Last week we discussed entrepreneurship success. As a continuation, it is appropriate to provide a few basic guidelines to those interested in setting up a new business.
Setting up a business venture, even on a small scale, entails the managing of many important issues. Among them are legal, finance, marketing, human resources, market feasibility, competition, and many other factors.
There are plenty of success stories of start-ups that one can obtain inspiration from, in Sri Lanka and the world arena.
At the outset, it is fundamentally vital to understand the challenges that lie ahead and the huge commitment needed to brave it. I can articulate with certainty that new entrepreneurs often fail due to a lack of promise and commitment.
They neglect the importance of the time, resources, and energy required to succeed. Many of them assume that starting a business is only forming an idea in the head and trying to run with that.
There are many more aspects in starting and running a successful business and it is not an easy task under any circumstance. Therefore, you must be careful not to let your concept snowball into something complex.
Examining and scrutinising market feasibility is one of the most important initial tasks one must perform before getting into an actual business activity.
A business entity can move forward only if there is a market and a clientele is available.
A feasibility study must not necessarily be a complex document with complicated mathematical calculations, but a simple set of notes defining what you want to do and how it can be done.
Information
The entrepreneur can obtain information about the chosen business by talking to people already in similar businesses or through secondary data available at various information sources and websites. Also, you can approach industry experts to derive firsthand knowledge. Nevertheless, a study about the products or services of the intended business is a must.
A feasibility study can give you the current and future market conditions and insight into the functional requirements, competition, and more importantly what exactly the potential customers need.
When the entrepreneur understands that there is a market available, he or she can analyse the negative aspects that are omnipresent in any business. When analysing the feasibility, you will come across possible hindrances that can lead to risks.
Taking risks is a vital aspect of entrepreneurship. However, those risks must be taken after analysing them with possible negative repercussions in a failure.
Therefore, the first step is to assess and protect what you already have as assets. The entrepreneur, before the start, should do a risk analysis and understand what will be lost if the new effort does not succeed.
For example, if you are engaged in employment, you must know whether the income you receive can be earned by the business in a specified period, after deciding on a reasonable grace period. Hence, keeping the day-job at a start-up time is not a bad idea. (However, this has to be done if your planned business does not have conflicts of interest with the employment).
Otherwise, the business will consume your assets and end up in a cumulative loss in a short time. Therefore, it is important to understand whether you can earn what you had been earning before the start of the business.
It is known that the time invested in a business plan will pay off many times over in a business. Therefore, formulating a simple plan covering all aspects of financial and operational functions is compulsory for a new business, irrespective of the size of the investment.
A business plan provides you many obvious benefits. Such a plan can work as a blueprint you can use to direct the energy to keep the business on track and as a timetable for achieving business goals.
Through SWOT analysis, you can not only make projections but also plan all your practical business strategies. It will help you in the prioritisation of critical capital disbursement and future cash flow projections. However, you must not go overboard with a lengthy and complex plan at the initial stage. In reality, often the start-up plans are being deviated from the original when the business grows in size.
Name
Another important task is to come up with a great name for your business. This is seemingly simple but in reality, it is not. There are various angles to consider when selecting a name. Selecting the right name, even when the start-up is small, bears a significant impact.
A name should be selected after considering the long-term vision of the entrepreneur barring superstitious beliefs and emotional principles. Some of the important aspects to consider are the sound it generates, length of the name, relevance to the core business, possible diversification, or extension in the future. When the business is up and running, the name must not be changed arbitrarily. Hence, conscious and deep attention must be rendered to name the business.
Setting up a business with partners has positive and negative repercussions in the long run be it siblings, relatives, acquaintances, or associates. Therefore, a clear cut deal about partnership arrangements must be agreed upon with the selected partners.
While the capital and other financial and non-financial contributions, and risks can be shared, joint business decision making can be tricky in functionality in the long run.
Therefore, it is recommended that vital features such as the business relationship, individual functions, shareholdings, profit sharing, commitments, and so forth should be agreed upon before the start-up. It is essentially important to have these agreements in writing and proper records at the start in order to avoid possible frictions later on.
An entrepreneur starts a business with his original business idea even if such business is being practiced by others. Therefore, protecting the original idea, plans and strategies are essential. Therefore, when discussing with outsiders and, specifically when the recruitments are done, caution must be exercised to prevent information leaks, at least until the operation is fully functional.
Important characteristics
The market, marketing, and clientele are the three most important characteristics of the success or failure of a new business entity. Therefore, the role of marketing and the revenue generated through sales are of utmost importance. From the word go, the new entrepreneur must market the product ‘like crazy’. Usually, businesses allow a limited grace period at the ‘launching period’ to bring in revenue. In my opinion, this grace period should be ignored totally and try to make sales revenue from the first day, or even before the launch if possible.
It is common knowledge that marketing takes over everything else in business success. As such, communicating with potential customers is one of the first tasks in a new business. Particularly, at the initial stages, when the company and the product are little known in the market, the maximum effort to make the prospects aware is very important.
The digital medium is exceedingly cost-effective and the reach is immeasurable as well. Besides, there are many other benefits available in marketing with digital media, although the heavy clutter at times can be an issue. Hence, using digital platforms is hugely useful at the time of starting to curtail expenses.
Knowing your immediate competition is as important as your own business because your new entity is preparing to enter into the market of other similar businesses.
Therefore, thorough research about the competition will be immensely helpful to the marketing effort. Information on competition will direct you to formulate effective strategies to keep ahead of the competitors from the beginning of the operation.
Finally, one of the most important ingredients in business success is the passion of the entrepreneur which will drive him to succeed. Having said that, it is important to state that passion and enthusiasm will drive you in the right direction although caution must be exercised in business decision making based on the knowledge you have acquired through the factors discussed above.