Every year, millions of Americans dream about starting their own business.
And every year, a percentage
of potential small business owners make their dream a reality.
Unfortunately, as many as 50 percent of them find that dream turning into
a nightmare as the business fails within the first year.
There isn’t much you can do to guarantee success but there are some
measures you can take to improve the probabilities of success.
Obviously, an article as brief as this cannot address in
detail all the problems a start-up business may encounter. In this brief
article, we will deal with a few tips to help your small business start-up
succeed. And, we will give you
some sources where you can look for assistance with more specific problems. A
side bar to this article contains some Internet sources you may want to review.
Some of these sources provide information directly on the web; others may
require you to order certain materials in published format.
Perhaps the best way to discuss how to start a business is
to look at it as a process. That
process has at least three distinct and necessary phases: The Dream; The Plan;
and The Implementation. We will
take each of these in order.
Assessing the Dream
Many people who start their own business do so for one of
the following three reasons:
I want to be my own boss.
I want to choose when I work.
I want to be financially independent.
Each of these is a powerful, motivating force and a
good reason to dream. However,
reality soon sets in when you actually get into business.
First of all, every customer or client becomes your boss.
If you do not find ways to accommodate their desires, you are soon out of
business. At least at the beginning
of a new business venture you MUST work very hard at making every available
customer and client happy. You may
not have a supervisor, but you will certainly have bosses.
Being in Business for Yourself Is Hard Work
Someone once said that being in business for yourself is
great because you only have to work half days—any 12 hours per day you want.
There is much truth in this.
Starting
a small business, particularly one on which you intend to rely for your
livelihood, is likely to require 10 to 12 hours per day for six or seven days
per week. At first, you may not be
able to afford as much help as is really needed.
You are likely to be doing two or three jobs yourself.
Once the business has “closed for the day,” you may still have
ordering, bookkeeping, clean up and more.
Many people have achieved financial independence through
starting a business of their own. Some,
like Bill Gates or Sam Walton, achieve wealth beyond their wildest imagination.
But many more have seen their life savings and the investments of friends
and family lost. There is a
financial risk in being in business for yourself.
The legal form you choose for the business can help mitigate this
risk. But, if you borrow money or
have investors, you have “partners” and they will want to have a say in the
business. Generally, financial
independence from the small business is several years away.
Take an Honest Look at Your Dream
The U. S. Small Business Administration publishes several
items that are valuable to those thinking about going into business.
One of these is the “Checklist for Going into Business”
(Management and Planning Series #12).
As
a part of “Assessing the Dream”, you can use this "checklist"
which has the following sub-sections: Identify Your Reasons; A Self-Analysis;
Personal Skill and Experience; Finding a Niche; Is Your Idea Feasible; and
Market Analysis. In each section,
there is a list of simple but very direct and very revealing questions, which
will help you take an honest look at your dream.
The objective is to help you attain that dream, not to keep you from
pursuing it.
A sample of the questions follows:
Are you a leader?
Do you have will power and self-discipline?
Are you prepared to lose your savings?
Do you know what skills you will need in order to have a successful
business?
Have you ever worked in a business similar to the one you want to start?
Will your product or service be competitive based on its
quality, selection, price or location?
Do you know who your customers will be?
It is important that you take an honest, objective look at
your dream. If you are still
convinced that it is what you want to do, it is time to convert the dream to a
plan.
Building a Business Plan
Having made the thoughtful decision to convert your dream
into a real business is an important step.
At this point, you have convinced yourself that there is business to be
done and that you want to do it. A
business plan will help you firm up the details of how that will work.
And, it will help you convince others that your dream can and should
become a reality.
Road Map
A business plan is a road map for how to get to where you
want to go. There are a lot of
decisions you will need to make along the way.
None of them will be as monumental as the decision to “do business”,
but each decision is important and each one, if well thought out, will help
improve your probability of success.
Some questions to consider in organizing your business plan
are:
What, exactly, will the product or service be?
What legal format will be best for the
business—proprietorship, partnership, “S” corporation, “C”
corporation, or limited liability corporation?
Where will the business be located?
How will the business be financed?
Where will I get help when I need it?
Financing Your Business
Money is always an issue when starting a business.
Generally, small businesses are started on the savings of the owners.
Family, friends, and others then supplement this capital.
Most start-ups look for additional financing fairly quickly.
The 1998 issue of the Tennessee District Small Business Resource
Guide has a specific section dealing with "Financing Your Business
Start-Up." This publication
also has excellent references for regulations and other assistance available to
small business start-ups.
