As part of our series on starting a small business, we’ve looked at making sure you are clear about why you want to start your own business and what you need to think about, so this week we will look at the steps to take when you start your small business.
But first, I need to recognise that Teik Oh Dot Com is followed and read by small business owners across the world, so I need to say that the legislation and taxation requirements are different in every country, and even in the different jurisdictions like States or Territories that you may be situated in. So it pays to check and research with your own government agencies and tax authorities.
Indeed, the first step to take is to find yourself a good accountant who can guide you through incorporation and registrations.
If you don’t already know one, how do you find one?
The best way is by referral – who do you know who owns a successful business who can say that they have a valuable relationship with their accountant? Take their advice.
Otherwise, contact the local branch of the relevant society of accountants in your area, whether Certified Practising Accountants, Chartered Accountants or similar. It is a little bit harder to choose one in this way because you may have a list of names – how do you choose a good one?
The next thing to do is double-check the feasibility of your idea.
While you are fired up and enthusiastic, it’s too easy to fall into the trap of looking at startup problems through rose-tinted glasses.
I have met and advised so many people who had such fabulous ideas they were so in love with that I had to puncture their bubble. That’s not to say that they did not start their business – far from it, I’d estimate at least 80% of them were able to design a better and more feasible business after some heart-to-heart questioning of their first idea.
Find out more about your industry and your market.
At this stage you don’t need to fully identify your target market – a general idea of who would buy from you is all you need at the moment.
Many industries have industry, professional, or trade associations with information about their members, trending industry concerns or opportunities, and other useful information. If your industry is represented by an association or professional body, contact them to see what information they can offer. You are looking for information about how competitive the industry is and what areas are represented by members, information about pricing structures, regulations and restrictions, or information about market trends.
This check will put your initial ideas in the context of market forces and barriers to entry to see how feasible your idea is.
Don’t forget to Google your industry or business idea.
For example, Googling “hairdressers” should show you a Google Map of all the hairdressers in your area. Too many? Too much competition? How many people live in your area? How many people who live there might go to a hairdresser? These are the types of questions you need to seek answers to.
You can also Google “how-to” or other questions that can reveal any industry trends. “How to start as a hairdresser” will give you articles about the skills and qualifications you need, as well as articles on growing your salon business. You can also Google questions like “what are the trends in the hairdressing industry?” or “is the hairdressing industry growing?” Reading these articles will give you more ideas about how to flesh out your initial business idea.
Don’t forget media articles, government business support websites or even company profiles of larger competitors – the idea is to get as much information as possible about your industry to assess the feasibility of your idea.
Once you have gathered enough information, ask yourself if your idea is indeed feasible, will it provide the basis for growth and a rewarding business choice?
You can watch a video here about “Will My Business Idea Fly?”
I spoke earlier about “barriers to entry”.
Barriers to entry are obstacles that make it difficult for a newcomer to start in the industry.
These may be high start-up costs, protected intellectual property owned by someone else, any industry restrictive practices like having to qualify or requiring union membership and so on, or competing against existing international distribution agreements.
Some of these barriers to entry may make it impossible for you to implement your business idea, and some of them may simply mean that you have to plan to jump across hurdles before you start.
You can get our free report on Barriers To Entry here.
You need to identify any barriers to entry so that you can prepare to jump any hurdles before you invest fully into starting your business.
Next, you should design your Business Model.
You may think that this is too involved – that you don’t need a “Business Model” and that you can just hang up your shingle and find out how things fall into place.
Yes, you may be right; this is indeed optional.
However, you could save yourself a lot of valuable time upfront if you figure out who your best customers will be and what value proposition you will offer them to attract them, how you should be contacting them and what type of relationships you should have with them, who are going to be your suppliers and what type of relationships you need to foster, what key resources you need to have available and how to maintain and renew them, and what key activities should you focus on to grow your business.
Getting a process of what you sell, how it gets supplied efficiently, and what you have to do takes time. Any mistakes you make early on will set you back disporoprtionately.
It is optional, but designing a Business Model upfront can save you time and energy because you know what you have to do from the beginning.
The best way to do this is to write out how the different parts of your business relate to each other, how they depend on each other and how they work together.
The main parts of your business to consider in this way are:-
- Your Customer Segments – Who are your customers, who are you creating value for? Amongst them, who are your most important customer segments? Are you targeting a mass market or a niche market?
- Your Channels – How do you reach your customers and how do they prefer to be reached? How do you integrate your channels, especially where your customers are segmented? How do you raise awareness and then help your customers evaluate your value and make a purchase decision? How do you deliver and support?
- Customer Relationships – What type of relationship will you have with each customer segment? How is this integrated with the rest of your Business Model?
- Value Proposition – What is the value you deliver? What problem are you solving? What product or bundles of products deliver that value?
- Key Activities – What key activities do your value propositions require you to take to deliver them? What key activities are required by your distribution channels and customer relationships?
- Key Resources – What key resources do you need to carry out your key activities and deliver your value proposition?
- Key Partners – Who are your key partners? Suppliers? Service providers? Funders and bankers? Retail networks? Wat key activities do they perform for you and what key resources do you get from them?
