How to Start a Successful Small Business
Tips for Starting a Successful Small Business
Many small business owners launch their dream of success with great ideas, but they later find their business floundering or failing to thrive because they overlooked crucial steps during the start-up phase.
Becoming a small business owner requires more than having a winning concept or a skill you can sell to others. Before you buy business cards, order phone service, and open your doors to the public, take some time to plan and address the stages of business launch and growth to ensure you have every chance to succeed. Here's a short checklist of important things to do along each step of the way.
- Develop and Define Your Business Concept
- Write a Solid Business Plan
- Consider Funding Options
- Look for Ways to Save Money on Start-up Costs
- Market and Advertise Your Business
- Grow Your Business
- Make an Exit Plan
1. Develop and Define Your Business Concept
A business concept is different from a business plan. You probably wouldn't be reading this if you didn't have an idea of what sort of business you're creating. No matter what the business is, whether it's plumbing, a restaurant, public relations consulting, opening a gift shop, or any other idea you might have, write it down and take a look at the scope of what you will be doing.
It is as important to know what you will not be doing as it is to define what you will be doing (sometimes even more important). If you're opening a restaurant, will you be open only during certain meal times or for breakfast, lunch, and dinner? What about the hours in between? What sort of food will you offer, and what will you not include on the menu (including items that might be within the theme of your cuisine, but are too labor- or cost-intensive to offer at this stage)?
If your business provides services to homeowners, will you make house calls on evenings and weekends? If you offer accounting or PR services, are you specialized in certain areas? If so, focus on those rather than trying to be all things to all people.
One challenge of start-up operations is learning to edit out what may not work for your immediate goals. You will be vulnerable in the early stages to the lure of going after additional revenue even if it falls outside of your original plans. When you see these opportunities, take time to examine whether you'll be doing something at the expense of a bigger (long range) goal if you take on work that isn't part of your mission statement and overall plan.
2. Write a Solid Business Plan
If you're itching to get clients or customers and get a fast start, the business plan can seem like having to do yet another term paper before you get to graduate and go into the real world. Not true. The business plan is your big-picture outline of what you will accomplish, and your deadlines (set by you) of when you will meet certain goals.
A good business plan helps keep you focused, keeps you going when you get discouraged, and keeps you on track. Without one, it is easy to go down rabbit trails or to sit and wait for the business to come to you.
What a Business Plan Includes
Here's an example of what a business plan can contain. You will need to adapt it for your own needs, but this should give you an idea of the questions to ask yourself and what to include.
- The services or products you will offer
- Equipment or resources the business requires
- Equipment you already have for that purpose
- The type of clients or customers you will target
- Optimum location for the business (if not a home-based operation)
- What to charge for products or services
- Overhead expenses (office space, additional staff, utilities)
- Operational expenses (gas, office supplies, manufacturing materials, etc.)
- Realistic revenue potential during initial six months
- Revenue goals for six months, one year, two years and five years
- Client or customer base needed to reach each stage of the revenue goals
- Incremental goals for building client or customer base (weekly goals are good)
- Marketing concepts for reaching client or customer base
- Expansion concepts (will you try to expand at some point?)
- Funding available for first 6-24 months
- Additional funding needed (if any)
- Point at which the business will support you without further investment or an outside job
- Plans for benefits for you and your staff at some point
This list can look overwhelming, and some points may seem boring or not relevant. Go over each point and fill in details to the best of your ability. Get colleagues, your family and your friends to critique the list and add input. If there are any points you feel do not apply, list them anyway, and add comments as to why they don't apply. You may later need to fill in those areas, and you will want to capture your reasons for not including them early on.
3. Consider Funding Options
Suppose your business plan and existing resources indicate you need start-up money? Now what? Here are a few options for funding.
Great Funding Sources for Small Businesses
SBA Small Business Loans: The Small Business Administration (U.S. Government) still has a few loan programs for various types of small business enterprises. Check to see if your business might qualify for this type of funding.
Private Loans and Investors: You may know individuals or companies that can offer small loans or angel funding to start-ups. Ask around and let people know you're looking for investors or a small loan.
Refinance Your Home: Ouch! I know - that one hurts! But some businesses get their initial funding through exactly that method of financing. This can sometimes be cheaper than any other loan - mortgage interest rates are at an all-time low. If you need a few years of overhead expenses to get started, see whether your home equity can provide the money. But be aware of the trade-off, and be prepared to take the risks.
Donations for Start-ups: There are several organizations (too many to list here) that have websites where people can donate small amounts of start-up money to entrepreneurs. Each has its own criteria for registering a business. Research these options to see if your business is a good fit.
Commercial Loans: Ask about the loan options and rates at your bank or lending institution, as well as at other institutions in your area. Be prepared to give solid information on how you'll be able to pay back the money through your new business.
