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How to Start a Successful Small Business

A professional career coach, Marcy has helped hundreds refine their resumes, improve their interviewing skills, and advance their careers.

Is your business ready to open its doors? Be sure you've done all your prep work before you hang out your shingle!

Is your business ready to open its doors? Be sure you've done all your prep work before you hang out your shingle!

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.

  1. Develop and Define Your Business Concept
  2. Write a Solid Business Plan
  3. Consider Funding Options
  4. Look for Ways to Save Money on Start-up Costs
  5. Market and Advertise Your Business
  6. Grow Your Business
  7. 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.

Create a list of goals and needs for your business. Run your business ideas by some trusted friends and associates.

Create a list of goals and needs for your business. Run your business ideas by some trusted friends and associates.

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.

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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).
You can start a business with a tight budget. This simple office set-up will serve its purpose but won't cost a fortune

You can start a business with a tight budget. This simple office set-up will serve its purpose but won't cost a fortune

Would You Succeed as a Business Owner? Take This Quiz!

For each question, choose the best answer for you.

  1. How comfortable are you with taking risks?
    • Not at all - I like for things to be predictable
    • Somewhat comfortable - it depends on the factors at play
    • Comfortable enough to take them now and then - for the right reasons
    • Very comfortable - I feel I can handle almost any situation
  2. Which of these best describes your work style?
    • I like my job to be defined; I go to work, go home and think of other things
    • I like a degree of latitude in what I do
    • I am a workaholic, and I always spend more than 40 hours at my job
    • I do whatever it takes to get the job done, and I always think of new ways to satisfy clients
  3. Which of these personality styles best describes you?
    • I'm a team player; I like to get along with everyone
    • I like to know my role in an organization and I take pride in doing my job well
    • I like to lead projects and programs, and build my team
    • I enjoy being in charge and making the decisions
  4. How do you handle stress?
    • I get sick to my stomach and worry; I absolutely don't like that feeling
    • I try to manage my life to avoid stress, but I hold up when it happens
    • I can handle my share of stress, especially if I'm in control of the situation
    • I have always been able to roll with the punches and bounce back
  5. How important is financial security in your life?
    • I have a lot of obligations and I need to know there will be money coming in
    • I am conservative about finances, but I do splurge now and then
    • I try to balance financial security with well-planned investments or risks at times
    • I can afford to have some lean months, and there's nothing keeping me from trying something new

Scoring

Use the scoring guide below to add up your total points based on your answers.

  1. How comfortable are you with taking risks?
    • Not at all - I like for things to be predictable: +0 points
    • Somewhat comfortable - it depends on the factors at play: +1 point
    • Comfortable enough to take them now and then - for the right reasons: +2 points
    • Very comfortable - I feel I can handle almost any situation: +3 points
  2. Which of these best describes your work style?
    • I like my job to be defined; I go to work, go home and think of other things: +1 point
    • I like a degree of latitude in what I do: +2 points
    • I am a workaholic, and I always spend more than 40 hours at my job: +3 points
    • I do whatever it takes to get the job done, and I always think of new ways to satisfy clients: +4 points
  3. Which of these personality styles best describes you?
    • I'm a team player; I like to get along with everyone: +1 point
    • I like to know my role in an organization and I take pride in doing my job well: +2 points
    • I like to lead projects and programs, and build my team: +3 points
    • I enjoy being in charge and making the decisions: +4 points
  4. How do you handle stress?
    • I get sick to my stomach and worry; I absolutely don't like that feeling: +1 point
    • I try to manage my life to avoid stress, but I hold up when it happens: +2 points
    • I can handle my share of stress, especially if I'm in control of the situation: +3 points
    • I have always been able to roll with the punches and bounce back: +4 points
  5. How important is financial security in your life?
    • I have a lot of obligations and I need to know there will be money coming in: +1 point
    • I am conservative about finances, but I do splurge now and then: +2 points
    • I try to balance financial security with well-planned investments or risks at times: +3 points
    • I can afford to have some lean months, and there's nothing keeping me from trying something new: +4 points

Interpreting Your Score

A score between 4 and 8 means: You work best in an environment that is stable, reliable and secure. You would feel more comfortable with a sideline business rather than one on which you depend for your livelihood.

A score between 9 and 13 means: You will need to carefully balance any small business decisions with your other obligations in life, and weigh the risks. You may be more comfortable joining a start-up business that offers potential but has someone else carrying the stress burden.

A score between 14 and 16 means: You would probably do well with a business that has a track-record and some underpinnings of support, such as a franchise or distributorship with a solid history and name recognition.

A score of 17 means: You would be a great entrepreneur; you understand risks and are willing to take them for the right opportunities. Please remember us when you're rich!

A score between 18 and 19 means: You are a born entrepreneur in spirit - you like to be in charge, you don't mind taking risks, and you thrive during stressful times. Be sure to take your anti-acids, and let us know when you issue your IPO!

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.