Starting a Business
The decision to start a business, whether as a sole trader or a registered company, is not one that should be taken lightly.
As well as the personal considerations such as whether you can afford to take the financial risks and allocate the often long hours needed to run your own business, you also have to consider whether or not your idea is even viable.
It’s a natural instinct to become emotionally attached to your idea for starting a business and, whilst this can be great at giving you drive and passion, it also leads you down a dangerous road where you can easily miss the many pitfalls awaiting you.
The trick therefore is being able to take a step back and evaluate your idea, trying as much as possible to remain completely impartial. However, this is much easier said than done.
Step 1: Test, Test, and Test Again!
The first step in planning a business is to validate your idea because no matter how hard you try, your emotions are likely to cloud your logical thought processes. The trick here is to start off small and ideally for free and only build from that once you have proven there is a demand for your new business.
1) Ask Your Friends & Family
OK we have to admit, this isn’t the most reliable data you can get. The chances are your friends & family will be overly kind to you and even if they don’t like your idea they may tell you to go for it because they don’t want to offend you. However, getting the opinions of friends and family is easy and free to do and it may just help you identify what parts of the idea they like and which parts need more work before you continue starting a business.
2) Consult Your Potential Customers
If your friends & family have given your business idea the seal of approval, it’s time to find out what the people who really matter think and seek the opinions of your potential customers. This is where things get a little trickier and you may need to think outside the box. The first challenge is working out who your potential customers are (and the more precise you can be, the better) and where they hang out.
Once you have established that you can set about seeking their opinion. This could mean asking them a series of questions or it could mean giving out samples of your product (if applicable) and seeking their feedback. It could even just mean a general chat about your plans to gage their reaction and interest levels.
3) Sell Your Idea To Actual Customers
This may sound like a strange thing to do given you are still planning your business and may not even have fully developed your product or service yet.
However, selling a product (even one that isn’t yet ready!) is a great way to make absolutely certain that there is both a market for your offering and that they are willing to pay the price you want to charge.
This is a common practice for landlords in the property industry, they will often see a house they are considering buying, but before they put an offer in they will advertise it to rent. Once they have had a few serious inquiries they will go ahead and purchase the property.
This way they can be sure that there is a demand and that they can rent out the property at the price they want to before they risk any of their money purchasing it.
We have even heard of people doing this with products being sold online, even going as far as processing the card payment before refunding it and telling the customer the product is currently out of stock. Whilst we would not advocate this exact approach, there aren’t many better ways of making completely sure people will buy your offering!
Step 2: Analyse Your Competitors
Once you have validated your idea and confirmed there is a demand for it, you then need to check where you will fit in the market and how your will compete with those offering the same or similar products and services.
And it’s important to think beyond your immediate competitors and look at the bigger picture. Take newspapers for example, The Telegraph knows that it’s direct competitors are The Guardian, The Times and the other broadsheets as well as to an extent the tabloids. However, if you look beyond that they are in competition with a wide range of other media sources such as the Internet and TV – all competing to be the platform that delivers the days news to you.
This means you have to be completely aware of all of the strengths and weakness of both yours and your competitors offerings – including those who are in slightly different markets but providing a similar service.
All of this adds up to one thing – knowing what your Unique Selling Point (USP) is.
Ask yourself this – why should anyone want to buy your product or service instead of one of the many other competitive offerings they have to choose from?
There are all sorts of ways you can distinguish yourself from everyone else to give yourself a USP, some of the most common revolve around things like price, service, quality, and choices.
Got your USP? Great! Now you need to find out how you can fit in with your competitors. How will you get noticed? How do your compare on price? Do you have something that will entice your competitors customers to try you out? Is there a big enough demand to support you entering the market? How much market share do you need to become profitable?
These are all questions you need to be asking as you learn everything there is to know about your competitors, customers, and the market you are entering before starting a business. You may find it useful at this stage to create a series of charts and spreadsheets to help compare and contrast the existing offerings on the market and where you will fit in.
Step 3: Create Your Business Plan
When most people think of planning a business they automatically think that is essentially just writing a business plan document. Whilst this is an essential step, it’s vital that before anything is written down, you have validated and tested your idea as outlined in the first two steps.
By doing this you are not only preventing yourself from wasting your time if your idea simply will not work – you are also educating yourself to a level that will make writing your business plan so much easier.
If you are wondering what the point of a business plan is and whether you really need one then allow us to point out that a good business plan is not just something the banks or other investors may want to see. It’s a document that should become your ‘business bible’ and help you retain focus even in those hectic first few months of getting your business off the ground.
A good business plan should cover the following:
- The aim and purpose of your business
- The opportunities that your business will look to exploit
- Finances – including investments, cashflow, costs, projections
- Competitor & market analysis showing where your business fits in
- Marketing techniques and the strategy you will employ to attract new business
- How your business will be structured and how it will operate
Whilst this may seem like a daunting list, putting in the hard work now to properly plan our your business will pay dividends in the future and save you a lot of time and effort in the long-run. It will also help to identify and therefore reduce your risks and give you the best possible chance of creating a successful and profitable business.
There are also business plan templates you can download to help make your job of writing one a little easier. One such template we can recommend is provided by Microsoft and can be downloaded by clicking here.
As part of the business planning stage you will also need to consider whether to setup as a sole trader or limited company which can be a difficult, yet very important decision in starting a business.