Archive for the ‘Business startup’ Category

The first step is easy.

Posted: September 12, 2013 in Business startup

It would appear that the important first step in entrepreneurship – deciding to start your own business – isn’t that big a deal.  I’ve taught several classes to individuals who paid to attend and I am not certain whether they actually started their own business.

The first step is easy. If you decide that you want to start your own business that’s the easy part. Following through isn’t. We all have distractions and even.. sober second thoughts.

I have come to the conclusion that most small business ideas are work-from-home part-time businesses. That isn’t easy either but this is less risky than Plan A.

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So, you have decided to start your own business? Before you go about preparing a business plan, here are some basic questions you need to answer:

  1. Do you have a name for your business? This isn’t as easy as it seems. You may have chosen a name only to find out later on that someone else uses it and has registered the name. Can you find out if this name isn’t taken?
  2. How will you operate? A proprietorship or a corporation?
  3. Will you work from home or rent an external office?
  4. How is the local (micro) economy in your immediate market? While there is never a wrong time (or best time for that matter) to start a business, the conditions of the local economy must be analyzed. If you plan to start a contracting business in a town with no growth, well — be careful.
  5. What is the state of your personal finances? Most small businesses are under-capitalized. The slow-to-arrive revenue must be financed somehow. Usually by your own resources. How good are they? If they aren’t good, be very cautious about starting an energetic business venture.

Okay, if you have all of those bases covered, the hard stuff begins….. preparing a 3-5 year business plan.

So, you weren’t scared of the low probability of success of start up businesses and you are still in the game? Okay,  the next step is to do the following:

  • Clearly articulate in 250 words or less the type of business you want to start.
  • What type of business will it be? Retail? manufacturing? Service?
  • Why is this business a good idea?
  • How do your qualifications dovetail with the business idea?
  • You should prepare a 1 to 2 paragraph “business bio” on yourself. This is not a resume but one of the foundations of your planning process. You may not have had the direct experience in this type of business as an employee but you may have had managerial or supervisory experience, marketing or finance experience and have had exposure to budgets and forecasts.

That is enough to keep you busy for a while. Here is a very good exercise that may curb your enthusiasm for a new business venture or possibly give you pause to do more in-depth research on your business idea. Each of the first four bullets above should have the words so what? added after.  This should give you time to reflect on your possible venture.

For example, you might say: “I plan to open a small business accounting business.” Okay, … so what? This will force you to add some features that will make your new venture stick out. You might add that the prices charged clients will be less than local full service bookkeeping businesses and certainly less than the rates offered by public accounting practices. You can add that your business will focus its marketing activities on businesses from 1-10 employees. This adds a massive market to your potential client list.

The next so what should deal with why the business will be attractive to possible clients.  The next so what might cover your academic credentials and prior experience in both private enterprise and public accounting. I think you see my point here.

By answering the so what questions you are narrowing your focus and concentrating on the key questions that possible clients would want to have answered.

Try it with your business idea. If there are more questions unanswered this isn’t bad. You need to do more research before you open your doors to a market that you might not have understood beforehand.

 

I have seen this sticker on many  semi-trailors on major highways: Don’t drive like you own the road, drive like you own the company. It is an important seguay into this (first in a series) of my blogs on entrepreneurship.

First, the sombre facts: over 50% of all start-ups fail in the first five years of operation. The reason – management! Now that this is out of the way, we can proceed to other realities that you must come to terms with:

  • Being an entrepreneur is different from being an employee. You can go through the motions as an employee and still pick up a paycheque every two weeks. As a self employed entrepreneur (in a proprietorship) your income is based on your ability to find enough revenue to cover your expenses and then hopefully have enough left over to cover your personal living costs.
  • You must never stop looking for business opportunities. You many be fully occupied with existing clients/customers but must always be on the lookout for new customers.
  • You must take a long term view despite the factoid #1.

You should do a personal assessment.

