22 Important Things To Consider Before Starting A Small Business
If you have an excellent idea for a business, what is stopping you from getting your idea off the ground and becoming your own boss?
Do you believe in your idea, and think that it may be of value to the rest of the world? Then you should do something about it.
There are lots of great reasons to go into business for yourself.
There is no better motivation than knowing that all of your hard work and creativity will be converted to profits which directly comes back to your company.
This means that your business can expand, touch more lives and make the world a better place. For some, the flexibility of setting your own work schedule is a motivating factor which implies that you can get better work and home life balance.
If you are more productive at certain times of the day, you can easily give yourself your most labour-intensive tasks around those times. It’s all your choice, you know?
But asides these obvious benefits, there are questions you should ask yourself. There are things to consider and know confidently before starting your business. Here’s a list of 20 things you should do to guide you.
1. Know Your Business Purpose
There are lots of things that you will need to get your company off the ground.
First of all, you need to figure out precisely what industry or sector you are going into. Platforms like Thumbtack reviews provide concepts for easier process on starting a business, especially for home service professionals.
What needs of people do you actually want to meet through your knowledge, time and expertise?
Travel agency, transportation, salon, marketing, etc. all meet someone’s need. They are being paid for knowledge. Once you’ve determined this, you can go to the next step.
2. Understand the nature of your business
The very first you need to know and decide about your business is the nature of your business. Some people skip this step or they do not clearly define the nature of their business.
There are two basic natures of business – manufacturing goods or rendering services. All others are a combination of these two at different degrees.
Manufacturing goods involves the conversion of raw materials into products. Is your business going to produce any product for sales or offer a kind of service? If yes, what are they?
2. Register your company
Once you’ve determined your business purpose, you can go ahead to register your company.
To do this, you will need to list the directors and business purpose. You can draw up a set of articles of association, which will be particularly useful if there will be more than one director. You don’t just dive into business and hope it will be legalized overnight.
You must consider and put registration of your business with the appropriate agency into the plan.
4. Have a business plan
If you don’t have one yet, you need to create one. Include projections and costings. Always assume that things will cost more than they do. Always plan for a contingency fund in case anything goes wrong.
You may need to take out a loan to get the capital to start your business. Nevertheless, you should be so certain you can recoup the money at the agreed time.
To have access to this, make sure you create a polished pitch that you can take to banks and potential investors. Factor in when they will see a return on the investment.
Many failed business is as a result of failure to write a business plan. “If you fail to plan, you have planned to fail.” Don’t be a sole proprietor or business owners who trivializes the aspect of writing out the business plan. That’s wrong.
Taking time to put your business idea and plan into writing increases your success chance because you would know what you have planned for and what you have not. It is a good way to visualize your business and to keep track of your progress. It should detail your forecast, marketing strategy and market you will serve. Do not ever start a business without a plan!
5. Have A Second Option – Plan B
If you’re worried about how your business will go, why not start it on a part-time basis. Hold down another job alongside it and run them side by side, then let your business grow organically.
Once you feel confident enough to take that big leap, you can move to run it full-time. With a limited company, there isn’t a personal financial risk if the business does fold.
Despite that, if you are involved in repeated activities that always go bankrupt, you may have trouble starting a business in the future. However, do not be trapped in the past either good or bad. Circumstances might have changed since the last time you started a business so take into account the current situation and plan this business accordingly.
6. Human Resources
In the early stages, you need to decide what part of your business you want to outsource. In particular, you may want to outsource some of your business functions to a company that can complete parts of your administration. This will allow you to focus more on the fundamental aspects of your business.
One of the hardest jobs for you as a business owner is human resources management. While planning for your business, you need to answer questions like, will I be hiring for this job or outsourcing it.
If you are hiring, how many people will you hire, what are their qualification, expertise and the cost of hiring? If it is outsourcing, which organization will I use, what is their track record, expertise and how reliable are they?
You might need some accounting software to start tracking all of your income, expenditure and track the tax that you will need to pay. Moreover, experts at Simplex Group also suggest businesses get done with their tax filings to avoid penalties in the future.
7. Know Your Market
“Who do you want to sell these to?” is a usual question I ask my clients when I want to advise them on a business or new product. It is one thing to have a good product or render the best service, it is another thing to have a market for it.
As you are developing your product, take the market into account. You must have a candid answer to the question “who am I selling to?”
8. Create a Market niche
Find a niche for your business in the general market. A niche is a particular and peculiar market for your business.
Take the transportation industry as an example. Your business niche might be small buses plying routes in the ABCD quadrant, or large buses for the interstate. Find a niche suitable for your business. If you cannot find one, create one.
9. Know your Operating cost
As a baby doesn’t start catering for itself from birth, so your business can’t take care of her needs for a while. You must plan for operating costs you would incur before your business can fend for itself.
You must list out those costs like overhead cost, fueling of the generator, power bills, staff salary, office supplies, etc.
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10. Plan Your Marketing
Now that you know the product and the market it is serving, how do you make sales? Marketing!
Without a good marketing strategy, your business will not make sales. Choose the right marketing strategy for your business because marketing is one of the vital factors that determine the fate of the business; success or failure.