What You Need in Order to Get Funding
To get funding from investors or through loans, it will help if you have certain things in place. Here are some examples:
- Business Plan: Put the plan discussed above into a solid prospectus that shows how investors or lenders will get their money.
- Advisory Team: You can be more competitive for loans and investors if you pull together a list of competent advisers to present to potential funding sources. These should be volunteers (friends and colleagues) who will offer advice and input to you as you start and grow your business. For larger enterprises, you may need to pay hourly consulting fees as needed. Documenting this resource shows your funding sources that you aren't going it alone in terms of decisions and direction.
- An Accountant: Do you have an accountant? If you plan to get outside funding, you may need to find someone you can use for your business and tax records. Submit their credentials with loan applications or funding requests.
- A Comprehensive CV: Polish your resume and highlight experiences that demonstrate your ability to manage, find clients or customers and grow a business as well as your background in the industry or profession of your new enterprise.
- Credit History: Get your most recent credit reports to see if there are any glitches or issues to address. You will want to present the cleanest possible credit record to lenders and funding agencies.
- References: Contact your network and get current letters of reference. Let people know what you plan to do, so they can draft letters that attest to your ability to manage, your integrity, your skills in the business you're forming and other information funding agents will want to know. If needed, draft sample language your references can include (as long as it represents you honestly).
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4. Look for Ways to Save Money on Start-up Costs
If your business will need space, equipment, staffing and other support, you can often find ways to save money during the start up stages without sacrificing quality or your ultimate goals. Here are ideas for cutting your start-up costs:
How to Save Money on Office Space
If you absolutely need outside space to operate your business, here are ways to start small or save money:
- Executive Suites: Most large cities have these mini-office suites that offer small spaces for you to meet with clients, a business center where you can make copies and fax documents, and (best of all) an on-site receptionist to answer phones professionally and take messages. These offices can serve one-person professional businesses quite well for extended periods of time. They can also be good launching points for businesses that will later grow and move on.
- New Buildings: Check your area for new office-space or industrial construction and get good deals on rent while they're trying to fill units.
- Shared Space: Look for compatible businesses in the geographic area you're targeting and ask about renting space from an existing company.
- Barter Your Services: Offer to barter your services in return for reduced rent.
Save on Equipment
- Buy used! If you look around a bit, you can likely get used desks and chairs in excellent condition from office resale warehouses.
- Lease: It might be more cost-effective to lease office furniture and equipment at first. You can often bargain for good deals on rental contracts if you shop around a bit.
- Government Surplus: If there are major government agencies in your area, ask about their surplus store. Many state and city governments sell used desks, chairs, equipment, fixtures, cubical walls and many other items to the public. You will probably have to pick through the inventory to find the right thing, but you can save considerable dollars by checking out these places.
Save on Staffing Costs
- Hire Stay-at-Home Help: If you primarily need help answering phones, taking orders, scheduling service calls or other support that doesn't require face-to-face contact with clients, consider hiring someone who will work from home. Many stay-at-home moms and dads want to work but still want to be home with their families. Some are highly skilled individuals with educations, and they will give you outstanding service. Aside from advertising for help, a good place to find reliable people is through local churches. Often, church leaders or members know of talented people who want to do part- or full-time work from home.
- College Interns: Many students who plan to go into various professions (such as accounting or public relations) need internships in order to graduate. These typically are paid positions (although I've had great luck recruiting interns for non-paid positions in competitive settings), but the pay is entry-level. You may need to submit paperwork for them, so they will get a grade, but in return, you will usually get a smart, highly motivated staff member who will give you their best work for a semester or two.
- Part-Time Workers: Rather than taking on full-time help, hire one or more part-time staffers to start. This allows you to add help during the hours you need it, only pay for the amount of help you truly need (do you really need a full-time assistant just yet?) and avoid the expense of benefits. If possible, though, offer at least some paid leave if you plan to have someone on board for more than a year.
5. Market and Advertise Your Business
Entire books are written on how to market small businesses (in fact, you may want to check your local library for titles). Here are just a few tips to help you promote your own business:
Visual Branding: Develop a business name, logo and style of typeface early on and use it for business cards, signs, letterhead and online communication. You will want a look that conveys what you are and do, is unique to your business (not mimicking another brand), is clean and attractive, and that has a lifespan longer than current trends. Stay away from anything that will look dated in a few years - it costs money to retrofit an entire business with new logo and typeface looks. Does branding work? Just ask yourself what you think of when you see two golden arches.
News Releases: For larger papers in urban areas, send small announcements to the business section. Your best bet for bigger coverage will be in smaller publications. Be prepared for them to hit you up as a potential advertiser, though. Unless there's some newsworthy element to your business (the first-ever in your area, a new service nobody else offers), you're not likely to get a story out of it. But you might get a courtesy listing in their pages.
