Before putting up that sign and opening for business, there is a significant amount of work you will need to do. The following paragraphs include some of the things you will need to complete before you can open your business.
Assess The Need
Is there really a need for the goods or services you are going to offer? Many new business owners overlook this very important point. People will often go into business offering a product or service they are good at producing but never really considered if the product or service would be useful to other people. The easiest way to find out is to ask people what they want or need.
Research The Competition
Now that you have determined that there is indeed a need for what you are offering, it is time to find out who else offers the same goods or services. Find out who your serious competitors are. You want to know what makes people want to do business with them. You also need to know what it is about your competitor that people don’t like. Be sure to not imitate the competitor’s faults. Also, you will need to determine if your market will support another business like the one you are opening. Do not assume that you will “steal” your competition’s customers. People are creatures of habit and it may be difficult for them to change to an unknown business.
Will You Make A Profit
This one is a tricky one because there are so many variables that affect the profitability of a business. But, you have to analyze everything you know (and don’t know) about the business you are starting. Everyone says it is great owning a business doing something you “love”, but how long do you think you will be doing that thing you love if you don’t make money? You are at a point in your venture where you need to create a “Break Even Analysis”.
A break even analysis is just a document where you list your projected expenses for a 12 month period to determine the dollar amount your business needs to generate just to pay the bills. You then need to look at your projected sales for the same period of time and try to make a determination if this is worth it. The first 2 or 3 years you will probably show a loss, but after that 5th year you should see decent profits if the business is viable. If you can’t show a profit after year 4 on paper, it is probably not a good idea to start that business. You will need to be honest about sales and expenses, avoid the temptation of being overly optimistic.
Seek Professional Help
Now is not the time to start cutting corners. A good accountant, lawyer, and any other business or financial professional is worth their weight in gold. If you don’t currently have these people as a part of your business team, you need to find them fast. Ask friends and relatives if they have any recommendations and be sure to check references. Don’t hire a family law attorney when you need a corporate lawyer just because it is your 3rd cousin. Good professionals (notice the emphasis on good) can save you thousands of dollars over the life of your business by helping you to avoid pitfalls and obstacles. An attorney should review every scrap of paper before you sign your name.
Location, Location, Location
You will need to find a few locations they may work for your business. Before you sign that lease, ask yourself if your type of business needs to be in a “high profile” area to succeed or can you do just as well off the main strip. This is important because the high profile areas usually mean high rent. But if your business will depend on high profile, then high rent is going to be a cost of doing successful business. You may want to consider purchasing over renting, be sure you factor this into your startup costs as it may cost you a considerable amount more to buy, but it may save you thousands in the future. Be sure to have a lawyer review any lease or contract in advance.
Your Gonna Need Money, Lots of Money
Be sure you determine your capital needs before open your business. In their optimism about owning a business, new business owners tend to under estimate the amount of money they will need to open and operate their business. This is probably one of the biggest mistakes new business owners make. In my opinion, you should determine your financial needs by listing your startup costs, then list your monthly operational costs. Now pretend that your first customer will not make a purchase until your 3rd month of business. If I were you, I would be sure to have enough capital to operate my business without 1 cent in sales for at least 3 months, you never know what will happen.
Now You Need A Good Plan
Once you have completed the previous steps, you are ready to complete the most important step, your business plan. A good business plan is like a map, it helps you find the path you need to take to get you to your destination. Also, if you plan to seek financing for your business, most banks and investors will require a business plan. Even if you don’t plan to borrow money, you should create a business plan. And you should make it a point to review the business plan frequently. This practice helps keep you on track and will help get your business to the next level. A lot of the information you will need for your plan will come from the previous steps discussed on this webpage. I have provided a link to the right on how to write a good business plan.