First Steps for Prospective Start-ups
Starting your own small business is a trend that shows no sign of slowing down, despite economic uncertainty and the statistics showing that the majority of start-ups fail within the first few years. It could well be that these facts are motivators for those thinking of going into business for themselves, with employment being very far removed from the jobs-for-life concept of old. Plus if you have an entrepreneurial mindset, failing businesses spell opportunity. If you think you might be able to succeed where others have failed, the first task you need to attend to is your planning and preparation, which if completed diligently will stand you in good stead when it comes to actually opening your business.
Researching the market
Before you can prepare a business plan or create a marketing strategy, you need to carry out research into whether your business idea is viable. You could have thought of a great service to provide, or a retail outlet selling products you think could be profitable, but these are just thoughts. Without the hard facts concerning key areas like the market, overheads, logistics and profit margins, you aren’t in a position to know whether the business could make money.
Even what seem like very good ideas can turn out not to be capable of making sufficient profits to be worthwhile. First find out if there is a market for your business idea, and what your competition would consist of. You can find out a lot of information from industry publications and reports that will give you an idea of the overall demand for what you intend to supply. If you want to open a pet shop, and if there are none in your vicinity, then you could be looking at filling a gap.
However, if there are already sufficient outlets to meet demand, then you would need to have a very compelling reason for people to come to you rather than a competitor. It’s also essential to factor in the online market; for example, books are still a hugely popular purchase, but bookshops can struggle because of the number of sales taken by online stores.
Once you’ve confirmed the presence of a sufficiently large customer base, you can then look at calculating how much it would cost to get your business up and running. Your specific overheads will vary according to the type of business you’re contemplating, but there are several areas you need to consider for all businesses. First are the infrastructure costs, which would include rent, energy, furnishings, facilities, consumables, equipment, taxes and staff costs. Of course, if you’re planning to run your business from your own home, you won’t need to worry about many of these, but you do need to be aware of the allowances you can claim against your business tax each year.
Then there are purchase costs for your products or raw materials, manufacturing, packaging, marketing, and outsourcing functions that you can’t or don’t want to do yourself, such as accountancy, cleaning services, maintenance, or SEO for your website. Getting these figures correct is essential to being able to gauge price points and predict profitability accurately, so it can take some time to get all the figures you need and check them carefully.
Again, the requirement for finance will vary according to the type of business you’re contemplating. If you’re planning to run a dropship business from your front room, you are looking at minimal start-up costs that you will probably be able to cover yourself. On the other hand, if you’ve invented a new gadget and plan to manufacture it yourself, you are looking at a sizeable investment in premises, machinery, and staff, plus the other overheads. You should always factor in a period for any business during which you won’t be making a profit, and therefore you need to have sufficient finance to cover the initial months when you are getting going.
The average period for businesses to start turning a profit is two years, but it could be longer, or if you do well, shorter. However, planning for at least two years is wise so that you are covered if it does take a while for the money to start rolling in. If you do need to raise some finance or get some investment, have a look at the options available to you on this helpful site, or speak to an accountant or financial advisor for advice. There are numerous funding options available, including business loans, attracting outside investors, and crowdfunding. You need to think carefully about what would suit you best and be sure that you can meet the repayments on borrowed money.
You don’t have to be an expert in every single aspect of your business, but you do need to know enough to make sure that the people working for you are achieving the optimum results. Your main input will be an overseer, the person with the strategic foresight and skills to keep the business heading in the right direction and maximizing your returns. If you know very little about business in general, you might want to do a home study course, to give you the knowledge to understand how businesses work and what you need to be looking at. It could be that you’ve had what you think is a brilliant idea, but because you lack sufficient technical know-how, you’ve missed the flaw in your reasoning that makes your idea unworkable. It’s always possible and indeed advisable to expand your knowledge throughout your career, but it’s also sensible to arm yourself with as much information as you can before you begin.
These are the primary considerations you need to address before deciding whether running your own business is a good fit for you, and also whether your idea is good enough to become a profitable reality. If you find it isn’t, then it could just be that you need to rethink your idea and reformulate it. It doesn’t mean you need to give up – but then if you’re a real entrepreneur, giving up won’t be in your vocabulary.