My co-blogger (Merri Jill Finstrom at HUTdogs) and I have decided that our second co-blog will cover the topic of what to do before starting your own business. Following are some things I think you should do. To get MJ’s perspective, log on to her blog and then tell us what you think!
1. Write down your business idea and be as specific as possible.
2. Determine your target market. Be specific! (yes, this word will be used over and over because it is important.) If you say that your target market is women, ages 18-34, state why you are targeting that age group and why they would be interested in your product/service.
3. State your differential advantage. In other words, what makes your business unique?
4. Write a list of your direct and indirect competitors. For example, if you’re a caterer, make a list of caterers who are currently serving your market. Then, include another column with a list of indirect competitors, those who do not perform the same service or sell the exact same product as your company, but who, somehow, would interupt a sale to your company. Using the catering example, xyz Caterers of Los Angeles might be considered a direct competitor because they also provide food, staff and rentals, but Bristol Farms might be considered an indirect competitor because they provide platters of food that can be picked up. Not exactly the same as what your company does, but in the end could interrupt a sale to you.
5. Determine your strengths, weaknesses, opportunities and challenges. What does your company do better than Bristol Farms? What do you not handle as well? (For example, B.F. might have fleets of trucks and the ability to deliver to a customer on a whim, whereas your catering company only has one truck and a smaller staff.) Opportunities would be areas in which you could grab some business. Perhaps Bristol Farms doesn’t deliver to Highland Park, but that is where your company is based and coincidentally where there are lots of other small business who need catering. Challenges would be “problems” that you might encounter in the future. By comparing yourself to others in your same field, and making that comparison on paper, you are creating a roadmap or framework from which to start your business.
6. Do your financial analysis. How much money will you need to start your business? How much for capital expenditures: computers, desks, telephones? How much for one time start up costs: first and last month’s rent, security deposits for the utilities, etc. Intitially, how much revenue will you take in? Don’t forget to factor in customers paying more slowly than they should (or yikes! not at all.) Then, analyze your projected revenue and your expenses using dates to assess what kind of cash flow you can expect. If your biggest customer always pays their bills on the 4th of the month, but your rent is due on the 1st, you might have a cash flow problem. This is not necessarily catastrophic, but it can be if you don’t have a plan.
7. Get a mentor. I have had mentors throughout my whole business career. They are invaluable because a mentor has been around the block. If you choose the right mentor: one who has tremendous business experience and the time and willingness to help you, can assist you in avoiding pitfalls you might not anticipate. The Service Corps of Retired Executives, SCORE, a nationwide nonprofit association of retired executives who provide small business education on the formation, growth and success of entrepreneurial ventures, can help. Search the internet for a location near you.
8. Make a presentation of your business to your mentor, or to some interested friends. Making a pitch is important because it will force you to think through your ideas and then force you to answer questions from your “audience” that perhaps you hadn’t thought of.
9. Now that you’ve written all of these notes down, go back and do it again. This time, in official business plan format. You can purchase a book on business plans at www.amazon.com or write it on your computer with business plan software. A good website is: https://www.sba.gov/category/navigation-structure/starting-managing-business , the United States Small Business Administration’s website. Another helpful site is: www.bizcenter.org/bizplanbasics.html . I have had good experiences with the Biz Plan Basics software.
OK, so why didn’t I just suggest that you write your business plan after getting the help from a book or available software? Because it can be intimidating. Sometimes I think it’s good to put a toe in the water to determine if an idea has legs. Once you get past the first eight “to do’s” listed here, and you still think you have a viable concept, then take the next step and formalize it by creating a real plan. To answer your next question, yes, I think it is still important to have a business plan even if you are not looking for investors or a line of credit from the bank. Thinking through these points and then writing them down is just good business. And remember, that’s the goal after all, running and owning a good business.