The ideas
in this piece is not totally mine but a
product of a book titled “So you want to start a business: 8 steps to take
before you make that Leap” by Edward D Hess and Charles F. Goers, 2008. With
this book starting a business is easy and a great fun. Some of the steps to
prerequisites of starting a new business are as follows:
SHORE UP
YOUR SAVINGS
Before you
think of starting a business, make sure you have savings of at least six months
of your salary. In the earlier notes, I refer to this as your emergency fund. This saving will help
balance you out in the first six months of your business when you will be
working hard to create a brand and win new customers. In this way, you can meet
your obligations and live a decent life.
Sourcing
for capital
Engage Partners not Lenders
As much as
is possible, do not borrow from a bank to start a business? Yeah, you say that
is so easy right!!! Before you draw up a
plan, or do a feasibility study think up at least five people who you know
trust your judgement and character, and would support you in whatever you do.
Let them be your test market. Sell the idea to them, gauge their reactions and
take positive feedback from them. From
there, you can launch out and engage
partners or stakeholders who will invest in your business. Aim to raise/save
enough money to pay your rent, your monthly working expenses and at least one year’s salary of your staff. This
way, you will not be under undue pressure for cash. The killer for most start
up business is a lack of finance or access to funds in the first year.
LEARN THE BUSINESS
Please, do
not start a business because your neighbour
did it or you assume it is a simple thing to do. Do a proper research
and study of the business environment. If possible, understudy in an existing
company and learn the ropes there.
START PART
TIME
Start on a part time basis and grow the business to
such a stage that you can leave your job and focus on it.
CHOOSE A
MENTOR IN THE SAME LINE OF BUSINESS
Yes, you
need to have someone who has been through
the start-up phase in the same terrain to teach you the ropes. Knowledge
is never too much but can be too little. Humble yourself and learn from the
mistakes or experiences of others. You
will be better prepared to deal with the
challenges that come your way.
PLAN FOR FAILURE
Too many
business plans to turn a profit in the first month and that in itself is a sure
way to lose your courage. Give yourself and your business time to grow. In your projects, plan for no sales or
customers in the first three months.
Prepare for rejections or outright refusals to patronize you. Use the
feedback to fine-tune your value proposition and come back with a winning
punch. It is unrealistic to expect to turn profit from day 1. Having looked at
his pre-start requirements, let’s consider some basic rules and steps to take.
CHOOSE A
GOOD BUSINESS OPPORTUNITY
A business
idea is very different from an
opportunity. An opportunity equals revenue potential and that is what should
always drive your business. A business opportunity must have the following:
·
Potential customers
·
Access to these customers
·
Customer’s ability to pay for the
goods or services.
CHOOSE THE
RIGHT CUSTOMERS
Know the
class of customers you want to service. Research their buying habits and
threshold for loyalty. Do not think because a group displays a certain style,
they will automatically appreciate our services.
CHOOSE THE
RIGHT CUSTOMERS
Following from the above, build your product around the
customers. Today’s customers know what they want and you can’t squeeze them into what you think is right for them.
Though they may buy once, you will not build a sustainable business with
one-off client. You need repeat customers.
PRICE RIGHT
Do not over
price or under-price your goods and services as either way may kill the
business. Choose the right price so the customer understands he is getting
value for money.
PEOPLE
ISSUES
Seek to
employ qualified personable people. This is a tough one to follow as there is
dearth of qualified personnel in today’s market. However, if you can find
personable teachable people, then commit to regular training and skill upgrades
to make up.
EXECUTION
After you
have made all the fancy plans and reports, execution remains your biggest
challenge. Execution is simply your ability to carry out the plans and bring
them to reality. You will need to be
courageous; bold; daring and fast mover. Sometimes, the courage to make the first
step is worth a lot more than all the business plans and investor agreements.
All the aces may not be accurately lined up but with a first step you put
things in motion for success.
Edward D. Hess, JD, LLM, has spent most of his life in business advising entrepreneurs and financing their business ventures. He is a Professor of Business Administration and Batten Executive-in-Residence at the Darden School of Business, University of Virginia. He has personally built three successful service businesses. His website is www.edhltd.com
Charles F. Goetz, MBA, Distinguished Lecturer in
Entrepreneurship at Emory’s Goiszueta Business School. He has built nine
successful businesses in six industries. He serves on the boards of several
entrepreneurial ventures and not-for-profits. He recently published The Great
Entrepreneurial Divide. His specialties are marketing, customer acquisition and
product development.