Wouldn’t it be a great idea to start your own business? This article examines 7 key points to follow when starting a business.
1. Personal evaluation
You should check yourself first before any capital commitment. Can you run the business? Do you possess the relevant skills and experiences?Do you have the self-confidence, discipline, health, honesty, motivation to start your own business? Will you start it as part-time or full-time? Do you have the time? Don’t forget the family support is very important to start a business. The key to start a business is your passion.
“If you work just for money, you’ll never make it, but if you love what you’re doing and you always put the customer first, success will be yours.”–Ray Kroc, Entrepreneur.
2. Idea evaluation
It is important to do some basic assessment of your potential business idea before investment. An idea should only be called a business idea when your skill and idea will solve someone’s need or problem. An idea development should start with value proposition to the customers and ability to provide a return on the capital you will invest.
3. Understand the potential market
Assessment of your industry and market is very critical before you start a business. One of the common tool use for an industry analysis is the Michael Porter’s 5 Forces. This model advises you to research about the buyers, suppliers, competitors, potential entrants and substitute products. You should also assess the potential market demand and economic environment.
4. Plan before you start a business
Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan. –Tom Landry. Start-up business plan is a key document that includes summary of key success factors for the business. It also includes analysis of resource requirements and utilization. It helps in deciding whether to go ahead with an idea or venture. It is a must have document if you are relaying on external source of finance. It can also be used to apply for government grants and supports. Business plan serve as a road map to guide you, and communicates what want to do and how you will do it. Elements of the plan may include mission statement, product or service offerings, target market, market evaluation and strategies, management CV, financials model estimates etc.
5. Structure your business and make it legal
Yes, very critical and important. You have to choose the legal structure of your business. Do you want to set up a sole proprietorship, partnership, limited liability company or sort of corporation? Each structure has its legal and financial requirement. I believe you would have read that Limited Liability Company is a separate legal entity from the owners (shareholders). This is not the case of the sole trade and most partnerships.
You will need to register the business, incorporate if necessary, and obtain the relevant licenses and permits. Please met your Lawyer or Accountant on how to go about obtaining these documents. This is the time you also make decision about the business location.
6. Get the capital
Good idea, huge potential and a good structure but who will finance the business idea? You need to mobilize your sources of finance to start running the business. Your finance sources could include:
- personal savings – do you see why savings is very important
- small business loan from your local bank
- Family/ friends soft loan – I actually do not encourage them to lend you.
- angel investors – Risk takers who are willing to invest on excellent ideas
- government grants – find out from your local chamber of commerce
- Credit card financing – This should be your last resort. It is very expensive but not illegal
- Buy the starting products on credit – mostly for trading business
7. Get started
Pay for the lease or use your house and let start. If you are using your house, make sure your lease agreement didn’t disallows it. Buy the inventories and equipment, hire staff, lunch and open to public. Remember you should leave some cash in the bank account for your day to day operations; we called it working capital.
Now that you are live and running, please stick to the business plan but be flexible to change as this time could be a trial and error.
Share your ideas on how to start a business.