11. Consider a good team
You can be good but not at everything. Building a team of people ensures input from different perspectives.
You have just one view, but a team has multiple views from different backgrounds and expertise. Their contribution will ensure a dynamic growth to your business.
12. Choose a good Location
From book knowledge to business seminars & the experience I have had, I can conclude that location matters a lot. It affects every aspect of your business: labour, raw material, and customers.
You must get the best location for your business to ensure success. Things to consider are proximity to raw material; proximity to market; and proximity to labour. You should also plan your business to be in a location accessible to both your supplier and your customer.
13. Have a debt management plan
Loans are good if they are within a reasonable limit. Some business owners start a business with a loan. While this might look okay, it might turn out to be a mistake.
The issue is that a new business faces many risks and if you eventually cannot pay up the loan, it becomes dangerous for a startup. Should that business fails, the owner still has to pay.
14. Plan your Capital
This is the amount you need to start your business. Even though this could be converted into monetary terms to get the value, capital is not only money. In your feasibility study (I trust you must have done it), you have an idea of the financial and non-financial burden you must incur to start your business.
Your capital should take care of your initial expense which includes the purchase of assets, office space rent and operating expenses.
When starting a business, some owners do forget to take note of the assets required for their business, especially the manufacturing businesses. They mostly take note of the consumable materials going into production that they forget about assets. You must include all the assets your business requires. You may have to keep updating the list as you grow.
These include furniture, gadgets, equipment, vehicle, generator, etc.
15. Have a clear line between business and pleasure
Business and pleasure don’t mix unless you mix them up. Have a clear boundary about your business and ensure you keep that boundary. Do not hire friends and family unless you are going to ensure it will be strictly business during the business hours.
When you hire friends or family, don’t hesitate to let them go if need be. Ensure your business stays business and your pleasure maintains its position.
As much as you have a distinction between your work and pleasure, ensure you also ensure a balance is achieved. I have seen business owners that lazily attend to their businesses for two to four hours a day.
On the other hand, some others take up twelve to fourteen hours every day (sometimes weekends). A balance is best, so you don’t do too little or burn yourself out. Give yourself time to rest to recuperate and don’t take too much time off so you can still be relevant and productive.
16. Decide your structure
Now that you know what, how, who, and where to sell, it is time to think about the form your business will take. You can be the sole owner of the business- sole proprietorship.
You can also partner with another person or a group of persons called partners in a partnership business. Furthermore, you can also go into business with stockholders (at least 4 other persons) for a corporation.
17. Ensure you comply with the law
You must first acquaint yourself with the local and national law of the country where you are setting up your business.
Many a time I see businesses collapse because of non-compliance to law. Ignorance is not an excuse to get to know the law governing your business in your locality. You should obey them. This may include taxes, dues, and other civic duties.
18. Open an Official bank account
Another thing SME starters don’t take cognizance of is a business account. Apart from the fact that an official bank account makes you look more professional, it also ensures you do not mix your personal and business records.
Open a bank account in the name of your business and use that account for business purposes only.
19. Have a good financial system
From the planning stage to the execution of the plan to start a business, ensure you have a solid financial system. Have a reliable accounting and financial reporting process.
You can only measure the progress of your business using the financial records and you only plan for the future too using the same record. So, to ensure your business functions properly, the yardstick (your account record) must be good. Employ the services of professionals and harken to the advice from financial giants.
20. Be flexible
Rigidity will break you in business! And believe me, I have seen a lot of people break. It is alright to have a solid plan but it is just a plan. No simulation can represent the real-life one hundred percent.
You must allow for changes in the environment. Have a good plan with a plan B and C incorporated into it. Flexibility is a good way to keep your business afloat. It is said that you cannot keep doing the same thing and expect a different result- that is madness. 😯
“Experience is the best teacher” is a common saying but I usually add this to it: “it gives you the examination before the lecture!” Normally, teaching comes before any test.
If you want to stack the odds in your favor when starting a business, get a mentor. A mentor that has a good track record in your type of business or general business. Someone you can look up to for advice and help. He or she must be someone that buys into your business ideas. This will make your journey smoother.
22. Put the fear of failure away
“He who has not failed has not tried anything new!” A baby falls many times before he walks. Do not be afraid to fail. If you fail, use that as a stepping stone, and added knowledge for your next trial.
All big and established business owners failed at one time or the other in their business endeavours. As they did not allow that to stop them, you must not stop too. Don’t quit!
Starting a business is thrilling and chilling. Thrilling in the sense that you get a freedom of not working the 8 am to 5pm job or reporting to a boss. You also get to see your business plans unfold into success. However, the whole process might be stressful, challenging and you don’t know what’s ahead until you are in it.
I am an entrepreneur myself with several businesses to my name with success in most of them. I now consult for business startups and development and I feel I must share these salient things to you before starting your business.
This will help your business to have a good fighting chance of not only surviving but excelling in the market.
Running your own business can be a lot of hard work. However, with the right support and information, you can create success out of nothing at all.
If you are still debating starting a business, then you could choose to visit your local business advisors. You surely need as much help and support as you can find.