Few things to consider before starting a business

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.