5 Things to Know Before Starting a Business
For millions of people, being your own boss sounds like the perfect career move. Reporting to no one but yourself. Making your own hours. Benefitting from the lion’s share of the profits. But as you dream about the adventure of entrepreneurship, make sure you know what you’re getting into before you actually take the leap.
You need a solid business plan.Before you start a new business, you must develop a comprehensive business plan. This essential document will define the business and its mission, detail the products and services you will deliver, identify your target audience, outline your business strategy, name the company leadership and provide an overview of your financial plan. Tempted to skip this step? Bad idea. Countless entrepreneurs can attest that the time you invest in your business plan will pay off many times over. In fact, when the Kauffman Center for Entrepreneurial Leadership surveyed the annual winners of its Entrepreneur of the Year Award, it found that companies with written business plans had 50 percent greater sales growth and 12 percent higher gross profit margins than companies without plans1.
Before you earn, you must spend.As the saying goes, "It takes money to make money." When it comes to starting a business, that adage has never been more accurate. So, your first job is to line up your sources of funding. Usual suspects are your own savings, friends and family or SBA loans. Alternative options include microfinance loans and crowd-funding.
But how much will you need? More than you think. A good rule of thumb is to have enough money to start the business, buy inventory, market the business and pay yourself for at least six months. Small business experts say that is the minimum amount of time it takes to get the word out, generate business and kick start the cash flow.
Critical choices: location, equipment and employees.One of the most important decisions you will make is where to locate your small business. Will a home office meet your needs? Should you be near public transportation or in a high-foot-traffic area? Bottom line, if people can’t find you, they may not be able to do business with you. As you develop your business-launching ideas, keep location toward the top of your decision list.
Next, you’ll want to be sure you choose the right business equipment. As an entrepreneur, you likely can’t afford to go extremely high-end when you’re just starting out. However, you must choose equipment that is safe, reliable and can grow with your business — or you’ll pay more in the long run for maintenance and upkeep. You’ll also need to decide whether to buy and finance — or lease — the equipment.
Most importantly, you must choose your employees wisely. This small group of people will help you build your dream, so it goes without saying that your employees should be hardworking, trustworthy and enjoyable to be around. You’ll be spending a lot of time together.
Your personal life will take a hit.Starting a new business is not for the weak. You must be smart, brave and incredibly hardworking. When you own your own company, there is always something that needs to get done — and it’s up to you to do it. You will most likely find yourself working at least 60-80 hours a week for the first two years. The rewards of owning your own business can be great, but be prepared to sacrifice your free time while you get your business up and running.
You’re not just the boss. You’re the marketing director.As an employee, you have the option of simply coming into work, doing your job and going home. As the boss, you will have no such luck. You are in charge of developing and promoting your brand, and it’s up to you to manage how the outside world sees your business. Once you specify a target audience for your product or service, you must continually work to promote your brand identity to them — even as the marketplace shifts. Smart, energetic business owners grow and maintain a network of resources and allies that can assist them in meeting their business goals. From industry groups to small business meet-ups to marketing professionals, working together with strong resources can provide outside perspectives and skills that can strengthen your business and bolster your bottom line.