The First 10 Steps To Starting A Business
As
a freelance writer and business consultant, a lot of people come to me with a
business idea and want my help with writing a business plan.
Contrary
to what many aspiring entrepreneurs think, writing a business plan isn't the
first or most crucial step to start a business. For most people-especially
those who have not yet started a business-this is one of the last things you
want to do in the start-up and get-off-the-ground phase.
This
article is specifically designed for those brave souls who have never started a
business, have a burning desire to do so, but don't know where to start. Here
are 10 practical, learned from the school of hard knocks, tips that will help
you avoid common pitfalls and get started right. (And keep in mind that these
are intended for businesses that need little to no start-up capital.)
1.
Read
Before
you do anything else, read these four books in order: Cash Flow Quadrant by
Robert Kiyosaki, The Art of the Start by Guy Kawasaki, Burn Your Business Plan
by David Gumpert, and The E-Myth Revisited by Michael Gerber.
2.
Dream
Take
time to create your business "spiritually" before you create it
physically. See it in its best, most perfect state, as a world-class operation.
How does it look, feel, taste, smell, and sound?
Entrepreneurship
is one of the hardest things you will ever do, and your business must
invigorate and excite you consistently, otherwise you won't last through the challenging
times.
Write
these dreams down--this is not a business plan, just written dreams, plans,
goals, and brainstorms. The formal business plan will come much later.
3.
Research
Before
you invest a lot of time and money in your dream, do adequate research to find
out if your idea is viable and sustainable.
In
this step, you basically want to ask and answer a lot of questions, such as
these: Will the market support your idea? What evidence do you have to support
this? What discontentment exists that your idea solves? Will it unleash an idea
virus? Who else is doing it, and how successful have they been? What will you
do differently? Do you have a readily identifiable market? Do market trends
support the idea, or will the idea be obsolete in a few years? Do you need
funding? If so, how much and by when? What technology can be leveraged in the
business? What skills do you lack necessary for the business?
Remember
also that hands-on experience can be the most useful form of research--you may
want to implement your business on a small scale at this stage to see what the
market tells you.
Assuming
you're convinced that your idea will work, now it's time to make it real and
form a business entity. You need an entity for four reasons: to be legal, to
maximize tax savings, to decrease liability, and to maintain control.
Your
basic business entity options include a sole proprietorship, LLC,
S-Corporation, and C-Corporation. Meet with an attorney and a CPA to discuss
the differences between them and choose the appropriate entity for your uses.
This will cost about $125 if you do all the paper work yourself, or between
$200 and $500 if you use a professional or an attorney.
In
addition to your entity, you must also ensure that you are legally compliant in
all other areas. For example, if you have employees, you probably need Worker's
Compensation Insurance. A good attorney will help you safely navigate all the
legal issues you will face.
This
step is critical. Too many newbies try to do too much at once, and are so
concerned about things like image that they spend tons of money, time, and
effort on logo and branding work, marketing brochures, advertising, etc. While
all of those have their place, they should be paid for BY the revenues
generated by the business.
Now
that you've had your time to research the steps, it's time to be extremely
pragmatic about applying them. Do whatever it takes to generate revenues, even
if it means door-to-door selling. No dream, however inspiring, will ever be
realized unless you can pay for it to materialize.
Now
that you have cash flow, it's imperative that you manage it wisely. Account for
EVERY income and expenditure, no matter how trivial, and maintain impeccable
records. You'll be glad you did come tax time.
The
most common accounting software programs are Quick Books and Quicken. Or, you
can use a quality bookkeeping service, which can help you with payroll and
quarterly taxes in addition to keeping your records.
7.
Begin Writing an Operations Manual
An
Operations Manual gives you the ability to leverage your efforts and duplicate
yourself by providing simple, step-by-step directions that anyone can follow to
perform any task.
Systematizing
your business is the most important thing you will ever do, and you can never
start soon enough. Systems, of course, will be refined over time, but it's
critical that you get them down in writing and keep them updated.
You
may also consider using a professional writer to write your Operations Manual.
Many
novices want to immediately start spending money on advertising, without
knowing the costs and/or benefits. It's been said that advertising takes a lot
of money, while marketing takes a lot of time.
For
start-ups, stick with marketing; in most cases, you have time, but you don't
have money, and marketing is generally more effective anyway. Advertising is
costly and relatively ineffective. Start-ups should be obsessive about managing
finances wisely, and very cautious about spending money.
Advertising
would include things such as billboards, radio and TV ads, flyers, yellow page
ads, etc. Marketing usually boils down to direct selling of some kind, whether
it be telemarketing, door-to-door sales, customer referral programs, etc.
If
your idea and delivery systems are good enough, the business should market
itself viral anyway. In any case, find something that gets results, stick to
it, and create and document systems in your Operations Manual.
9.
Refine Systems, Replace Yourself, More Refining, & Document Religiously
In
the first year or so, you will most likely be performing most, if not all,
tasks yourself. This gives you the opportunity to learn and work out necessary
details, but it won't be sustainable when it's time to grow.
With
an Operations Manual in place, you can now begin hiring and training others to
replace you. Once they're replaced, then continue to oversee and refine the
systems consistently.
Also,
you must be religious about documenting every aspect of your business. For
example, if your business does door-to-door sales, all salesmen should document
how many doors they knock, how many people they talk to, and how many people
bought.
Over
time, this data will prove to be invaluable as you seek to refine your systems;
without real numbers you have no idea what's working and what's not.
10.
Write a Business Plan
The
last step in the start-up process is the one that most people think they should
start with. Here's why it should come last: if you want it to secure funding,
investors will want to see a proven track record before they invest anyway, and
if you do it after the first nine steps, you can now do it right, with actual
numbers, facts, and statistics rather than unfounded assumptions.
Furthermore,
this gives you an opportunity to reconnect to your dreams after wading through
a lot of trials.
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