The following is a post from Brabble director of business development Patrick Mackaronis. Patrick is a thought leader and subject matter expert in the fields of entrepreneurship, finance and startups, and has been a self-starting businessman for years.
The decision to start a new business can be an exciting moment. However, the moment soon passes and the it’s time to start working. An entrepreneur must not leap into the business start-up fray without building a strong foundation for success. Too often, new businesses omit the most important part of that foundation – good planning.
The planning process encompasses all aspects of a new business – financial stability, product or service marketing and branding, and administration and operations. All of these aspects interrelate with each other, and the entrepreneur will omit or downplay any one of them at her own peril.
One of the most common reasons for business failure is the lack of capital to survive downturns as well as take advantage of emerging opportunities. Business environments are dynamic in nature and an entrepreneur who does not have the resources to adapt to changing conditions will ultimately fail.
What are the major pieces to financial stability?
- Obtaining sufficient capital before opening the doors to the business is the first piece to the puzzle. Resources can be gathered from family or friends, personal resources, SBA Loans, or investors. Whatever the source, do not assume that capital will come along. Find it before starting the business venture.
- The initial nest egg will probably not last through the entire life cycle of the business, so entrepreneurs need to build strong business credit. This can be accomplished by creating vendor accounts and then paying bills on-time and also by obtaining lines-of-credit and credit cards from financial institutions.
- Track business expenditures to ensure that money is being allocated correctly and to identify any troublesome trends that could become compromising.
Product / Service Marketing and Branding
An innovative idea for a new business is great but, if there is no market for the product or service, it will never become profitable. In addition, if the business is not able to distinguish itself from the competition, it will not succeed.
What are the major pieces to product / service marketing and branding?
- Identify what the business’ market is, whether it is local, regional, national, or global. Read local and trade publications or go onto the internet to determine if people want what will be sold. Depending on available resources, a market research firm can be hired to do this or just getting out and talking to people can be useful.
- Examine the market to determine the level of competition. A great idea may not go far if the market is already saturated with competitors while an innovative idea with very few competitors may be very lucrative.
- Study the number and type of competitors carefully to determine how the business’ product / service can be distinguished from them. Concepts such as quality, affordability, convenience, and customer service are often used to stand out from the crowd.
- Create a marketing / advertising budget and stick to it. Generally, television, radio, and print advertising is cost prohibitive for a business start-up, and is often not as effective as networking, sponsorships, and volunteering anyway.
Administration and Operations
Many businesses fail because entrepreneurs did not understand adequately the costs of day-to-day business operations. Too often, the assumption is made that actually operating the business will come naturally and does not require planning.
What are the major pieces to administration and operations?
- Issues such as office space, staffing, equipment and supplies, telephone and internet, and signage must be planned out in advance, with reasonable budgets established and evaluated regularly. Entrepreneurs often find themselves wearing multiple hats when the business opens which is reasonable when resources are tight. However, that same entrepreneur may become overwhelmed if proper staffing is not built into budget formation.
- Proper tracking is essential in managing a business successfully. This is accomplished through financial tracking software and spreadsheets which can be used to determine where resources are going and what product / services are generating the most income. Tracking of supplies and costs for telephone / internet are also important to determine expenditure levels and ways to better manage them.
- Evaluate and re-evaluate staffing and other operational issues to better match emerging priorities to available resources.
A Well Constructed Business Plan is an Entrepreneur’s Best Friend
A comprehensive business plan can serve to better understand and track financial, marketing and branding, and administrative and operational variables / priorities. A well designed plan will document the entrepreneurial idea that serves as the motivation for the business and market conditions that can make the idea profitable. It also addresses administrative and operational requirements including staffing and infrastructure costs and how much money will be needed to sustain the business short-, mid- and long-term.
There are numerous resource books / software available on the market to help entrepreneurs develop a successful business plan. Business plan creation can also be performed by business and management consultants. Whatever avenue an entrepreneur uses to obtain a comprehensive business plan, this document is essential for proper business management and ultimate success.