of the places where he sold the type of product he wanted to produce, about the quality, prices and sales volume of existing products.
Maybe he did not always get the information he needed, but with the one he got, and with a little common sense, he was able to project potential sales during the year. Also that market and competition study helped him create a list of prospects, who told him to be interested in testing their products.
Another tool that we can also use is the information and statistics of the market trend with respect to your business, which can be found on the Internet, the census in libraries, publications of chambers of commerce, and especially in publications of the associations and specialized magazines in the industry that you choose.
Also the same competition is a source of information to give us a good idea of the size of the market.
LOCATION OF YOUR BUSINESS
Moving on to the next point, we have the location of the business. If you plan to set up a retail business or service where your clientele have to come to your business then this point of business location becomes of paramount importance and here you should ask questions like:
#1 Is it close to consumers?
#2 Are you going to have to buy or rent the premises?
#3 What business are they going to be around?
#4 What is pedestrian and automobile traffic?
#5 Is there enough parking?
#6 Is there any restriction or incentive on the part of the city for that area?
#7 What future developments are expected for that place?
#8 What about the competition in that place?
Important check with local authorities
An important point to stress is that before signing any purchase or rental agreement for a local, you should check with the local zoning authorities if there is any restriction on your business in that specific place that you have chosen.
Sometimes it happens that even if they are acquiring an existing business with all the equipment installed and working, when they are going to ask for their business license, this is denied them, since the city has changed its development plans and no longer wants that type of business in that place, so it is very important that you research first so you do not have problems in the future.
As we mentioned in the previous section, competition can be a source of information to determine the size of the market: But we should mainly study and follow it closely because it will serve us to know our strengths and weaknesses with respect to competition, which we will serve to plan our internal processes, look for a competitive advantage that differentiates us from them and plan our promotions and advertising.
In short, we can learn a lot by watching our competition, to imitate it in the good and to overcome it in what it is doing wrong.
But how can we investigate fellowship to learn from it?
There are several techniques they can employ, including: they can check your ads on, T.V., radio, newspapers, flyers, directories, the Internet, etc .; they can go to their business and talk to their employees; they can also ask their clients or send someone to buy or buy their services; and sometimes through the chambers of commerce, associations or specialized magazines can obtain information.
In short you must be creative to know everything that is possible from your competition.
After this analysis, you should have enough information to know where you are located, size of your business, product lines or services, prices, number of employees, marketing means you use and an idea of how much you invest in advertising and promotions , as well as to know who are its main suppliers, etc.
ORGANIZATION AND ADMINISTRATION
Moving on to another point in the business plan, we have the one that refers to the organization and administration of the business.
At this point we should be able to describe how we plan to start our company, with what personnel, describing the activities that will be carried out by each one (job descriptions), schedules, responsibilities, form of payment, training, etc.
We should also describe the administrative processes and establish policies and procedures for our company.
Lack of good management is one of the biggest reasons for the failure of new business.
In many cases, when people start a business, they are not an expert in management; however, lack of good management is one of the biggest reasons for the failure of new businesses.
For this reason, if they are not good administrators, I recommend that they take some courses in accounting and administration or hire an accounting office to help them with the calculation of their taxes and their cash flow in order to organize their payments, sales, expenses , inventory, collection, etc.
Finance is one of the critical parts of starting a business, these have to do with how they will raise enough money for; acquire the necessary equipment and materials to begin, cover operating expenses and costs, and support the family for the necessary months or years until the business begins to generate enough money to sustain and sustain you.
When starting a business it is very difficult to obtain loans from banks, or from other government institutions, it is easier to obtain loans from our friends or relatives or sometimes from the same suppliers of equipment or materials.
However we must establish a good relationship with the bankers so that in the future these support you with credits.
It is very important to keep a good control of your income (income) and expenses (exits) to avoid financial problems during the existence of the business.
PROCESSES AND PROCEDURES
When we are developing our business plan we must describe, as much as possible, the processes of production, administration, sales, customer service, collection, commissions, etc. as well as business policies and procedures.
These will help us organize our company more efficiently to better serve our customers and to avoid problems and misunderstandings within the organization.
Do not start if you do not have a good marketing plan.
You could almost say that you should not start your business without writing a marketing plan.
This should be included within the business plan, and should include an analysis of strengths and weaknesses of your business, knowledge of your clientele, description of your products and services in detail, description of your competition, analysis of your competitive advantage (which the difference of the competition), budgets to invest in advertising and promotions and methods of measurement and evaluation of your advertising campaign.
Here it is very important that we study all the marketing tools that we can apply in our business, many times our guide that we must do is the same competition.
Some of the instruments to consider are: television, radio, newspapers, a page on the Internet, e-mails, flyers, coupons, organizing and attending seminars, hiring vendors, sending letters, making demonstrations, putting ads out of business, or on buses, etc.
Apply a little common sense and above all investigate well before deciding what media advertising and promotion will use.
LICENSES AND PERMITS.
To explain the point of licenses and permits, I will use a diagram, which shows the steps to follow in general at the time of starting a business:
If you have chosen to start as sole proprietors, follow the dotted line and if it is a corporation or corporation follow the thick continuous line.
The last point that we are going to explain in this article is the one referring to the support information, which means to append everything that you think fit to support your business plan, some documents that should be included are: financial estimates, quotes, contracts , market studies, business diagrams, insurance, catalogs, designs, articles related to your business, owners’ curriculum, tax payments, credit records, etc.
This information is very important especially if you are going to use the business plan to get financial support through a loan or an investor.
With this we terminate the general explanation of the content of a business plan. As I mentioned at the beginning of this article, planning is a very important part when we want to start a business, especially if we want to avoid problems and expenses not necessary.