Business Start Up – Basic Steps Before You Can Even Open Shop

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The facts are that most new business endeavors fail in the first year or two due to poor planning and poor financial support. There are some very important steps to consider when starting a new business and that is what this article is all about – the major steps that one must follow, consider, then implement BEFORE OPENING DAY in order that the business can thrive and be profitable.STEP 1: IT MUST MAKE SENSE
If your idea of a new business is to have a Sno Cone store located on the beach in central Maine, then you will have major obstacles to overcome, not unlike selling ice cream to Eskimos in the winter time. Sure, you will be busy for a month or two each year, but is the business able to be sustained, i.e. remain profitable on a year round basis? Likely not. Your new business needs to be an idea that makes sense, or is something you have been trained to do. I was personally trained to be a dentist and later a real estate agent. Both careers made sense in the busy Washington, DC, metro area. My current consideration is in the restaurant business – an idea that makes sense because of the next step in this article. So first and foremost, your idea for your new business has to be logical. This is where step 2 comes in.STEP 2: LOCATION and DEMOGRAPHICS
The first three rules of real estate are: Location, Location, Location. You have heard these words a million times over, and they are true now more than ever. There is NO POINT in putting that dry cleaning shop next to a smelly meat rendering plant, or next to a cigar shop, or worse yet, next to three other dry cleaners that are already well established (i.e. the area is saturated) One of the most logical things to do at this point is to run a demographic analysis to see if your business idea might fit into the physical location you have in mind. If you are a dentist, for example, you would want to know the population of your area, how many other dentists are right nearby, is the population always moving? (transient types), are they able to afford your expensive fees when a dentist down the street charges half?, are the possible patients commuting to work and would prefer a dentist in town perhaps?, what insurances are in that community? (i.e.is this a suburb of Washington DC so we know Delta dental dominates?), how many children are in the community (you would not want to specialize in children’s dentistry when the demographics show 90% of the people are over 50 years old).STEP 3: THE BUSINESS PLAN
In all my years as a dentist, real estate investor, and business consultant, I have seen very few business plans and I’m not sure why. They are really not that hard to do if you have a good business model/concept in mind. There are plenty of books out there to help guide you. If you have the money, you can hire a good consultant to help you write one. Basically – create an outline of what you intend to do, the costs involved in getting the business started, the costs to keep it going, how many employees you need, what you will pay them, insurance costs – life, health, disability, business overhead, etc, legal costs, accounting costs, and the list goes on and on. The idea here is to create a plan that says you know what you are doing here, you know what you are up against. So make sure to write up a good plan because the next step is where you will put that plan to good use.STEP 4: FINANCING
Unless you are wealthy enough to pay cash for this new business, you will need some degree of financing to make it happen. This is where that business plan will come in handy. With my own clients, whether they have been in business 20 years or are just starting out, I tell them to create a plan that explains where they want to go and map out the first few years so you can see how things are progressing. Then, you can show this plan to your local bank to get the financing you need to get the new restaurant open on time. I guarantee a good business plan will greatly increase your chances of getting the money you need. In addition – you must plan for a reserve fund. This is critical for a new business. Your first months, perhaps your first years, may be a bit lean and you will need money in the bank. What happens if we have a snowstorm that shuts the area down for two weeks and you have not had a single customer in that time? Well, payroll, rent, debt service, etc. are all still due. You don’t get a break on the bills just because it snowed. This is why you MUST have a reserve fund, or a LOC (Line of Credit) ready. For my own clients, we set up a special LOC since it costs nothing to just sit there, but if there was a broken down pizza oven that needed replacement right away, the money is ready. This is a good segue to understanding types of costs each business must face.STEP 5: COSTS
Fixed Costs – these are costs that are always there until the day you close the business and likely they will go up every year you own the business. These costs include things like rent, debt service, insurance, condo fees, cleaning and maintenance fees, and staff salaries. These costs will always be there, staring at you every month like a hungry baby bird with it’s mouth wide open! So as I explain to my clients – if you have a small business, most likely you will have to be there most of the days it is open to make sure things run smoothly and properly.Variable costs – supplies, maintenance needed due to being busy, staff bonuses, legal fees, marketing costs, and finally your own salary/pay/profit. So, this means that you do not get paid unless EVERYBODY else gets paid first.STEP 6: LEGAL ISSUES
