Thinking of Starting a Business?
Why Do You Want To Do It?
Have you always wanted to start a business? Do you have a lifetime of experience to draw on? Have you seen how good businesses operate? Would you like to relive the famous story of Colonel Sanders who started the Kentucky Fried Chicken business while in his sixties? Could you write a list of the ten most important things a business must do to succeed?
If you answer ‘yes’ to one or more of these questions, you are a candidate for starting a business.
Laying The Groundwork
The first step is to get your finances in order, understand your assets and liabilities and determine your financial risk tolerance. Only one in five new businesses survives more than five years. Even venture capital firms, with their significant financial and managerial assets, are considered successful if one in five investments succeed. You must be prepared to lose whatever money you put into a business.
Once you have your financial resources in order, the next step is to line up your human resources. Be sure your spouse and other immediate family members are ready for you to disappear into the business for two or three years. Even if you are planning only a part time venture the above statement will still apply. You might also line up friends for support, potential trusted advisors and sounding board members and anyone else willing to help. If you see yourself more as a Mr./Ms. Inside or as a Mr./Ms. Outside, you might think now about finding a complementary partner. Very few people can do the whole thing themselves.
You might also devote a little time to determining whether you should start a business from scratch, purchase an existing business or acquire a franchise. There are pluses and minuses to each but roughly speaking, there is a higher risk in starting a business, somewhat less risk in buying an existing business, and even less risk in acquiring a tested franchise.
What Type of Business?
Now the real fun begins… figuring out what business to start or buy. If you have decided on a franchise, the International Franchise Association in Washington, D.C. is the place to start. If you are looking to buy a business, talk with your accountant about his/her client companies and which ones might be for sale, and also ask for introductions to other accountants.
To identify an idea for starting a business from scratch, start by looking at successful businesses and think about whether they could be replicated or even improved upon. Look inside yourself at your experience and expertise, interests and passions and the “I always thought it would be a good idea to….”. Also look at markets and demographics. You may be reading this article because you are a pre- retirement Baby Boomer looking for alternatives, a very large market about which you already know a lot.
Once you find that million dollar idea, be it a new chili recipe, an Internet start up or an iPod application for businesses, or whatever, write a brief executive summary or business plan defining the market, the market’s need, how you are going to sell to that market, the product itself, the financial plan, the unique value proposition and any other key factors (an alternative to this thoughtful approach is to just start the business, wing it and adjust on the fly. There isn’t much evidence to indicate that one approach works better than the other).
Next, write a short action plan, a list of action items with a time schedule and assigned responsibilities. Add in contingencies for what will go wrong, because major problems and challenges are virtually guaranteed.
Next, do a reality check. Find the competition (and no matter how unique the idea, there is always competition). Then talk with customers. Ask them whether and how much they would pay for the product or service you are contemplating. Remember nothing happens until money changes hands. You must be sure money will change hands.
Lastly, test the idea with professionals. Talk with your banker, accountant and lawyer. If you need financing, talk with potential investors to see if they will write a check. Check with your Chamber of Commerce, your local business college, entrepreneurial networking groups and other resources, such as the Service Corp of Retired Executives.
Are You Sure?
Starting a business really is a great adventure. Whether you fail or succeed, it will be an exciting experience. It will be particularly exciting if your old friends and business associates get to read about you in Inc. Magazine’s List of the 100 Most Rapidly Growing Small Companies. But keep in mind; you won’t get there without a lot of hard work and determination.