You want to start a new business, but you don’t know what to do first. While there are a few obvious first steps, there’s a lot that isn’t taught in business school. The truth is that most businesses stumble to get off the ground. Most of them fail. A few succeed. Here’s what they’ve learned and what you need to get right the first time around.
Have a Business Plan
Business plans are underrated. Almost no small business makes a good one. Even when a business plan is made, it often lacks important documents that make realistic projections of cash flow and sales.
A lot of small businesses never make a business plan at all. Then, they wonder why they can’t get funding from a bank or an angel investor. Here’s the thing: without a business plan, you have no hope of ever succeeding.
A business plan outlines your business structure (i.e. sole proprietorship vs corporation), the officers in the company, the financial structure, how the business will get funding, the marketing plan, and so much more.
The best business plans dig right into the nitty-gritty details of how the business will market its products and services. Get pricing for marketing initiatives from marketing agencies. Use direct marketing to quantify projected results. Have a “cost per lead” and “cost per customer” calculation that’s based on realistic hypotheticals – hypotheticals you get from an experienced marketing firm.
The marketing analysis is probably your strongest and most reliable measure of how your business will perform. It will detail not only the marketing plan, but your intended demographics, the prospects for business and growth, and the competition you’re up against.
Marketing, and your product or service concept, will determine whether or not you get funding.
Research Your Suppliers
Don’t just take it for granted that vendors will come through for you. A lot of businesses get hosed by inexperienced or average suppliers. Companies like BusinessProfiles.com, however, can nip this kind of thing in the bud, getting rid of the undesirables while finding the gems that will be really valuable long-term business partners.
How? By compiling business profiles on any company you’re planning on doing business with. You get the inside information you need to make smarter business decisions. You get information about the corporate officers, the history of the company, and whether it’s been in any legal battles that would affect its ability to pay its bills. You can also get information about any public documents it’s filed.
Get Adequate Funding
Funding is the blood of your business. It’s what your company runs on. You had better have at least 5 different options for funding, because 3 of them are probably going to fall through. Your best bet, as a small startup, is angel investing. Banks are usually a waste of time. Few banks will bankroll an unproven idea.
Banks tend to stick with large companies that have a proven track record and want to expand the business.
Outsource everything that isn’t your core competency. Really. This is something a lot of businesses that fail don’t do properly. That’s part of the reason why they fail. They don’t know how to delegate.
You should be outsourcing your marketing, sales, accounting, product development and manufacturing, and anything else you don’t personally know how to do.
If you’re an entrepreneur, odds are you’re the “idea man.” Stick to that. That’s what you’re really good at.
If you’re a marketer, stick with marketing and outsource everything else. Key areas that are often outsourced include accounting, web design, marketing, and sales.
Not every business scales well. Some companies, like online e-commerce businesses, scale really well. It’s a simple matter of pumping more money into the marketing department, running more ads, and buying more bandwidth from the hosting provider. Basically, you just throw more cash at the problem.
If you run a brick-and-mortar business, a consulting business, or any business where there’s face-to-face interaction or where there’s customization involved, you’re going to have a harder time scaling the enterprise up.
You may need to bring in other professionals, for example, to do staff training for an expanded customer service department. You may not be able to simply throw money at an innovation problem. Creative people don’t just grow on trees.
Building buildings is a logistical problem that’s not easy to solve either. You must coordinate with regulators, construction companies, and an architect to make sure the job gets done on time – on time for your increased production demands (i.e. sales).
Steven Patterson has been an entrepreneur since his first lemonade stand as a child. With years of experience, he often blogs about the ins and outs of running effective businesses in today’s market.
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