Becoming an Entrepreneur
The following article takes you through all absolutely everything you should be considering before making any steps towards starting your own business. This article will be covering the following topics to consider before taking the dive and starting your own business.
- Starting up
Why do you want to get into business?
People buy WHY you do what you do. Not WHAT you do or HOW you do it.
Let me use a hairdresser as an example.
WHAT: They cut and colour peoples hair
HOW: By using qualified hairdressers and the latest colouring techniques
WHY: To make their clients feel confident and beautiful whatever the occasion
See how the Why will appeal to the emotional side?
Once you get this right, it will make everything else much easier.
Let the brilliant Simon Sinek explain in this video about your why.
The Following questions are a great place to start thinking about your business’ focus.
What Will Your Business Do?
Are you provided a service of a product?
Is there any need?
Is there a need for what you’re offering?
Have you identified a need in a market place that you can fill?
Why do most businesses fail:
Before going into business, it's always a smart move to assess the damage. That way, you're giving yourself the best chance and there's no chance of any surprises. These quick summaries below give you a fast summary of the big mistakes to watch out for.
This can happen if your fixed costs are too high for the level of sales coming in. If you're not all over your numbers, you realise this when it's too late.
Poor Management and Supervision.
You may know everything about your business, but sharing knowledge with those who don't isn't always easy.
Lack of Proper Accounting.
We call this knowing your numbers. You need to watch your numbers like you watch the dials on you car. Especially your cash position.
You need to fully research your competitors. See a bit further down how to assess who your direct competition will be. Try calling up as a prospective customer, this is usually the fastest way to learn everything about them.
Not Enough Capital.
Again this is all about knowing your numbers. Depending on what you're going to do will effect the amount of capital you need. If you're starting a consultancy from your home then you will have very low costs, maybe a PC and a printer. If you're starting a manufacturing plant or coffee shop you will need quite a bit of capital. Work all of these costs out first before making the leap.
Customers who don't pay on time and think they can pay whenever cause this problem. Try and set up a type of subscription scheme or be really strict with payment terms.
Excessive Remuneration to the Owners.
Don't forget all of the bills you have to pay including VAT and tax. Don't forget it's not all profit.
When will you be launching your new business?
Entrepreneurs are world class at "getting ready" and never getting it out there. You should set yourself a deadline. Deadlines are good and work. If you're really brave make your deadline public "I'll be launching WidgetTech on the 3rd December - Look out for offers".
Set yourself a realistic goal and deadline for your first day as a business owner. It's exciting!
Who is your customer?
One of the biggest business sins is to say that "Everybody is my customer".
No they're not.
You need to work out exactly who your ideal customers will be and their wants and needs. This is done through creating customer avatars.
For each of our businesses we have at least five or six different what we called “Customer Avatars”. An Avatar is a full description of who your ideal customer is. The following video explains what a customer avatar is.
You can download an exercise via the link below on customer avatars. Make a few copies as you’ll have more than one avatar. Then anytime that you write marketing or planning your new business, read your avatar type that you want that marketing to resonate with.
Click here to download Customer Avatar Exercise
Who is the competition?
If you are to stay ahead of your competitors, you must know who they are, what they offer, how they sell it and how much they charge. Focus on their strengths and weaknesses and think about ways you could outperform them.
A word of caution: don’t compete on price alone, because it might not be enough to tempt customers away. And don’t think your idea is so special that you won’t have any competitors. You will. You just need to be better than them.
Make a list of everyone you deem to be your competitors. This is someone selling your service or goods, usually in your area, with the same customer avatars as you. Research them and their websites. Make the same notes on each of them and call them up pretending to be a prospect to fully research them.
Knowing the numbers
I cannot stress how important this is to know from the very start.
First thing you need to know is how much money you need to make to break even. To cover all the costs and pay your bills business and personal. You don't go into business to go into debt.
Secondly, on average, how much is one customer going to be worth to you in a year? Because you're going to have to work out how many of those customers you're going to need to meet that break even point. When you work this out, is it a possible number?
What are you going to call this fantastic new enterprise of yours?
The name of your business can have a tremendous impact on how customers and investors view you, and in today’s small world, it’s a world-wide decision.
Here's a checklist on choosing a name:
1. Unique and Unforgettable
2. Avoid Unusual Spellings
3. Easy to Pronounce and Remember
4. Keep it simple
5. Make Some Sense
6. Give a Clue
7. Make Sure the Name is Available
8. Favour Common Suffixes
9. Don't Box Yourself In
10. Sample Potential Customers
If you want a deeper read into this, see this blog post.
Ah... The logo. That little picture that you spend hours and hours working on and then proudly display it for everyone to see. Even getting a phone cover with it proudly on.
Heads up. Nobody gives a hoot about your logo.
Please don't wast valuable time in the early days of your business designing your logo. Nobody cares…
Start up costs
You need to minimise your start up costs. Don’t buy told unless there is a sound business reason to do so. Explore second hand options first. Some investment from your family may be an option, but get a basic legal agreement so everyone knows where they stand. You might have to wait until you can draw wages, so think how you will get by in the meantime.
Make a list of everything that you need to start your business and get the prices for everything, Consider computers and materials, as well as rental costs and any surprises, budget money in for this too.
Banks can be a source of funding, but it's not easy to get going on the amount they lend and the limitations as to what you can spend it on. Here are some other ways of funding your start up:
- Bank overdrafts
- Cash advances
- Angel investors
- Peer to peer loan
- Community schemes
- Family loans
If you want a deeper read into this, see our blog post on 'Raising Finance For Your New Start Up'.
Where are you going to base your business?
Premises and their associated costs provide most businesses with one of their biggest overheads. Not only is it the rent, it's the electric and phones and maybe maintenance. If possible, set up and run your business from home. If you need premises, start your search in good time. Location is critical for businesses that rely on footfall custom.
Here is a checklist of the essentials you will need to get up and running for your business. For the purpose of this blog post, being an overview, this list is bullet pointed, but if you want a deeper look into these points go read this our blog post on 'The Essentials to Starting a New Business'.
- Business bank account
- Registering your business
- Tax responsibilities
- Legal responsibilities
Types of company
Again, this is something that has to be considered before setting up a company. Below is listed all the different types of companies you can set up.
- Limited by shares
- Private company limited by guarantee
- Public limited company
We also have a blog post fully discussing each type of company mentioned above in more detail called 'Starting Your Own Business: Types of Company'.
A builder wouldn't start building a house without working from a plan and you shouldn't start building your business without a business/marketing plan.
This will come in especially helpful if borrowing money from a bank or investors.
Do read up on each section included above. The purpose of this article is simply to bring to your attention a condensed version of everything that needs to be considered before starting your own business. Do take a look at our blog for more in depth discussion on each particular topic, as mentioned throughout!
Good luck, and congratulations on your new exciting endeavour!
If you enjoyed this article, take a look at the following blog posts we have on starting your own business:
- Raising Finances for your New Business
- Starting Your Own Business: Types of Company
- Branding Your New Business
- The Essentials to Starting a New Business
Just started your own business?
Whether you're still in the organisation stage of starting your own business or you've just taken the plunge, EXELA can help you become more fully organised. Call our Head of Services today for a free consultation.