  1. Why do you want to go into business for yourself?
  2. What personality type are you?
  3. Can you handle stress? (Business will be stressful at times).
  4. Do you have a family? If so, they should be consulted with and advised about your plans. Do not come home on a Friday evening and announce to your spouse that “I’ve quit my job and decided to start my own business.”
  5. Are you aware of the constraints this can impose on your personal life?

Business owners work long hours but some people look at them and are jealous that they can come and go as they please or drive a flashy car. They think the entrepreneur has it all. Not true! Many entrepreneurs I consult to work 50-60 hours per week, open and close their doors each day and their flashy car may be the only perq they have.

So put the horse before the cart. Do a serious evaluation of your personality type and why you want to go into business – even before you go into business. You will have a leg up on other would be entrepreneurs.

More posts on this topic will follow.

 

There usually is never any question about succession in a family business. The newest (family) members will take over – some day! I’ve worked around family businesses most of my career and here are some of my observations:

  1. The new family members assume their positions by virtue of DNA, not ability. This isn’t a critique as much as a statement of fact.
  2. The new members may bring some new and fresh ideas but they are usually marginalized by the scion of the family.
  3. There isn’t a clear time frame for the current family ownership to transition out.
  4. The mantra is “follow my lead.”

The key issue in any family business transition is the preservation of the family business name. It should be to ensure the business can survive and prosper going forward. What worked for Dad or Grandpa’s era may not (and probably doesn’t) work in Junior’s era.  There is too much information and too much choice now.

It seems ironic that most well run businesses spend a lot of time scrutinizing the resumes of prospective hires for managerial positions yet don’t perform the same due diligence when a family member joins the firm?  There are different sets of rules of course and this could signal the end of the business.

I recommend that the newest family member “learn the ropes” by getting to know how the business operates. It could entail wearing blue jeans at the loading dock or getting dressed up in a suit to meet key clients. That’s the probationary period.

Then, I recommend assessing the shortcomings and making sure that they get proper training. This training could be expensive but it will pay dividends in the long run. The big issue is whether current family management thinks that training is an investment or a cost.

More in a future post.

 

Yesterday I had the privilege and opportunity to participate in a “garage mentoring” session with a couple of Ottawa and area start ups. The two businesses that presented themselves were varied but have potential. They haven’t started active operations but have products for their markets.

The presenters were passionate and ambitious. The one shortcoming was their lack of understanding of their market. This is not a criticism just an observation. I was fortunate to be with a marketing consultant and he offered suggestions for the entrepreneurs to find their market niches.

The entrepreneurs who are behind both of these businesses are working on their business plans. It has been my experience with numerous local businesses that an understanding of a market is critical to the success of a business venture. Once you understand your market then you can direct your selling efforts to generate revenue.

I am an accountant by profession. However I advised these entrepreneurs to find their target markets and customers and establish a pricing strategy – then I can help them with the financial forecasts.

It was a great session. It is nice to see that entrepreneurship is thriving in Ottawa.

 

The previous posts have all led to this post. Your “Google Map” is your business plan. It should be a written description of where you want your business to be in 3 years.  Why 3 years?

  1. The Canada Revenue Agency (CRA) has ruled that a business must have a reasonable expectation of profit. Simply put: one cannot use business losses continuously to offset other income. The CRA will reverse it.
  2. Most start-up businesses fail within 5 years of start-up. Unfortunately many fail within 3 years.
  3. If you are attempting to generate a full time living from a money losing venture, you will be destitute after 3 years if your business continuously loses money.

You must be a visionary when creating your plan. Your plan will place you on sounder footing than the business that starts without one. The business plan components should be properly researched, and with realistic financial forecasts. The financial forecasts are the acid test of a business plan. If the forecasts (income and cash flow) don’t look reasonable – well – reload and rethink your assumptions.

I have developed a very comprehensive 9 module “Starting Your Own Business 101” course. Check out the table of contents on the front page of this blog.

