You've got four pre-planning steps to go through before you should even think about launching your company.
Prospective clients often ask this question: "I have an idea and I want to start a business, but where do I go from here?" Depending on their background, their proposed industry and what they have accomplished at the time the question is asked, my answer varies. However, one component of my answer never changes: I always advise clients to do some pre-planning. "If you're going to take a risk," I say, "why not a calculated risk?"
Here are four elements of planning that can help an aspiring entrepreneur move from point A to point B.
1. Personal Assessment
Ask yourself: Do I have what it takes to be an entrepreneur? You must consider your willingness to endure these factors:
The lack of emotional or financial support from family, friends and significant others. The road to entrepreneurship can be a lonely path. Be prepared to hear some negativity from the ones you love. Do you have the emotional stamina to handle this?
The risk involved. Some people are risk-averse, and the thought of starting something that could fail is unbearable. If you are one of these people, business ownership is not for you.
The long hours and holidays with little or no pay. Do you have any obligations that would hinder you from working the hours you need (e.g., a health problem, family obligations or school)? If so, you must analyze whether you can balance these competing interests.
Working alone while having to be a self-starter and innovator. For some, this may be a daunting task. For an entrepreneur, it's essential.
You must also have working knowledge of the industry and its patterns. In the book What No One Ever Tells You About Starting Your Own Business, Craig Hartman of Preferred Industrial Services admits that his lack of technical knowledge and business management skills significantly impeded his company's
A participant in one of my workshops said she had no competitors because her business idea was unique. This is a mistake most startup businesses make. There is always competition, and that's why research is important. Doing initial research about the audience you want to target means asking yourself several questions:
Why do I want to start this business, and what pain would I be relieving? Compare your business to an aspirin. If your customer doesn't have a headache, why would she take your aspirin? There must be some pain. Also, ask yourself whether you're starting a business you love. If not, find something you are more passionate about.
How does my target customer buy, and how do I conform my product or service to fit what this customer wants? If your product or service targets young people, you should study young people's habits. Don't be like the woman I met at a networking event who owned a consulting company geared to help high school seniors make the transition to college. She complained about not being able to grab their attention. When I asked for a sample of her materials, she handed me a traditional looking postcard with no website address included. Obviously she didn't know her market very well.
Who are my direct competitors, and what are their selling patterns? Learning about your competitors during your planning stage gives you some idea of the scope of the market and how you can position yourself and your business.
Based on the above answers, how do I develop my concept further? Inevitably your concept will need revisions at this stage. The key thing to remember is that a business is only as good as its concept and its ability to woo its customers.
I had a client who wanted to start a private transportation service for the elderly. She was unaware that her locality offered services that already had forced private companies out of that market. Imagine what would have happened if she just dived in without doing initial research. You can collect your data by surveying potential clients, researching at the library or hiring someone to conduct a feasibility study. Do whatever works for you, but don't skip the research stage.
When my husband decided to start his own business, I was still working in the banking industry. He's an attorney who hates to plan. With my financial planning and business banking background, on the other hand, I wanted to plan ahead.
I remember taking a piece of paper and jotting down all of our expenses vs. income. I asked how he proposed to supplement his income. He was quiet for a minute. Then he said, "Well, with the sales coming in . . ." I interrupted him: "Well, yeah, but you can't count on that, at least not for the first six months. So during this time, how do you suggest we pay the bills?"
He suggested the credit cards we had started to accumulate just for this venture. I quickly jotted down some figures based on potential credit card scenarios: If this balance is charged on the card using this interest rate and these finance charges, this payment will have to be made. Then I asked him how he planned to pay the credit cards after we charged them, plus pay business and personal expenses.
He had no answer just then, but it got him thinking. We finally came up with a budget strategy that involved saving some money and borrowing some money to ensure that we paid our bills on time.
If you're thinking about starting a business, you need to seriously consider your personal and business finances before you make this leap:
Start formulating a budget strategy based on an analysis of your current spending habits and income.
Think about what you or your family would need to save for six months to one year to pay your bills.
Analyze your personal expenses vs. any business-overhead expenses.
Start the mental preparation for not receiving a paycheck for a year or two.
4. Professional Expertise
Start aligning yourself with professional expertise during the planning stages. You might need initial advice from an attorney, an accountant, an insurance broker, a business consultant, a marketing or sales expert and a business banker.
Here are a couple of tips for reeling in these individuals throughout your planning process:
Call and try to get 20- to 30-minute phone consultations. This gives the experts a chance to learn about your business and maybe give you some free tips. It could also be the first step to building a relationship for the future.
Start attending seminars or workshops hosted by these individuals. This will help you gather valuable information that could prove useful in the long run.
Skip the drive-through window at your bank. Go inside and start talking to your bank representatives--even if it's only about your personal accounts. Building these relationships may prove advantageous when the dialogue about your business plans comes into play.
Once you've gone through these pre-planning stages, the next step would be to start the registration process and write your business plan. If that sounds too difficult, hire professionals to aid you in this task. Whatever you do, remember: If you are willing to take the risk, take a calculated risk.
Cheryl Isaac is a startup business consultant and the founder of Isaac Business Services isaacbusinessservices.com, which helps entrepreneurs launch their businesses while keeping their full-time jobs.