Some Help
If you expect to get financial support from friends,
family, or a financial institution, be prepared to present them with a
reasonably formal business plan. There
are many sources of help with business plans.
In an earlier article (Memphis Business Journal's, Small Business
Start-Up Guide, "Creating a Professional Advisory Team," November 20,
1998), we discussed the importance of getting financial advice at the very
beginning of your deliberations about the business.
A certified public accountant will be an excellent source of such advice
and you would be well advised to bring one into your confidence from the
beginning. There are also numerous
published resources, which will serve you well.
One of those is a book entitled Total Business Planning by E. James
Burton (John Wiley & Sons, new edition forthcoming in the Spring,1999).
You may also find assistance from other sources such as the Service Corp
of Retired Executives (SCORE) or the Memphis Technical Assistance and Resource
Center, a partnership between the city of Memphis and NationsBank.
The importance of developing the business plan cannot be
over emphasized. The document is
valuable. It will permit you to
communicate your ideas with potential investors, creditors, vendors, employees,
and others. But, the process is at
least as important as the document itself.
Follow the business planning process given in almost any good planning
book or article. That process will cause you to think through lots of start-up
issues and answer lots of questions you may not previously have asked yourself.
A business plan will greatly improve your probability of success.
Implementing the Dream and the Plan
Once that business plan has been developed and reviewed, it
is time to move on and start implementing the plan.
Dreams do not implement well.
Plans
do. Dreams are ends.
Plans are means to those ends.
Both are important. Both
contribute to the success of the business.
Each is necessary. Neither
is sufficient without the other. But
once all the dreaming and planning are over, it is time to get down to business.
There are still many tasks to be accomplished.
Estimate the amount of time you will need before you
actually begin the business activity, then at least double that amount of time.
This exercise will provide for the unanticipated snafus, which may result
from licensing procedures, acquiring machinery or supplies and all the other
myriad of details that rarely go according to plan.
Site
If you are not already committed to a location for your
business, contact a Realtor for assistance in finding the appropriate location.
Be sure to discuss with the Realtor both your currents needs and the
needs you may have for future expansion.
Your
Realtor will be familiar with the general area and will provide valuable
assistance in finding the location, which is suitable for your type of business.
Be certain that you verify zoning requirements to see that your type of
business is permitted in the location you are considering.
Recruiting Employees
If you plan to have employees, you should take the time to
think through and carefully define the job descriptions for each position.
It would be well if you were to write these out.
You can contact the local Chamber of Commerce to determine the probable
pay scales for the jobs you have defined.
You
will probably want to place help-wanted ads in local newspapers; place those ads
30 to 45 days before you anticipate the actual employment.
You will want time to perform background checks on some, if not all,
employees.
Post Office Box
If you want a post office box, it may be necessary to apply
at the local branch office as much as eight to 10 weeks in advance of the time
the box will be needed. Office
furniture and other equipment not stocked by local merchants should be ordered
at least six weeks in advance of the time you want it in place.
Before actually starting operations, you will want to
contact your insurance agent in order to get appropriate coverage.
You may need such things as fidelity bonds or other bonding
arrangements, which will take some time to negotiate.
You will also want to discuss your liability insurance needs, workman’s
compensation, and fire insurance. There
may be other special needs as well.
Once you have determined a location for your business, you
should contact the telephone company to arrange for service.
A special representative at the telephone company handles new
business accounts. That number can
be found in the front of the telephone book.
You will probably need to place your order 10 to 12 working days in
advance of the time you want service to begin.
Be prepared to pay a deposit for the service.
Utilities, Licenses, Permits and Signage
If the other utilities are not a part of the real estate
package that you negotiate, you will need to contact your local utility company
or companies to arrange for service.
Your
Realtor may be able to help you with this as well.
Be prepared to pay a deposit for these services.
Depending upon the type of business, there may be a number
of licenses and permits you will need.
Your
certified public accountant will be very helpful with most of these.
He or she may refer you to an attorney for others.
Stationary and business card as well as signage should not
be ordered until after the location and telephone number have been finalized and
after any necessary business name approvals have been received.
Allow one to two weeks printing and a minimum of one month for
sophisticated signage, which by the way, does require a permit.
Conclusion
Being in business for yourself is a wonderful, gratifying
experience. Or, at least it can be.
But, there are literally thousands of details that must be handled.
To improve your probability of success and to minimize the headaches, get
all the help you can. The side bar
lists some sources of help you should consider.
In spite of the problems of starting a small business, it is still a
dream of many. And, dreams
are meant to be turned into reality.