Is your business going to be as a sole proprietor or a corporation? The difference is that a sole proprietor is personally liable for all actions in the business, and pays for all problems that might occur on a personal level, i.e. if someone breaks their ankle at your doorstep, they can not only sue the business, but they can sue you personally as well. So you say – that’s pretty stupid, isn’t it? Well, I just met a businessman recently who has been in business for over 20 years, he makes over $200,000 personally and is a sole proprietor. He has a beautiful home with a wife and kids……he could lose all of this if something as common as a broken leg happened at his doorstep. If he was to set up as a corporation, his corporate insurance with an umbrella policy would likely cover any accidents and he would not be held personally responsible and risk losing all that he has worked for. There are different types of corporations out there, depending on what type of business you are running. The best thing to do is hire an attorney who can set up your entity properly and maintain it for you.The issues mentioned above are what I try to tell all new clients to consider (just for starters) before they even consider opening the new business. These concepts need to be reviewed and reconsidered carefully, with the understanding that maybe you should not open that business in that location. Maybe a whole new demographic analysis needs to be done in a different area. You might be pretty disappointed at first when your pizza restaurant does not fit into the community where you live and you would need to move it 20 miles further out to make sure you have customers. This is the way a business is, this is the way you have to think of a business. In the end, it’s just a business!Next Article: Are we there yet, can we open shop?

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What’s Keeping You From Starting Your Business?

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Starting a Business?You’ve been thinking about starting your own business but you just can’t seem to take the first step. It may be because you don’t know or maybe you’re afraid of something. It could be a little of both, fear and not knowing what to do. Starting a business isn’t a one step process but it is easier than you think. You could already be doing it without really knowing it. You may have wanted to start a business making pies because your pies are the best. People around the office are always asking you to bake one for them because they just can’t get enough. And you do, you bake several, collect your fees and continue working your 9-5. Knock, knock, you’re already in business! Just concentrate on putting a plan in motion and take it one step at a time.First though, I’d like to give you some friendly advice on starting your business:Be prepared for rejection
You will hear a lot of no’s during your starting phase. There will be so-called friends trying to bring you down because there is a pie factory right down the street. Do not, I repeat Do not let this discourage you. Acknowledge their comments, step around them, and continue. Just remember to say hi from the top!If you fall, get right back up
There will be times where you will feel like the whole world is against you. Where you can’t make a sale for the life of you but at this point it is KEY to continue plowing through. It only takes one small break to make it big. If you stop when you fall, you are limiting yourself to finding out what really lays ahead; what your potential truly is.If someone is already doing it, do it better
Just because there’s a pie factory down the street doesn’t mean you can’t start your own successful homemade pie business right next door; just do it better! Offer something unique, you’re already baking homemade pies, I’m sure you can think of something.Just do it!
Yes, Nike said it first but it applies to all! What’s keeping you from just doing it? Fear… fear is our own worst enemy. No, let me clarify; WE are our own worst enemy. We allow fear to take over and paralyze us to the point of no return. Why? Because we are constantly second guessing ourselves. We sabotage our own beliefs and start thinking that we just can’t do it. Then we stop. Put those thoughts out of your mind and focus on just doing it! Some of the wealthiest men and women out there live by this rule and so should you! Now, what’s stopping you?So now on to what you need to do to start a business:Clearly define your idea or product
This is where a business plan comes. It doesn’t have to be too elaborate or over 100 pages. It just has to be clear. Start off by defining your business name, objectives, and goals.What will the name of your business be: Pie Bakers Inc.
What your business will do: Pie Bakers Inc. will bake homemade pies and desserts. We will only use organic ingredients to ensure the quality of our pies.
What will your business accomplish and when: Pie Bakers Inc. will produce 100 pies a week for the first year and increase by 5% each year.
How you will gain customers: Pie Bakers Inc. will go door to door seeking customers that do not have the time or energy to bake homemade pies.
