Business Start-up

Starting a business – better think it through

A lot has been written on this topic but it is worth a few reminders as I often see the same mistakes repeated too often. Let’s look at some of the keys to a successful launch for a new business.

As a preliminary step, assess whether you as an individual are suited for entrepreneurship. Regardless of the merits of the business concept you must be prepared to deal with the risks and rewards of being your own boss and also responsible for those you may employ. If you assess that you are willing and capable of operating a business continue and carefully evaluate some of these factors.

1.     Start with a plan. Review the market potential of the idea. What is the competitive set? Should I start a new business or is there a business for sale that suits my needs?

2.     Will the business be profitable? I am often surprised by the lack of understanding of basic fundamentals ignored by some entrepreneurs. You must clearly understand the costs that will be incurred in setting up the business and provide a significant contingency fund to cover the unexpected. There are always surprises and setbacks that raise the costs of starting.

3.     If you are giving up a full time job make sure you are properly funded. It has been stated so frequently but under capitalization continues to be the most common yet often ignored reason for business failure. You may wish to start the new business part time to reduce your risks and allow the business to grow more slowly. The down side to part time activity is that you have less time develop the business or provide adequate customer service.

4.      Make sure you have a strong management team. Surround yourself with strong, qualified people. If you are using outside financing banks or other lenders will want to know “who is looking after the money”.

5.     Stay on top of the finances. You will sleep better if you have a handle on your bottom line. It’s nice to see sales flowing in but managing cash flow is critical and the key number is on the bottom line not volume at the top.

6.     Expect your competition to react aggressively if you are a new entry into the marketplace. Often the best defense from a competitor is an aggressive price competition. How will you react and your staying power may determine whether you survive.

7.     Take advantage of professional advice. Your accountant, lawyer, banker and others like the Business Development Bank can be very valuable and readily available assets. Don’t be too proud to ask for help. No one person has a monopoly on all the good ideas in business.

This just scratches the surface of issues to be faced but perhaps provides some food for thought. It’s a place to start this often challenging but potentially very rewarding road.