Are you thinking about setting up your own business? Maybe you have an idea for a new business but are unsure about how to proceed? If you have answered yes to either of these questions, this article could be of benefit to you.
In my early 20’s I launched my own webdesign and boutique media company, I grew the business successfully and after 5 years sold the company. I am going to write about how to plan and create a successful small business based on these principles.
Many people are looking at ways in which they can become self-employed as they have had enough of being dictated to and fed up of long and frustrating commutes to work. They want the freedom of being their own boss and to be able to choose their own hours of work, if your one of them then this is for you…
Leaving a full time career can be quite a scary prospect however. The security of having a regular income and other benefits such as a pension and a share save scheme can seem hard to let go. I am sure many people whether rightly or wrongly have opted to stick with this security and to merely keep their business plan as an idea, which they never see through or use.
Other people are willing and happy to take the risk and see it as a way of getting out of the rat race. You might say this is the difference between an entrepreneur and a wantrepreneur those that say and those that do.
When you have an idea for a new business you will often first think about the niceties, like the brand identity name and logo. Whilst important as these do represent the business they are not as fundamental to your actual business model and business plan. I made this mistake when I was younger and wasted a lot of time fiddling with colour schemes and typography, but after all I was a trained graphic and web designer!
Either way when you do come round to naming your business, some suggestions are to keep this name quite short as it makes it easier to remember for people. It obviously needs to have something to do with the business sector you are entering, so think about keeping it relevant. Avoid gimmicky names based on website domains, trends come and go but your company name should be there to last!
You will now need to work out how much money you will need to set up the business. This can be quite daunting but is essential. In the short term I would advise to keep these start up costs as low as possible, you can always buy or rent better equipment in the future. This should be based upon your business plan and research.
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The order in which your plan is presented should be something like the following:
- Mission Statement
- Executive Summary
- Product or Service Offerings
- Target Market
- Marketing Plan
- Industry and Competitive Analysis
- Pro-Forma Financials
- Resumes of the Company Principals
- Your Offering (what type of financing you’re seeking)
- Appendix (any other pertinent information)
You’ll probably also want to note any personal seed capital you’re investing in the venture. Financiers want (and often require) entrepreneurs to put their own funds in the venture, and the greater the portion you invest relative to your net worth, the better.
Now let’s review each section of the business plan in detail.
1. Mission Statement
The mission statement is a concise, one- to three-paragraph description of your business objectives, or your business’s guiding principles. In this section, you should state your unique selling point, or what separates your company from all the others in the industry that are otherwise just like it.
2. Executive Summary
This is a one- to two-page summary of your business. Potential investors will read this to decide whether they want to look at the rest of your plan.
3. Product or Service Offering
Create a section describing your product or service offerings in detail, as well as how much you’ll charge for what you’re selling.
4. Target Market
Present your primary and secondary target markets, along with any research that demonstrates how your target market will benefit from and consequently purchase what you’re offering.
5. Marketing Plan
Present your marketing plan, which should show in detail how you’ll reach your target market. This part of the plan will include advertising and promotional strategies. (Read Advertising, Crocodiles And Moats to learn more about the importance of good advertising.)
6. Industry and Competitive Analysis
Include a complete and thorough industry and competitive analysis that includes all stakeholders in your business. Don’t forget to include governmental and regulatory agencies. (Read Competitive Advantage Counts to learn the importance of being different from the pack.)
7. Financial Statements
These must be complete, accurate and thorough. Each number on your spreadsheets must mean something. Don’t estimate payroll, for instance; determine what it will actually be. Your income statement must reconcile to your cash flow statement, which reconciles to your balance sheet. Your balance sheet must balance at the end of every period. You must have supporting schedules (e.g., depreciation and amortization schedules) to back up your projections.
If you are having trouble building your pro-forma financial models, which should project out for at least five years, seek outside help from a qualified professional.
Use realistic projections. In estimating the growth of your business, you will make certain assumptions, which should be based on thorough industry research combined with a strategy for how you’ll compete. Also, analyze how quickly you’ll achieve positive cash flow. Investors vary in their standards, but most like to see positive cash flow within the first year of operation, particularly if this if your first venture.
In order for your projections to be accurate, you must know your business. If you’ve built an accurate and realistic model, but still project negative cash flow for more than 12 months, rethink your business model.
8. Resumes of Company Principals
Include the bios and professional backgrounds of all significant employees of your business. You will want to emphasize how their backgrounds have prepared them to take on the challenge of running your new startup. Also, if an employee’s business background is in a significantly different industry, you might want to emphasize how this can be an advantage instead of a detriment.
9. Your Offering
Present what level of investment you’re seeking and for what purposes you will use the funds. If you’re selling business units, state the individual price per unit.
Once you’ve put together all of this key information, make sure to present your plan professionally. It should be typed, margin aligned and neatly bound. Use color graphics and pictures where possible. Do not handwrite changes or corrections. The inside of your business plan should be near book or magazine quality.
10 Professional Help
After you’ve finished your plan, have a professional you trust, such as a Certified Public Accountant (CPA) or Lawyer, banker or insurance broker, look it over. This person may catch details, errors or omissions you’ve made. They also will be able to give you a more objective opinion of the viability of your business.
Once you are aware of how much money you need, you then have to find it. You may have enough yourself via savings or a redundancy payout, however most people are not in this position. If you do not have enough money, you could try and raise money via the family, by seeking a partner or by releasing the equity from your house. There is also the option of a business loan.
The next stage is to market your business
There are many ways of doing this including:
- The internet via a website
- An advert in the newspaper or websites
- Direct marketing in the form of leaflets
- An advert in the yellow pages
- Trade fairs
- social media
I would advise finding out where other people from your industry advertise as they will have tried and tested many of the above options.
You then need to work out how much to charge for your product or service. I always keep these charges fairly low at the outset in order to attract as many people as I can and to get some income in. I then hope that word of mouth will take over and the idea is that after a few months I will be in a position to increase my fees.
It is also important to realise that we will make mistakes along the way. When this happens we need to think positive and not to beat ourselves up. It is an experience we can learn from.
Always have belief in yourself. At times any business will go through a rocky period, this is when we need to be strong. In my opinion the more work we put in, the more rewards we are likely to obtain.
Self-discipline is one of the keys to your success. Being able to choose your own hours of work may seem like a dream but it can prove to be many peoples downfall. We have to ensure that we work the required amount of hours. It is far too easy to stay in bed for that extra hour or to arrange yet another game of golf. These things are fine once you are established, but this is a long way off at this stage.
If you want to know more about starting your business by minimizing the risks, and using less cash get my Top Resources Report