Your business plan is a living document. You will need to change it as your business grows. This is where you will look to for help if you feel you’re straying away from your original idea. It will also help you get the financial assistance you need from banking institutions because they will rely on your plan to help them decide how much to give you.Business Structure
By the time you have your business plan ready, you should have figured out your business structure. This is very important because it will define how you pay taxes, employees, etc. The most common structure for a one owner business is a sole proprietor. But this may not be the best option. It is important to review the alternatives a sole proprietor has to legally register his/her business so that they are able to better deal with the liabilities any structure brings with it. Depending on what structure you choose, you will have to register your business with your state. Registering certain structures incurs fees. For example, in Texas corporations, limited liability partnerships, and limited liability corporations each pay a $300 fee to register; check your state’s website for exact fees.A sole proprietor only pays $14 to register with the county clerk’s office. Once your business is registered you will have to apply for a sales tax permit with your state (check your state’s website). This will help you avoid having to pay sales tax twice, once when you buy your materials and again when you pay your state taxes.Once you’ve chosen your structure, it is important to request an Employer Tax Identification Number from the Internal Revenue Service, any business that sells a product or service must have one. The ETIN is used to identify your business by entities such as Federal, State, Local, and other agencies the regulate businesses. These numbers are free, you DO NOT need to pay to get one; simply request one by completing the online form on the irs.gov page. Certain types of businesses require licenses. For instance if you are opening up a restaurant you must have food handling permits, pre-opening inspections, and require all employees to obtain an individual license to handle food as well. Check your local and state licensing facilities for specific information pertaining to your business.Accounting
I cannot emphasize this enough! Keeping track of your income and expenses as you incur them will save you many headaches come tax time. Depending on your business structure there are certain tax regulations you must abide by in addition to your government taxes. As you are trying to decide what type of business structure you will adopt, you should also be looking at the different tax obligations each structure demands. Keeping track of your business shouldn’t be a tedious task. If you set it up correctly at the beginning and you take some time to enter all of your receipts and invoices; this should be a breeze. The most common accounting software is Quickbooks. By no means am I promoting any of the brands I write about. They are simply stated here because I have tried them and I feel they may help you better manage your business. With that said, Quickbooks is the most popular by far BUT it is not the only one. If you are starting a new business the first thing you DON’T want to do is spend hundreds of dollars on an accounting system that is somewhat difficult to learn (very good but difficult to learn); nor do you want to spend the time of getting to know it just enough to effectively manage your business. There are plenty of free, yes, free accounting software programs out there. I’ve tried a few but have come to the realization that, I don’t want to spend a day and a half a) learning a new system and b) entering receipts and trying to figure out if they are right or wrong.Just recently I found one that is very easy to understand, simple to use, and offers free support. Oh, and did I mention it was free? It is! When I signed up for this cloud (online – no need to download a program and accessible anywhere you are!) based program I thought I was going to review it then delete my account as I had done with so many others. I was surprised at how easy it was to handle so I stayed. It was extremely easy to add invoices, expenses, and even link my business bank account to it so I didn’t have to spend too much time on reconciliation. Within 10 minutes I was able to enter all of my invoices and expenses and see just how much my business was really working! The best part is that it comes with the ability to send your invoices via e-mail AND the system tells you if the vendor actually saw your invoice or not! No more “I didn’t get your invoice, can you send it again!” The program is called Wave Accounting and is super easy to use, check out their tutorials! Like Wave Accounting, there are plenty of free accounting programs out there that you can use to help you manage your business more effectively. This one just happens to be one I use and really like.There are plenty more things to do when starting a business and it could seem like an impossible feat especially if you don’t know where to turn for help but I am here to assure you; you CAN do it! Set your mind to and never be ashamed to ask for help (this applies to everything you do), never say or think you “can’t” do it, and always follow your instincts. Don’t let fear prevent you from becoming the entrepreneur you are meant to be!If you have any questions about starting a business, feel free to drop me a line or two; I will be glad to share with you the knowledge I have of running several successful businesses.

