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The Recipe for Starting a Successful Small Business
The recipe for starting a successful small business calls for three basic ingredients: Capital, Labor, and Time. So, before beginning, check how much of each is available. Other items can be added to season the business to suit one’s own tastes, but these three are essential. More importantly, they can be blended in different proportions and still be successful. The more of one on hand, the less needed of the other two. The more Capital available, the less Labor is needed and the less Time is required to show a profit. Then again, without a lot of Capital, more Labor is required (either yours or family members) and much more time is needed before seeing a profit.
MEASURING AND WEIGHING
After gathering the three basic ingredients, measure and weigh their value. Determine the total Capital available. Add to this amount the total value of all available Labor including family members to arrive at the total being invested. The value of the Labor should be based upon what could be earned at other endeavors. Calculate the Time that can elapse before needing to draw a salary. Salary, remember, must come from the profit that remains after all of the start up and operating costs have been paid from the total income. To draw from the business too soon is to reduce the original capital investment and, thereby, to increase the Labor and/or Time needed to succeed.
The next step requires dashes of Judgment and Commitment with smaller pinches of Optimism and Desire. Determine the risks involved and target the level of financial return that justifies the total being invested. During the current economic crisis, no risk Certificates of Deposits return about 2.5%. A newly launched business should return much more than this even if the risk is considered to be very low and future profits a slam-dunk. Greater risks demand greater returns. If the math gets too complicated, add one or two levelheaded cups of advice from an Accountant or a Mentor who has experience in these matters. Both of these ingredients improve the chances of success so the sooner they are added the better.
THE MOST CRUCIAL STEP
Whip up a formal business plan that itemizes the extent of the basic ingredients going into the mix, that identifies the goals and the profit expected, and that also includes details about the strategies and the steps to be followed to achieve them. Itemize all of the conditions, actions, and results that define Success. Leave nothing to chance. Anticipate every step to be taken along the way.
Follow this recipe carefully, proceed with caution, and be confident that your diligent planning, preparation, and execution will be rewarded. After all, "the proof of the pudding is in the eating."
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