- Cost Structure – What are some important costs in this Business Model? What are the most expensive resources required? What do performing key activities cost?
- Revenue Streams – What will our customers be willing to pay for our value proposition? How many different revenue streams are there?
Your Business Model can be drawn up pictorially on a Business Model Canvas. Drawing it up this way shows you the relationships between the different parts of your business and what you must do as a whole rather than focusing on just one element. Having the full picture in front of you, allows you to make decisions about how to build up the important parts of your business.
The next step is to make plans.
Some small business owners prepare strategic plans that look, without substantial detail, over a long period of time, say 5 years or more, to set some milestone targets of the direction they want to take their business.
You don’t have to write a 300-page document – a simple plan of one or two pages would suffice for the startup of a small business, outlining your vision of what you want the business to look like in 5 to 10 years’ time, that will involve who it will serve, what it will sell, and what type of people will work in the business and what they do in the business and for the business. Then, describe what you are going to do to build up that Vision over the next 5 years. This might simply be half a dozen broad strategies such as building a loyal customer base through excellent service; developing or finding and then selling the best product in your industry; hiring the best-qualified people; making sure all your processes are efficient and use systems that are easy to follow; borrowing enough capital to expand sensibly (or, taking your time and sustainably expanding only from profits); and finding partners in the industry to help each other expand their businesses.
This gives you a “strategic direction” or a clear focus on what you need to do over the next 5 years. It tells you what not to do as much as what to do. For example, if one of your strategies to get to your vision was to “selling the best product”, then if you were offered a cheap profitable product that did the job but would not last due to quality issues – you would turn away from that product despite the short term profit it could make. Not only would you ignore your strategy of selling the best product, but you may also endanger your loyal customer base.
This is an example of making decisions to follow your strategic direction.
While some small business owners ignore writing up a strategic plan, they should nevertheless write up a short-term business plan, especially when they start their business.
If you have drawn your Business Model, if you have written a simple strategic plan, a Business Plan details the steps you need to take within a short timeframe of say 1 or 2 years to follow your strategic direction or to implement your Business Model.
Even if you did neither, you need a Business Plan because you need to know what your annual goals, objectives and targets are. Otherwise, you are simply operating blind.
Here, you can read about how a Business Plan can grow your business year by year.
And here, you can read about what a Business Plan can do for you.
Finally, don’t forget your Marketing Plan.
Imagine trying to hit a target without knowing what your target is. That is what opening the doors on your business without knowing how to get sales is like. “Build it and they will come” doesn’t work in a business startup. First, you have to make your target customer segments aware of you and your product.
Then, you have to show them the benefits of your product as opposed to other products so they can evaluate your value. Then you have to appeal to their needs and desires in what they may not even know they need. Then you have to d=funnel them into a conversation about trusting and buying. Then, once you have made the sale, it doesn’t;t stop – you have to ensure they do not regret the purchase and keep coming back.
That is what a Marketing Plan does. It identifies your customers and how to get to them, it identifies the needs that your product meets, it identifies the best way to reach your target customer through the best channel for them, and it creates an annual marketing set of activities to make aware, give them information, appeal more to them, and help them make their choice.
Read this article about how three business owners wrote their Marketing Plans to target successful sales.
If you would like some help in writing your Marketing Plan, you can also check out our free online program here.
Now you can start setting up.
This will involve the registration of your business entity. Your accountant can help you decide on what type of entity to set up – your circumstances and legal; jurisdiction will have a lot to do with the right choice, whether it is as an incorporated entity like a company, a partnership, or as a sole trader. A good accountant can show you the advantages and disadvantages of each for your current situation.
Registration will also involve registering for taxes and possibly local council registrations. Some industries like food outlets or mechanics will require licenses for waste disposal and so on.
Setting up may require you to trademark or patent your product or techniques, or sign agreements such as leasing of premises, distribution agreements, partnership agreements and so on. Get these done right upfront so that you don’t have to worry when all you want to worry about is opening the doors and running the business.
Don’t forget to get your accountant to help you prepare a budget so that you can make sure that your financial targets are met as well. When you prepare a budget, it may reveal some weaknesses in your plans, particularly to do with financing your business. This is the time to seek finance from banks or enter into other finance agreements. Make sure you are getting the right advice so that you don’t over-borrow and that the loan terms are right for you.
Finally, open your business!
This is what you have been working and planning for so enjoy the time!
Speaking as a small business owner myself as well as a decades-long advisor to small businesses, there is no better reward for your effort than a successful business. This is the time of your life and will make your life if you put the foundations in place at the start. So, enjoy yourself!
You are now officially your own boss! Well done and congratulations.
In the next article, I will go into greater detail about Feasibility Studies, which “check” on the feasibility of your business idea. Don’t miss it – you can make sure you don’t by signing up to get it delivered directly to your inbox.
Finally, if you really are interested in starting your own business and you would like to be guided on the steps to take – in your own time – but you’re a bit confused about where to start, once you see our step-by-step online program you will be totally clear and ready to take each step at the right time. Our program called “How to Start Your Own Business – Without Pain” is only AUD$97 and is yours forever to watch and follow over and over again. You can read more about it here.
See you next week!