Marketing Your Small Business to the Best Effect at an Affordable Cost

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Marketing becomes effective when you are able to create a desire to buy your product or service in the mind of your prospective customer. How to create such a desire is the question that every marketer has to answer. And answering that question requires a number of steps.The first step is to know the prospect well. The marketer gets to know the situation and habits of the prospect. Next the marketer seeks to understand what factors affect the buying decision of the prospect.By knowing the customer and that person’s habits, you know which media to use to get your sales message to that person. For example, if the person watches TV programs during a particular time, ads can be displayed in programs broadcast during that time. If the marketer knows which particular TV programs are popular among his particular customer group, the task of reaching the group becomes even easier and less expensive.Local small businesses have an advantage in that they are likely to be quite familiar with their prospective customers.Selecting the Media for Getting Your Sales MessageThe second step is selecting a media to deliver your sales message.TV is not the only media, and is typically not even the best media to reach your customer. TV ads are expensive, and the TV ad scene is overcrowded. After spending all the money, your message might not reach the customer effectively.The media available to a marketer are numerous, ranging from door delivered mails and flyers, human billboards, ads on moving vehicles through press and broadcast ads to exhibition venues and sports stadiums. Just observe all the different advertisements that you come across.Try to answer the following questions about each ad you see. Where are these displayed? Who are the prospective customers for the advertised product? Are they likely to see and understand the ad? Soon, you will begin to gain insights into the media selection issue.The Sales MessageDeveloping an effective sales message that will create desire for your product or service is the third step.To create a desire-creating sales message, you need to know the decision-making process of the prospective customer. You should gather the information needed for this purpose in the first step, getting to know the customer.How does your prospective customer decide to buy the kind of product or service that you offer? For example, does the person see it simply as a commodity that can be bought at any outlet selling that type of product? Or does the person look for a particular brand? What makes the person choose that particular brand? Can the brand loyalty be overcome by making your offer available more conveniently, say at an outlet nearer the customer?The above are just a sampling of the questions you need to ask about the decision-making process of your prospect. The nature of the product, its value and other factors will determine the specific questions you have to answer. Knowing your product and your customer, you should be able to identify what questions need to be answered.Once you have a clear idea about the decision-affecting factors, start developing your sales message. Try to come up with a basic message that will effectively influence the person’s decision in your favor. For example, if patriotic feelings influence the buying decision, emphasize that your product is made locally.You might have to go quite deep to identify the most important influence that determines the customer’s buying decision. Work at it and even test it before you finalize your sales message.Once the basic message is finalized, the task of writing effective sales copy becomes the critical issue. Sales messages need to be structured and presented in a certain way to be most effective. Just throwing your basic sales message any which way at the prospect is not likely to make that person even notice it.Sales copy writing is a skilled task and you should approach a professional with proven effectiveness, preferably someone with experience in your particular industry, to do it. Give that person a clear idea of what you have found about your customer – the media that will reach the person and that person’s decision making process.With these inputs, a competent sales copy writer should be able to come up with just the right kind of sales message.Other Marketing TacticsSo far, the assumption was that you would conduct your marketing campaign through sales messages displayed through selected media. This is not the only marketing tactic, and might not even be the most suitable tactic for your offer.Whatever tactic you adopt, the basic elements must be present, viz.
You have to get to the attention of your prospective customer group
You have to deliver a sales message that influences prospective customer in your favor
You have to make your offer available at a point that is convenient to the customersSome common marketing tactics are:
Achieve publicity for your business through every document that goes out. Imprint your logo, business/product name and a slogan on envelopes, invoices, shipping notes and other documents, as well as your letterheads and other stationery.
Use press releases, talk shows, community participation and such avenues for publicity. These will generally cost little money.
Make special offers of different kinds that are likely to motivate buyers and publicize these effectively
Set up business in an area where there are similar businesses and plenty of existing customer traffic, some of whom might decide to try you out
Take pains to provide a great customer experience so that word-of-mouth publicity gets around and you get more customersBy observing how your competitors promote their offers, you will come across the most suitable promotional ideas.Track all Marketing CampaignsTracking the results of marketing campaigns is something you cannot avoid. This can be a tiresome task, not as exciting as conducting a glittering campaign. However, if you overlook this task, you could be wasting money on campaigns that merely drain money. Even the best planned campaigns can fail to deliver results owing to some reason or other that you might not have anticipated.Conduct your campaigns in a way that allows such tracking possible. For example, don’t conduct multiple major campaigns at the same time as you might then not be able to find which one of them generated the results. Devices such as coupons can also be used to track particular campaigns.Few business activities are as satisfying as conducting a highly effective marketing campaign. Organize for such a campaign by attending to the key tasks of understanding the customer, developing an effective sales message or tactic and then implementing the campaign on the ground.