Starting your business
Starting a business is a big deal. Odds are that you are going to be overwhelmed by what you need to know to get up and running. The good news is that if you plan carefully before you jump in, your chance of success is that much greater.
Here are a few things you need to consider when starting a business:
- Challenges, both initial and ongoing
- Business Name
- Accounting and taxation
- Plan on and prepare for challenges; every business will encounter them. The more you anticipate, the better your chances of success will be.
- Know when to change your strategy
- Maintaining a reasonable work/life balance
- Insufficient capital and cash flow
- Developing a great product or service
- Having a strong plan and vision for the business
- Employees challenges – finding great ones and firing bad ones
- Working more that you expected
- Dealing with customer rejections and conflicts
- Managing time efficiently, both yours and your employees
Finding the right name for your business can have a significant impact on your success. The wrong name could result in unnecessary and even insurmountable legal and business hurdles. Here are some quick tips for naming your startup:
- Avoid hard-to-spell names
- Pick a name that will not limit your business as it grows
- Conduct a thorough Internet search on your desired name
- Although not as important as it used to be, use a ‘.com’ domain for your business website
- Conduct a thorough trademark search if it is warranted
- Make sure you it is a name you will be happy to say out loud
- Come up with five names you like, then test market the name with prospective employees, partners, and investors as well as potential customers
You constantly have to be in marketing mode. You will need to constantly attract new customers, retain your existing ones, and to an extent even train your target market. Make sure your marketing strategy includes: Website SEO, Social Media marketing, press releases, and continual networking.
Accounting and taxation
Pay attention to your financials. It is vital that you stay on top of your expenses and learn to thoroughly understand financial statements and budgeting.
Many businesses have failed because the entrepreneur was unable or unwilling to modify spending to avoid running out of cash. Establish a detailed, month-by-month budget, and review it regularly with your accountant.
Some key questions that you absolutely need to have the answers to:
- What are your one-, three-, and five-year projections?
- At what point will the company be profitable?
- How much cash to you expect to use to get to profitability?
- What key metrics will your management team focus on?
- What factors will limit faster company growth?
Do not make the mistake of hiring inexperienced or incompetent legal counsel. Interview several attorneys or firms, and determine if the lawyer or firm has the necessary expertise. Resist hiring based on friend or relative suggestions, or on fee discounts. Do not deny yourself the advice of experienced counsel who could potentially help you avoid serious legal issues. Your legal counsel should have experience in (or access to other attorneys experienced in):
- Corporate and securities law
- Contract law
- Intellectual property law
- Employment law
- Investor and venture capital financing
Hiring employees is a big step – make sure you do it right. Check references and academic credentials, ensure that the applicant has relevant experience for the position. Have more than one person in the company do an interview, and pay attention to their input. Have employees sign confidentiality and intellectual property agreements to safeguard your business products.
If you don’t have your own capital, you will have to depend on investors. Raising money through investors is a daunting and time-consuming task. You will need to have all of your ducks in a row. There are two documents that you absolutely must get right: the executive summary and a ‘pitch deck’.
An executive summary is usually a 3 to 5 page high-level summary of your company that you will present to potential investors.
The pitch deck is a brief presentation, usually created using PowerPoint, used to provide potential investors with a quick overview of your business plan. You will usually use the pitch deck presentation during face-to-face or online meetings with potential investors or customers.
Running and growing your business
For a business to run effectively and have the opportunity for growth, it takes exceptional planning and organizational skills. Many businesses are started without a plan, thinking that turning on the lights and computers and opening the doors is all it takes. Unfortunately, this is not the case. You can avoid this by taking time to envision and plan the necessary steps to be successful.
Effective and well thought-out organization — plans and procedures — will help you and your employees complete tasks and stay on top of things to be done. Start the day with a comprehensive to-do list. This ensures that an important task is not forgotten or overlooked, and that you and your employees are focusing on important, essential tasks and not trivial items.
Provide exceptional customer service
It is all too often forgotten that customers are the lifeblood of a business. Without customers, there are no sales. Without sales, the bills will not get paid. Look into customer loyalty programs and other incentives to attract and retain happy customers and clients.
Consistency is a vital component to an ongoing business. Building a successful business has much to do with doing the necessary things day in and day out. This helps create long-term habits that will help you make your business viable in the long run.
Count on making sacrifices
All the prior planning and conceptualizing of a business startup is hard work, but it is only the beginning. You will almost certainly find that you will have to put in more time than you would than if you were working for someone else. Prepare for it.
Gear up your creativity
Always be looking for ways to improve your business and to make it stand out from the competition. Recognize that you don’t know everything and be open to new ideas and new approaches to your business.
Analyze your competition
Competition breeds the best results. To be successful, you must never be afraid to study and learn from your competitors. After all, they may be doing something right or providing some other service that you can implement in your business to increase revenue.
Know where you are and where you’re going
The key to creating strategies to grow and run your business successfully is in knowing where it is and where it is headed. Keep detailed records. If you do not know how, enlist a qualified bookkeeper or accountant and have them teach you how to read financial reports. Knowing the details can help you spot challenges before they become critical and help you devise plans to overcome them.
Selling your business
You’ve spent a lot of time building and nurturing your business, now it’s time to move on. What are your choices?
- Retain your ownership interest and management control, but pass the daily operations duties to offspring
- Retain ownership but hire outside management
- Sell your business outright to an employee or outside purchaser
- Liquidate and close the doors
Selling to an outside interest or an employee is relatively straightforward; of course you’ll want to get your CPA and attorney involved, but the process is easier to manage than passing on the business to a family member.
Fewer than one-third of family businesses survive the transition of ownership from first to second generation and of those that do, half do not survive the transition from second to third generation.
To be one of the few family businesses that survive, you must have a good understanding of your business and your family. Here are four basic reasons why family firms fail the generation to generation succession:
- Lack of viability of the business.
- Lack of planning.
- You as the owner don’t really want to transfer the firm.
- The person or persons that you want to transfer the business to don’t actually want it.
Any of these factors make transferring a family business difficult. The primary cause of failure is lack of planning. With the right plan in place, the business will most likely remain healthy.
It is vital to develop a family/business strategic plan designed to maintain a healthy, viable business, establishing policies for the family’s role in the business. For example, it may include an entry/exit policy outlining the criteria for working in the business. It should also include the vision, mission and purpose statements spelling out your family’s values and basic policies. It will also address other issues that are important to your family such as compensation, sibling rivalry, ownership and management control. Addressing these issues in the plan may save conflicts later on.
The plan should also outline how succession will occur in current and subsequent generations and how to know when the successor is ready. Many founders do not want to let go of their company because they are afraid the successors are not prepared, or they are afraid to be without a job. If you haven’t planned the succession carefully, potential heirs may sense this reluctance and plan an alternative career. However, if the heirs see a plan in place that outlines the succession process, they may be more willing to continue in the family business. Although not easy, the commitment made by all family members during the planning process is the key ingredient for business continuity and success. The first rule for successfully operating and transferring the family firm is: Share information with all family members, active and non-active. By doing this, you will eliminate problems that arise when decisions are made and implemented without the knowledge and counsel of all family members.