 

 

If you are still committed to starting your own business and have researched your idea and still feel it is sound, what next? Here’s my recommendation:

  1. Articulate your business idea. You may not have a name for it yet and at this stage it doesn’t matter. You should list the pros and cons of this business. Most new entrepreneurs will have little trouble populating the “pro” column. However what are some of the “cons” that you can think of? Be very frank and objective in your articulation of the pros and cons. If you have a lot of “cons” then this is grounds for more research on the efficacy of the business idea itself.
  2. Create your bio. This is not your resume. Your bio is a summary of your career accomplishments and academic background as they will relate to your business idea. If your career included budget responsibilities, management of staff or operational experience – these are all positive attributes. The bio should convey not only experience but discipline. Many people with an entrepreneurial flair find work in larger organizations stifling. However these organizations exist and grow because there are procedures in place. The procedures create discipline.  If your start-up business requires funding from a bank or micro-lender, they will closely scrutinize this paragraph in your business plan.

These two topics should not be completed hastily. They are important components of your Google Map (aka .. your business plan). More on this in a follow up post.

 

 

This is a continuation of my previous post. So assume you’ve done your personal gut check and still want to start your own business! That’s good! I offer some advice based on my own experience and being around ‘former’ entrepreneurs who tried self-employment and weren’t successful.

My first nugget of wisdom is: have realistic expectations. A business idea that seems like it’s a no-brainer is probably a non-starter. Just because it’s your idea and no one is there to critique your idea doesn’t make it a great business idea. Can it support you full-time?

Secondly, do not start a business because some of your friends or associates tell you that they would buy your product or service. You might have a dozen friends or colleagues who think your idea is great. You will need more than a dozen sales to keep your business afloat.

Finally spend some time doing some Google searches. The first search should be to input the type of business you wish to start and click “enter.” Your search will probably return thousands of hits. It may depress you somewhat that your business idea isn’t unique. Don’t be too distressed – a dose of reality is needed to focus your attention on what will make your business a success.

There are local on-line free business advertising sites. Check these out and focus on the sector that you wish to enter. You will get an idea of who your local competitors are now. If their ads include a URL, look over their site. What do they offer?

I will add more in a future post.

 

 

 

I am offering a few insights to prospective entrepreneurs based on my 30+ years experience in and around the small business sector. Many employees dream about starting their own business but never do. On the other hand, many entrepreneurs are created overnight – by necessity. In the 1980s, I worked for a company that closed its doors and I needed to find money to help support my family. My spouse worked but we had young kids and we needed to fill in the gap in cash flow. I found sporadic work and went about trying to find clients the wrong way. This was pre-internet, pre-cell phones and pre-web pages we now take for granted. I was offering a service and it was a service that businesses required. I  got depressed thinking: “why aren’t clients beating a path to my door?”  If we fast-forward to 2013 there are many new entrepreneurs who feel the same way I did and they have the benefit of all the gadgets that were unavailable to me at the time.

This seguays into a self-assessment exercise you should conduct before you venture out into the new world of self-employment. Entrepreneurs can now work from home as easily as work at or from a client’s establishment. That still doesn’t guarantee success. I loosely call this the “self-employment gut check.”

Ask yourself the following questions and they aren’t rhetorical ones:

  • What is your idea and is there a need for your (business) idea?
  • Do your skill sets (academic and career) make you an ideal candidate for this endeavour?
  • Have you done any “recce” (research) on the potential for your business idea – in your local area? (Forget about an exponential world market that is falsely claimed in TV get-rich-quick ads)
  • Do you understand the risks involved in starting such a venture?
  • How well do you handle stress?
  • Are there conduits (possible) partners in your area that you can tap into to offset your shortcomings in gaining access to your market?
  • What is your family situation? If you have a spouse who has a full time job this is a bonus but, can he/she support the family (and you) on one income for quite some time?
  • Do you appreciate the work that will be involved?

I will end this post here and continue on the self-employment theme in future posts.