Be Smart about Starting a Business
January is the time of year when we see a lot of individuals wanting to start a business. Some of these succeed but unfortunately, many of them fail. The failures are most often due to a lack of planning and business operations knowledge rather than just having a bad idea. This is why the SBDC offers its signature StartSmart program at the beginning of the year. Here are some takeaways from the class with practical advice that you can follow if you are considering starting a business.
Market Feasibility: Always start by assessing if there is a demand for your product or service. You need to have a point of differentiation from your competitors. What is your edge or uniqueness? Performing a SWOT analysis is a great tool that you can use. Part of this is to consider industry and economic trends. Businesses do no operate in a vacuum so if your idea is in a declining industry you should take a long pause and even consider scrapping the idea. Then think about segmentation in the marketplace meaning the group of people that you will sell to. Once you have painted a picture of your ideal customer you can develop a plan to communicate with them which translates into the best way to market your service or product. Communicating with or marketing to a 20 year old is radically different than trying to reach a 60 year old baby boomer.
Management and Operations: Do you have experience in this area? Being able to bake, repair autos, cut hair, etc.… means that you have a skill or talent. It does not necessarily mean that you are capable of running a business. Having an organizational chart may sound like it applies only to larger companies but all businesses need one. Start by listing all of the activities that are necessary to operate the business and think about who will be assigned to these tasks. Sales and marketing, record keeping and HR are just a few of the essential functions of a business. Is it realistic to think that you will be able to do all of these? Will the thing that you love to do become a chore if you are exhausted from doing everything else?
Financial: How much is it going to take to start your business and how much will you need to sustain it until you become profitable? Being underfunded or not having access to capital is the kiss of death for a new business. I highly recommend that you do financial projections for your business and if you are seeking funding, a lender will require it. It is critical that you be realistic with these projections. Once the business opens, you will need to practice smart financial management. This means understanding your numbers and making your business decisions based on these. Evaluating the heath of a business and its ability to sustain and hopefully grow does not equate to whether your checkbook is positive or negative.
Becky Brownlee is a consultant with the University of Georgia Small Business Development Center and can be reached at email@example.com for business assistance and free consulting services.