Starting a business is what we talk about In this issue. Successfully start a business without getting into possible risky situations is important. Preparation is the key to avoiding risks and setup a new business that not only gathers the initial momentum but runs profitably. If you are a business graduate, you may want to look at proper founding processes for your specific LoB, this article is for new aspirants.
How to Successfully Start a Business
Starting a Business is never easy, it’s fraught with risk and uncertainty. Had it not been so, the rewards would not have been high. Starting a Business and making it profitable is one thing that scares the coins out of most aspirants. But let us make the process easier for you to undertake.
Starting a business plan
It always starts with a plan and it has to be clear, precise and supported by data. First you need to identify the Business you are going to undertake. Then you research the potential revenue, risk, chain of supply, staffing requirements, operating margins, type of product or service and its associated costs, USP, demand and most importantly competition.
For example, if you are to start a sales business that runs on salesmen efforts from a back office, you need to ensure you will get the right kind of sales staff in that area. We have one of our promoters fail their business because of staffing issues. Each factor needs to be vetted properly or things may turn undesirable. Brainstorming with partners, family and friends to list failure points, possible lockup situations and possible solutions to those problems if and before they knock.
Calculating business risks
Calculation the risks is the key to weigh in not just your decision on a business but it can lead you to fix certain problems before they start. Starting a business without knowing if you have the capacity to deal with the risks can be a very big mistake. For example if the business has a seasonal risk and you do not have funds to run the entire season, you may be out of business before you plant your feet in the market.
Risk appetite is different for everyone, this applies especially to small businesses where the owner placed a lot of personal investment at risk. Please conduct your own due diligence and do not leave out any area. Be thorough.
Enlist startup business requirements
Prepare a list of what your business will need to start and run. Make list of required facilities like land and building, office furnishing, showroom space, renovation and painting, office equipment, power and network management, inventory, logistics, initial stock, working capital, employee salary advances and deposits and so on.
Always make 10-15% over estimate but not too much. Overly funded businesses may not be a good idea as excess money is usually not utilized carefully by most small business owners. Do keep in mind that starting a business is one thing and running it is another, so do keep working capital for backup. For example a fashion store at a certain location may require a full season worth of working capital.
Starting a business under a brand
At this point we must mention that franchising is quite valuable for new businessmen who want to put in the money and use expert help to launch their business. Do consider if you want to start under a franchise and if it fits your plan. Starting a business under a well known brand umbrella will help you with pre planned structure, a working chain and hassle free experience.
Once you secure a successful franchise, you could always launch your own brand separately as a new or altogether business now that you have experience. you still would need to do your due diligence though.
Write an operating handbook
Create an operating process and procedures rule book for your employees and yourself. Businesses run best when they follow predefined processes and procedures for each step of operation. This not only gives a smooth customer experience but removes confusion, reduces latency and improves profitability. Be clear in your instructions, ensure it answeres an operators question in complete clarity and does not leave room for ambiguity.
Decide on the business model
You would need to identify in specific, the sources of revenue, intended customer base, products, financial details like equity and debt ratio etc. Also it’s a good idea to weigh in the pros or cons of different types of legal structure like LLC, PLC, Sole proprietorship and others, to see which one suits you best.
There’s nothing better than having the key skills to do the work yourself. Especially work that is core to the success of your business. Even if it means your employees will do it, you still better get trained for those days when you don’t have any backup while the employee is on leave or you are awaiting new hiring. Also a better skilled owner is a better recruiter as he/she knows the job at hand.
So for example if it’s a restaurant you want to start, better jump into hotel management or a crash course in cookery at the least.
New business funding
It’s best to fund your business with your savings that are not critical to you and your family. Worst form of startup funding comes from high interest loans, we would recommend you to stay away from that idea even if you think you have assured business opportunity. This has been known to be the recipe for business disaster for many. There are unseen risks and sometimes they can lend you a fatal financial blow. Save up and invest non-critical cash only. Always start with excess and not just on a tight budget. You can also draw funding from government employment and business funding schemes. New concepts like startup funding and crowd funding is also available for innovative business ideas.
Naming, structure and paperwork
Pick a name that is unique, easily recognizable for your industry. Decide on staff and line chain of management and assign responsibilities. Would you consider a private limited company or a limited liability partnership if more than 1 person is involved in ownership. How you define partner roles is what should be done after due research here. Also, you will require tax information numbers, GST numbers or any other tax and employer related registrations required by law.
File your papers and open the required bank accounts so that initial deposits and funding can be done. This will also help you with initial expenses involved with starting a new business.
Laying down an organization chart
Preparing for an organizational chart that draws out the ranks is next. Chart out line and staff structure. Keep the reporting depth as shallow as possible. Even some large companies keep the maximum chain of direct reportees to a maximum of 7 levels from bottom to the CEO.
Small businesses can focus on the main staff required to do the job then draw the ranks accordingly all the way to the owner. The owner or a generic skilled manager can take up multiple roles due to the small size of the workforce.
Procuring, lease and setup
Procure the required raw materiel after leasing a space for operations and display or front office (if required) and set the place up with required production and office facilities. Keeping the costs low is the key to starting a business.
While setting up, you should aim at keeping the costs low, efficiency in production and safety in place. For specialized requirements it’s best to seek expert help but not without your own due diligence and research.
Stocking and working capital
Load up enough stock to account for final produce stock buffer, payment cycles and sudden market demands. If your suppliers are capable and product is fast to produce, you may opt for Just in time stocking and production.
Keeping low working capital will dry out your business and too much will make it low on profitability. You could keep higher working capital at the start and reduce it with experience. Not having enough will leave you with no funds for production, salaries and monthly bills.
PR, Advertising and launch
Prepare for a launch and have a plan in place for your intended audience to get an introduction about your business. A good PR plan involves public launch event inviting key people from your target customer groups, suppliers, vendors, investors and other stake holders.
You may advertise your launch and target the right people you intend to through demographic research. So if it’s a fashion store you are opening, an advert in a local fashion magazine or an uptown invitation event may suffice.
Review and course corrections
Once you start operations, keep in mind that running a business is a bigger challenge that starting a business. Review your progress often and take corrective measures more often. This frequency will reduce over time yet you need to stay laser focused on the task at hand while at the start.
Continuous operations, regular review, course corrections and working closely with your employees, customers, vendors and other stakeholders will give you the experience and success that cannot be described here. Slowly your business will dig in and gain the momentum it deserves. Give your business time to be successful. The day you quit is the day you fail. If you work smart and hard with conviction, you are bound to succeed.