Handouts and Promotional Offers: Rather than paying a service for this type of thing, print off your own flyers and offer special rates to new customers or clients. For professional services, mail the announcements to every single contact you have. For storefront operations, target nearby neighborhoods and take your kids out for the afternoon (or a friend's kids) to distribute your announcements.
Nearby Businesses: See if nearby businesses in the same strip center will let you put brochures at their checkout counters. If you offer a service they might need, offer them $50 worth of your time in exchange. They may place your brochures just to be good neighbors, though, especially if you can return the favor.
Open House: If your business lends itself to walk-in traffic, hold an Open House with light refreshments (nothing messy or anything that requires forks and plates), door prizes, small giveaways or other enticements. Invite your friends and associates as well as neighbors in the area.
Offer to Speak: If you have expertise to share (how to save money on plumbing, accounting tips, etc.), offer to give short talks to business and professional groups. You can also give how-to talks to small groups of homeowners if your business lends itself to that audience. Make certain you're actually giving valuable information rather than just drumming up business. You'll get far more business growth from sharing your talent than from coming across as wanting money from the audience.
Paid Ads: You'll get plenty of pitches to buy ads in local publications. Just take the information and tell them you'll think about it. Then, go through their publication and call a few businesses that advertise there to see what results they've had. If the ads truly pay off in traffic, see whether the trade-off potential is there.
Build a Website! What's the first thing most people do when they need a mechanic, or an accountant, or a florist? They search the Internet. If you don't want to build your own site (and you don't happen to have a teenage on hand who can do it for you), you can pay to get one built. A website will drive traffic to your door, keep your customers informed and give you a presence in the community. Research websites of similar businesses (especially the ones that rank high when you do searches) and use those as models for what yours will look like and say.
Smart Phone Apps: At some point, it may benefit you to have a smart phone app for your business. This sort of tool can help restaurants, entertainment businesses and other operations that get social traffic. But it may not be useful for every type of enterprise.
Social Networking: Put your business on Facebook, LinkedIn, Twitter and other social venues that can help spread the word. Ask all your Facebook contacts to 'like' your page, and invite new customers to follow you on Twitter. Don't spam people with endless drivel - make certain your messages have real value and content.
What About You?
Have you ever wanted to start your own business?
6. Grow Your Business
Many studies and surveys have shown that a key point at which businesses fail is when they start expanding. Even if you haven't yet opened your doors, give some thought to how you can sensibly expand if and when the time comes.
Things to Consider When Trying to Grow Your Small Business
- Do you really need that extra space just now?
- If you add staff members, is the business stable enough to pay their salaries?
- If you take on those additional clients, are you prepared to deliver the goods or services with your current resources?
- Are there hidden expenses to some element of the expansion (higher utilities, less walk-in traffic at a new location, moving expenses)?
- Will you continue to offer the same high quality of service if you expand?
- Can you expand more cost-effectively (part-time staff rather than full-time, etc.)?
- Can you make-do rather than add to your expenses? Is your office really that crowded?
- What will this decision look like a year from now?
All these factors, plus additional ones related to your individual circumstances and location, should be carefully considered before you jump into adding new staff or finding roomier digs for your business.
Success can often be the driving force that leads companies into expanding too rapidly or prematurely. To grow the smart way, plan each stage carefully and make certain the new staff, new clients, bigger space or whatever fits into your long range plan. If the plan needs to be tweaked, make the adjustments with the big picture in mind, not as a result of some immediate urge to add to your operation.
Sub-out Additional Work
If you're getting a surge of work that's enticing you to expand, consider sub-contracting the work at first rather than adding to your own staff. You will still get some profits, you will add to your reputation, and you'll retain the client, but you'll save the risks associated with adding new staff or getting a bigger office.
7. Make an Exit Plan
What? You haven't even hung out your shingle, and we're talking about an exit plan?
Yes. One thing to consider is what role your business will have in your life 10 years from now, or 20, or even five years in the future. And, what if the business doesn't succeed? Have you thought how you would shutter the doors and close shop?
Why Exit Plans Are Important for Businesses
Some businesses are started with the specific goal of growing the company and selling it off. Some small businesses are the personal dream of the sole owner, who plans to work there until they retire - but what happens after you retire? Is this a family business that you picture your kids will inherit?
Your exit plan may not be on your mind right now, but as the business grows, give thought to what involvement you want to have when you reach a certain age, or how it can provide an income for you when you 'retire' one day. Will you build the client or customer base and sell it off? Will you get a partner and work in the background? Will you hire reliable people to keep it running while you travel?
The idea of quitting doesn't seem logical during the hectic months and years when you're starting out, but if you look toward the future, you can make decisions today that will create the maximum opportunity to realize your 20-years-out goals one day.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.