Steps to Starting a Small Business

The person who is planning to start a small business should write at least a draft of a business plan. Yes, you should get help from your lawyer, accountant and other experienced business people but the initiative has to come from you, the  future small business owner.

It should outline who you are, what you plan to achieve , the location of your small business, start up timing, potential risk factors and anticipated returns. It should clearly state the objectives of the business and how this goals will be reached with time lines .

Depending on the nature of your small business, your business plan will be used by lenders, investors and/or suppliers so they  can make an intelligent decision on supporting your venture.

While preparing a business plan may look like a lot of unnecessary "office work" , it really is a useful guide  implementing the business. It forces you to think realistically about the market you are entering. A wise entrepreneur once told me that you should not think about what you want to be but what lifestyle do you want to live? In the 'Seven Habits" book by Stephen Covey, he suggests that one of the success habits is   "beginning with the end in mind"  as  a good place to start any business plan. You have to think about how your small business will impact not only your personal lifestyle but how it will effect your family life.

Let me give you a really good tip here:  make sure that what ever your are going to do will make you a lot of money to counter balance the extra work /time commitment and worry component that you will bear setting up a traditional business. If you are not going to make substantially more than you make at a job, stick with your job. Also, don't enter a small business arena you are not thoroughly familiar with. Get a job working at what you will be doing. It will take time but you will avoid costly mistakes. You will also have inside knowledge of how your competitors operate.

Types of Business Ownership

One of the first elements you will want to decide on is the type of small business ownership. All have advantages and disadvantages which you will want to discuss with your lawyer and accountant. For a small business, sole proprietorship is probably the most common form of business ownership. It's also the simplest. If you do have a partner that is not your spouse, you should clearly have a partnership agreement which is business-like. Just because you are friends with someone doesn't mean you should partner with them. I have never had a partner (in business) and would never want one because I have a strong work ethic that is not shared by many people. I basically like to work alone although I do ask for other opinions and feedback. Partnerships are like a marriage so treat it that way. It's a long term commitment to contribute equally to the success of your joint venture.

You may want to consider incorporation which could be dictated by the size of the venture and financial considerations and the potential for serious liabilities. Discuss these options with a lawyer and your accountant as the type of ownership has big implications for personal liabilities and taxes.

Products or Services

Most small business starts with an idea to either produce or distribute a product or service that customers want. Every successful business starts with a really good idea. Just make sure that your idea will make money. You should carefully delineate how your product or service is different from the competition. If it's not different, where's your niche? If it is different, how do you know that people will actually buy it? What are the features and benefits that customers will buy into? What warranties/guarantees on products or services will you offer? If you have any patents, trade secrets, secret recipes or technical expertise that the competition does not have, they should be fully explained here.(please do this with advice of lawyer and non disclosure agreements or you could lose your idea to competitors really quickly).

Marketing

Every business need customers. The success of your business will depend mostly on your customers. How do you plan to attract them? (Radio, TV, print advertising including direct mail). What are your customers' demographics? (age, sex, educational levels, income levels).

What price points are you aiming for? How does that compare to your competition? How will your competition react to your business? How are you going to react to them? How will you do things differently to the competition so you have a competitive edge? What are your key points of difference and how are you going to capitalize on them?

What 's your marketing and advertising budget? Are you prepared for the long haul? Remember, your competition has probably already established a market presence which you now have to create.

Operating Requirements

In real estate, there is only one thing that matters, "location, location, location". Sam Walton was asked what the most important factor was in the success of a WalMart store and he said "location, location, location" He scouted his store locations from the air so he could see traffic patterns and competitive store locations easier. So if location is really important for WalMart with all its clout then I guess it's really important for most businesses. It's no accident that all major fast food locations are clustered in the same area. Like businesses attract like businesses because all together they attract customers. That's why shopping malls work. That why supermarkets were able to swallow up the butcher stores, green grocers and bakeries because they were able to create a one stop shop for customers. If you are in the financial sector, you should probably be in the downtown business core because that's where your competition is and that's where your customers expect you to be. In bigger centres, there are numerous sub core areas which would fit too. Make sure you check the zoning by laws to ensure you can actually do what you intend to do in the chosen area. Don't forget, your customer probably needs parking. This alone could determine your success or failure unless you are on a popular public transit route.

Once you figure out the location, size and layout of the space matters. Layout can be very dysfunctional and cost you hours and hours so do a traffic flow chart so it's an efficient design and layout. Be prepared to hire a contactor to finish the interior of any premises you buy or lease. Next comes equipment: desks, chairs, lighting, computers, printers and related necessities. Obviously any specialized manufacturing equipment has to be sourced out and delivered. This can be a minefield. I know of one retail store that delayed opening for months just because they were waiting for freezer doors. Vehicle requirements also have to be assessed. This is not an exhaustive list but it gives a good starting point .

Employees

If you need employees, you may want to use a temp agency at first but as the business grows, you will probably need employees. Depending on the positions, this could be a real problem as good employees take time to find. No employee walks into a job without training and does a good job so plan on training all employees well. The key reason why the MacDonald's system works so well is that they can train young people in high school and retired seniors to take care of a million dollar business. It's all in the training. Employees like to be paid every pay period so you have to ensure the cash flow is there. That could be difficult at first so plan on it.

Depending on the type of business, you may need detailed background information on major employees as well as anticipated salaries and perks. Banks like to know they are dealing with knowledgeable/experienced people.

Hours of operation

This can be a simple 9 to 5 decision but most new businesses require a lot of intensive use of time. It can be a real trick to balance personal family time to business time. Depending on your business, you could get drawn into a 911 type of business where as soon as the client calls, as in real estate, you go no matter what you or your family are doing. Setting your own hours is one of the advantages of having your own business but its also one of its disadvantages especially if you have workoholic tendencies. You can literally work all the time. If you are not disciplined you may have the opposite problem resulting in too few hours for the tasks at hand.

Financial Projections

Depending on your financial resources and needs, you will probably need to provide a projected 3 year cash flow, balance sheet and profit and loss statement. Obviously, your accountant will play a large part in this but only after you've provided all the above details. Since all business gets down to numbers, this is definitely one of the more important parts of any business plan.