As a freelance writer and business consultant, I frequently receive inquiries from individuals who have a business idea and require my assistance in developing a formal business plan.
Contrary to popular belief, writing a business plan is not the first or most critical step in starting a business. For the majority of people—particularly those who have not yet started a business—this is one of the last things on their to-do list during the start-up and get-off-the-ground phases.
This article is aimed at brave souls who have never started a business but have a burning desire to do so but are unsure where to begin.
Here are ten practical tips, acquired through the school of hard knocks, that will assist you in avoiding common pitfalls and getting started properly.
(And bear in mind that these are targeted at businesses with little to no start-up capital.)
Before you do anything else, read the following four books in order: Robert Kiyosaki’s Cash Flow Quadrant, Guy Kawasaki’s The Art of the Start, David Gumpert’s Burn Your Business Plan, and Michael Gerber’s The E-Myth Revisited.
Allow time to “spiritually” create your business before you physically create it. Consider it in its most ideal form, as a world-class operation. What does it look like, how does it feel, how does it taste, smell, and how does it sound?
Entrepreneurship is one of the most difficult things you will ever do, and your business must consistently energise and excite you; otherwise, you will not survive the difficult times.
3. Conduct research
Before you invest significant time and money in your dream, conduct sufficient research to determine whether your concept is viable and sustainable.
Essentially, you want to ask and answer a lot of questions in this step, such as the following: Will the market embrace your concept? What evidence do you have to substantiate your claim? What is the source of dissatisfaction that your proposal resolves? Will it result in the spread of an ideavirus? Who else is doing it, and to what extent have they been successful? What are you going to do differently? Do you have a well-defined market? Is the idea supported by market trends, or will it become obsolete in a few years? Are you in need of funding? If so, how much will it cost and when will it be paid? How can technology be used to benefit the business? What skills do you lack that are critical to the business’s success?
Additionally, keep in mind that hands-on experience can be the most effective form of research—you may wish to implement your business on a small scale at this stage to ascertain market feedback.
4. Establish a Business and Ensure Legal Compliance
Assuming you are convinced that your idea will succeed, the next step is to turn it into a reality by forming a business entity. You require an entity for four reasons: legal compliance, maximization of tax savings, liability reduction, and control maintenance.
A sole proprietorship, an LLC, an S-Corporation, or a C-Corporation are all examples of basic business entities. Consult an attorney and a CPA to discuss the differences between the entities and to determine which one is best for your purposes. This will cost approximately $125 if you complete all of the paperwork on your own, or between $200 and $500 if you hire a professional or an attorney.
Along with your entity, you must ensure that you are compliant with the law in all other areas. For instance, if you employ people, you almost certainly require Worker’s Compensation Insurance. A competent attorney will assist you in navigating all of the legal issues that will arise.
5. Earn Revenue
This is a critical step. Too many newcomers attempt to do too much at once and are so concerned with image that they spend a fortune on logo and branding work, marketing brochures, and advertising, among other things. While each of these has a place, they should be compensated FOR BY the business’s revenues.
Now that you have had your time to fantasize, it is time to be extremely pragmatic in putting your dreams into action. Take whatever steps are necessary to generate revenue, including door-to-door selling. No dream, no matter how inspiring, will ever come true unless you have the financial means to see it through.
6. Establish Financial Structures
Once you have cash flow, it is critical that you manage it prudently. Maintain meticulous records of ALL income and expenditures, no matter how insignificant. You will be thankful you did come tax season.
Quick Books and Quicken are the most popular accounting software programs. Alternatively, you can hire a professional bookkeeping service to assist you with payroll and quarterly taxes in addition to maintaining your records.
7. Begin the Process of Creating an Operations Manual
By providing simple, step-by-step instructions that anyone can follow to perform any task, an Operations Manual enables you to leverage your efforts and replicate yourself.
The most critical task you will ever undertake is systematizing your business, and you can never begin soon enough. While systems will undoubtedly be refined over time, it is critical to document them and keep them current.
Additionally, you may wish to hire a professional writer to create your Operations Manual.
8. Establish Marketing Structures
Many novices want to immediately begin advertising without understanding the associated costs and/or benefits. It has been said that advertising requires a great deal of money, whereas marketing requires a great deal of time.
For start-ups, focus on marketing; you typically have time but not money, and marketing is generally more effective. Advertising is both expensive and ineffective. Start-ups should be obsessive about prudent financial management and extreme caution when it comes to spending money.
Billboards, radio and television advertisements, flyers, and yellow page advertisements are all examples of advertising. Marketing is frequently reduced to some form of direct selling, whether it is telemarketing, door-to-door sales, or customer referral programs.
If your business’s concept and delivery systems are sufficient, it should market itself virally in any case. In any case, find something that works and stick with it, as well as develop and document systems in your Operations Manual.
9. Improve Systems, Replace Yourself, Continue to Improve, and Document Religiously
During the first year or so, you will most likely be responsible for the majority, if not all, tasks. This allows you to learn and iron out necessary details, but it is not sustainable when the time comes to grow.
After creating an Operations Manual, you can begin hiring and training others to take your place. Once they are replaced, maintain consistent oversight and refinement of the systems.
Additionally, you must be a zealot when it comes to documenting every aspect of your business. For instance, if your business conducts door-to-door sales, all salespeople should keep track of the number of doors they knock, the number of people they speak with, and the number of people who purchase.
This data will prove invaluable as you refine your systems over time; without actual numbers, you have no idea what is working and what is not.
10. Compose a Business Plan
The final step in the startup process is the one that the majority of people believe should be initiated. Here’s why it should come last: if you want to secure funding, investors will always want to see a track record before investing, and if you do it after the first nine steps, you can do it correctly, using actual numbers, facts, and statistics rather than unfounded assumptions.
Additionally, this allows you to reconnect with your dreams after overcoming numerous obstacles.
Additionally, just as with the Operations Manual, you can always hire a professional writer to write your business plan.