Starting a business – things you must consider before you start the business!
Starting a Business may be a life changing experience but it is a beginning of a long journey and not a destination.
XLIN Team has been involved in business for many years and now and we know it is a very exciting to own and run a business. However, setting up and running a business involves its fair share of stress and problems and it is important that you consider the pros and cons of the being your own boss.
We are trying to list a few of the important aspects or factors you must consider before you venture into the business.
Why are you starting a Business?
You feel you have got a bright idea which can be converted to a successful business OR you want to convert a Hobby or your skill into a Business. Or, maybe you are considering to start some business because you are tired of your current job or have been made redundant from job and can’t find another employment in this rough financial times. Are you just starting the business because you feel you can have more free time on hand if you are running your business?
Please note that running a business is a 24 x 7 involvement – at least during the initial few years and you may find that you actually have less free time on hand as compared to your current 9 to 5 schedule.
How Big Your Idea Can Grow or Size of Business Opportunity
OK, so you have a bright new idea which you think can be converted into a successful business. However, have you considered how many people are out there who may be willing to pay real money for your product or service? Do you know if your product or service will in demand in local town or community, or can it grow to state level, national level or global market?
If you have identified a problem or as they say in management parlance, ‘Pain Points’ you need to ascertain the size of the problem since Bigger the problem, bigger the opportunity!
Initial Investments – Do You Have The Money OR Can You Borrow?
You must consider the initial requirement of funds to start the business and also the funds requirements on an ongoing basis. Do you have funds or will you get Loan or Grant to start the business? If you are manufacturing a product, how much is the complete cycle time from your procurement of raw material to production to sales to receiving the payment? Will you get any credit facility from your suppliers or will you have to allow any credit facility to your buyers?
You also need to consider the realistic period to generate a profit which you can withdraw as your salary from the business. Ideally you should have a buffer for a reasonable period, including contingencies and emergencies, so that you are not stressed if something goes wrong and cash flow does not follow your projections.
Write a Business Plan even if a one pager and do have a Mission Statement
Please prepare a Business Plan to describe where you wish your business to be in next 3 to 5 years time. While it is best to have as detailed a business plan as possible, but if you do not have time for the exhaustive business plan, have a brief document where you note down your plan of action so that you can refer to the same and can modify the same as the business is implemented.
We understand that your business may not follow the plan you made, but if you try to consider all important factors that may affect your business, you may be able to make appropriate changes to the business to avert major problems or losses.
Having an innovative idea is very important. Are you a good improviser? You don’t always need an innovation to launch a business but if you can improve an existing product or service and can offer better value, your chances of success will be much higher.
What are you sacrificing to start a business? What are the Opportunity costs?
Are you currently employed full-time and plan to resign from the job to start the business? Leaving your 9 to 5 career to be your own boss may be a very good idea, but you need to know that you will stop receiving the fixed monthly income of salary – which also is your opportunity cost. Do you have a family to look after? Do you have savings to take care of you and family while your business becomes profitable? How much time you can devote to your new business and how long you can sustain yourself and family without profits from business?
If you are employed with a large corporate, you may be responsible for only a small function in the organization, however as a small business owner you are a receptionist, office administrator, buyer, salesman and receivables collectors. These things may seem trivial but can eat away a lot of your time. So, be realistic.
Separate yourself from the Business. You and Your Business Are NOT Same!
You are not your business and your business is not you. Can you objectively separately both these entities into separate compartments to make sure you maintain the balance between your business and personal / family life.
You have to evaluate the business from time to time and if it is not picking up or continues to make losses, you must have courage to take an objective view and close the business.
Research External Factors – Competitors, Government Policies & Clients
External Factors that may affect your Business and many times these factors are not under your control. Most of us operate in a very fiercely competitive market and you need to understand who are your competitors, what is their business size, what are their products and how your products mean a better value to your clients. Ease of entry by competition will also guide you about how new competitors can copy your idea and be your competitors.
Government policies keep changing and if your business is not flexible enough to make swift amends, you may end up a loser.
In the current technologically advancing market, customer preferences keep changing and you need to constantly upgrade your product and service to make it attractive to the clients on an ongoing basis.
Conduct periodic ‘What if’ Analysis and have Worst Case Scenario ready to guide you
Starting with ‘End in Mind!’
What are your long-term plans for the business? What are your exit strategies? How would you expand? Would you consider selling the business if right price is offered? Would you be willing to buy another existing business to grow at a faster rate?
If you are able to separate yourself from the business, you should be able to think clearly about your future expectations from the business.
Decision Making and Decision Owning, Delegation, Prioritization, Team Building
Are you ready to make all important decisions yourself? If you have always worked in a position where the job role was clearly defined and there was someone above you to make those important decisions, you may find initial decision making a little difficult. But, are you prepared to make decisions? May be you will make a few wrong decisions, but that is how you learn to make and own the decisions.
Are you open to criticism or suggestions? Our professor of marketing used to say that it is important to be a very good listener to be a successful marketer. Listen carefully even if it is criticism of your product or service because if you listen to it properly and take steps to implement them to improve your products or services, you will improve chances of success for your business.
Communicating Clearly With All concerned
Are you convinced of your product or service? How much conviction can you show about your product or service? Do you have all answers to satisfy your prospective customers?
Communicate clearly with your suppliers, clients, employees, bankers and all stakeholders in a confident manner which is very important to build a positive image of your business, product or service.
We hope the above gives you some basic idea about the things you must consider before starting a new business.
XLIN team will be happy to help you if you feel you need some help in finding the answers to these questions. Please give us a call and we will be happy to help you.
All the Best For Your New Business Venture!