Starting Your Small Business

Start with a plan.  The plain facts are that most businesses don't.  They begin with an idea--or even more likely just a talent.  Individual scrape together savings, take out a personal loan or maybe starting flinging credit cards, open the doors and hope.

Although a certain politician might disagree, hope is not a plan.  An idea isn't even a plan or registering your company.  Buying an ad in a yellow paged phone book or paying for a website is not a plan.  A plan is not signing a lease, finding your first customer nor hiring an employee.

A business plan is a road map for success, and oddly it begins with a destination.  In the parlance--your mission statement, which should not be confused with a public relations vision statement.  Your mission is one sentence that describes how and what your business will do.  Everything in the business plan must further the mission.  Everything in the daily operation of your business must further the mission.  If not, then either the plan, operation or mission must be modified.

Payment - Having formulated a mission, how will you get paid?  It sounds silly, but this step is often overlooked.  First-time business owners and entrepreneurs usually come from the work-a-day world of an employee.  It's taken for granted that you put in your time, do your job and get paid on Friday.  It's a rude awaking to the real world.

Almost every small business operates on customer credit.  Even retail establishments take credit cards and checks.  What happens when that expensive piece of merchandise leaves your store and the customer invokes the right of "charge-back" on their credit card because they're "not satisfied" with their purchase?  What about the bouncing checks?  Bills that aren't paid on time--or ever?  How will you survive when several accounts become "non-performing" all at once?

Do you even know how much cash flow you need to keep your doors open?  What about a roof over your head and food in your belly otherwise known as profit?  Will your business ever generate that much?  Scary questions for sure, but a lot scarier if you're asking them six months after the investment's been made.  You wouldn't be a self-starter if you weren't an optimist, but you can't afford to be a dreamer too.  The definition of success is a positive, realistic planner.   

Performance - You've figured out how you're going to get paid, now how will you return value to the customer? A business plan is founded on satisfied customers.  Can you deliver?  There are really two components to the question.  The first is explicit.  Can you do the task or provide the goods you offer?  The second implicit question is, can you find customers that need or want what you offer?  The two must align.  

The entrepreneur must also recognize the second question is not can you sell what you offer.  Collecting money without satisfying a need or want is possibly a recipe for short term success but certainly long-term failure if not disaster.  Examples abound.  In the legal profession a lawyer might sell you an "Estate Plan" or offer to "incorporate you" for a nominal fee of a few hundred dollars, and tell you it's "all taken care of."  Chances are nothing of value's been done for you, but the hope is that by the time you've discovered it, if ever, that lawyer will never be found.  Or another lawyer will tell you that you were taken and might as well move down the road with the real problem confronting you rather than chase after money badly spent.  But woe to that attorney if the chicanery is timely discovered.

Marketing - How will you reach your customers.  No, just building it does not mean they will come.  Business promotion can be a serious inhibitor to market entry.  Competition can be cut-throat.  How much is each customer worth to your business?  How much can you spend in activating each one?  What means of activation is available at that cost?

How do you feel about self-marketing?  Can you sell?  Are you embarrassed by self-promotion?

Government - The tax man cometh.  Without fail government wants its money.  It's the easiest cash-flow mistake made.  The government rarely squawks for its money until it's too late.  Then watch out because they carry the biggest bat.  The easiest tax issue to overlook is self-employment tax.  Back when you were an employee, your employer matched your social security and medicare taxes.  Now you're the employer and those so-called payroll taxes must be paid for by you.  Likewise, if you have actual employees, the expenses are much higher than the hourly wage or salary offered.  Even without offering benefits, payroll taxes and unemployment insurance are additional costs.

Then of course there are business licensing, occupancy and zoning concerns.  Retail establishments must collect sales taxes.  Are you in a highly regulated business or profession that has its own licensing requirements and maintenance?  Are you sure?  More and more laws and regulations are passed each year--laws couched as being for public safety but in-fact are intended as trade barriers that reduce or prohibit competition.

© William Hudnall 2011

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