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Things To Think About When Starting Or Running A Small Business
The ABCs Of Starting Or Running A Small Business
After thirty years of starting, running, growing and closing businesses, both large and small, and being outsourced, out placed, laid off and bought out, there are several things I've learned through trial and error, a lot of error, that I'd like to share with anyone thinking about starting or already involved with a business.
A) Whether you're buying a franchise or an starting a business of your own make sure you're passionate about it.
If you're currently out of work and deciding that you've had it with working for someone else and that you want to start something of your own, always remember that a job is a job, no matter who owns it. And in fact, creating a job for yourself is worse, because you're the one responsible for all the expense. If you're just doing it for the "supposed" security of owning and controlling your own destiny and are not really passionate and in love with what you are about to do, it will quickly turn into just another job, but with a lot more stress. And instead of being laid off by someone else, you'll end up terminating yourself.
The best way to determine whether or not you can stay passionate about what you're about to undertake is to understand the repetitive daily activities of the business and whether those activities are things you can look forward to and will make you happy every single day. And since at the beginning you might be the only full time employee, it will be your passion that will determine if the business succeeds or fails.
Never forget that passion creates dedication which creates determination which creates enthusiasm which ultimately creates and almost always ensures success. Whereas a lack of passion creates boredom which creates lack of enthusiasm which creates lack of determination which almost always ensures failure.
B) It's great to have an idea, but make sure you also have a sound, objective plan for bringing that idea to life.
In my experience, I've seen a lot of great business ideas never get off the ground, because there wasn't a realistic plan on how to bring that idea to life. It's easy to fall in love with your own idea, because it's yours and you naturally think it's terrific. But understanding and having a realistic, well thought out plan to objectively assess the actions required to bring that idea to life and the probability of it's success is critical. That's why business plans are written. They require you to put all the aspects of your idea on paper with all the numbers and facts associated with it, so that you can not only see what it's going to take to bring your idea to life, and the probability of it's success, but also what the realistic return on your investment will be and the projected, realistic time frame it will take to realize it.
If I were to write "Business Planning For Dummies" it would be quite simple. It would show 1) The idea, or business concept and incorporation method chosen. 2) The niche it fills or in other words the reason the business is needed. 3) The competition you're facing that's already doing the same thing in your projected trade area and the price they charge. 4) The initial cost of starting or buying the business and the ongoing expected fixed operating expenses (payroll, rent, utilities, etc). 5) The "go to market" or distribution strategy (whether it's retail, wholesale or internet or some combination of all three). 6) The initial and on-going marketing plan. 7) The sales, opening and ongoing inventory costs, margin and gross and net profit projections for a least the first year .As you can see, the business plan gives you a lot of necessary and valuable information that allows you to objectively evaluate your idea before you ever spend a penny.
C) Understand completely the financial requirements of starting and running the business.
The number one reason most small businesses fail is because they are under capitalized. It takes money to make money and it usually takes a lot more money than you think. When you plan the business you should always over estimate the costs and under estimate the sales and the time it will take to start making money. That approach will force you to look realistically at the capital required not just to start, but to maintain the business for at least the first couple of years. That is especially true in the area of marketing. Unless you're buying a franchise that has a national marketing campaign and already established name recognition, all other small businesses take time and money to develop a customer base, especially when you're doing it yourself with a very limited marketing budget.
The next big reason small businesses fail is because they over estimate their sales and hence over estimate the amount of inventory they'll need. Inventory costs money and doesn't give you a pay back unless it's sold. By under estimating sales, you automatically project less inventory and give yourself the opportunity to assess what actually sells instead of what you think should sell. You can always buy more inventory, but you can't always sell too much inventory.
D) Set short term and long term goals for the business.
Every business needs to set and have goals, but small businesses don't need to set and focus on lofty three to five year business goals like much larger, private and public companies. Small businesses need to have and focus on much shorter daily, weekly, monthly and yearly goals. What happens in shorter periods of time is much more relevant to a small business owner, because while you can and should have lofty goals and expectations for what you'd like to see the size of business being three years from the day you start, the reality is that what happens to the business three years from today will be determined by the revenue you can generate today.
E) Set your ego aside and get assistance from experts when you need it.
Here again, unless you're buying a franchise that provides you with all the support and training you'll need, at a cost of course, you'll need to understand what you don't know and seek out advice and counsel from people who do. Whether it's an attorney to make sure you form the right corporation and sign the right lease deal or an accountant to do your books and prepare your tax returns or a marketing consultant to help you determine the best and most cost effective ways to get your business seen, make sure you get the help you need to ensure your business has the best chance to succeed.
F) Understand the importance of your customers and treat them as if your success depended on them - it does.
It might seem obvious, but without customers you have no business today and without repeat customers you might not have a business tomorrow. Besides your product or service, your customers are your most important asset. They not only buy your product or service and make you money in the short term, but if you're open to their feedback, they can also give you suggestions on ways to improve and develop your product or service going forward. Since most of what is sold today is not truly unique and can be copied if it is, customer service can be the one personal, unique thing you offer that makes a person choose and keep doing business with your instead of your competition.