Although more than half a million businesses are started each year, owning and operating a business is not for everyone. Many businesses are started without a realistic evaluation of personal objectives, individual talents. and personality traits.
There is no way to eliminate all the risks associated with starting a small business. However, you can improve your chances of success with research, good planning, and preparation. Start by evaluating your strengths and weaknesses as an owner and manager of a small business.
YOUR PERSONAL OBJECTIVS
What are your personal needs?
Your fincancial objectives?
How will owning a business affect your family?
Your standard of living?
Are you mainly interested in money, power, or flexibility?
YOUR TALENTS
Do you have any special skills or expertise in a particular industry?
How will your talents help you in the development and operation of your own business?
How good are you at making decissions?
At planning and organizing?
Do you like to sell?
Can you sell? (You will be required to sell yourself, your company, and your products or services.)
YOU PERSONALITY TRAITS
Are you a self starter?
Is your drive is strong enough to maintain your motivation?
It will be up to you not someone else telling you to develope projects, organize your time, and follow through on details. Running a business can wear you down. Some business owners burn out because they carry all the responsibility on their shoulders. Strong motivation to make the business succeed will help you survive slowdowns as well as periods of burnout.
Are you an authoritarian or a team player?
How well do you get along with different personalities?
Business owners need to develop working relationships with a variety of people customer, employees, bankers, lawyers, accountants, vendors, etc.
Are you willing to risk everything you own?
Will you be able to live with the fear of loss?
Will your family?
CONSIDERATIONS IN CHOOSING YOUR BUSINESS
What kind of business should I start?
People often ask, "What kind of business should I start?" No one can answer this for you. A particular business generally succeeds or fails because of its market, the skill of the owner(s) and workers, and the quality of the product or service, not because of the type of business.
Your experience is most important when you are considering starting a new business or purchasing an existing one and less important when buying a franchise. If you start a new business or purchase an existing one, past experience in that particular industry may help you to better understand your customer market, the operating cycle of the business, and the practices unique to the trade, and it may help you to avoid costly mistakes. If you buy a proven franchise, your purchase should include a developed technical support system that makes previous experience in the industry less important.
Consider working or volunteering in as many positions as possible in a business similar to the one you want to start or buy, before you open your own. This way you can try it out before committing. You can also explore the business by attending association and networking meetings within the industry and by talking to other entrepreneurs. Ask question and more questions. Entrepreneurs love to talk about their businesses and share experiences.
IS YOUR BUSINESS IDEA FEASIBLE?
People make the mistake of blindly pursuing business ownership without adequately evaluating whether the idea is feasible. Evaluating the feasibility of a business allows you to make a more informed "go" or "no go" decision, and it involves a detailed examination of financial, personal, and market realities. Some of the key elements that you should explore and honestly appraise include the following:
Do you have enough money to get your idea off the ground without going into debt?
If not, where are you going to get your money?
Do you have enough cash and the right combination of prior experience, credit status, and other tangible assets to secure financing for the venture?
Are you willing to take the risks of loss associated with assuming debt?
Can the business generate enough cash to pay its expenses as well as your desired level of owner profit?
Are your management skills adequate for overseeing and developing the business operations and market and selling your product or service?
Is there a demand for your product or service?
Can you really compete and stay comopetitive with other businesses that have been at it longer and that enjoy an established reputation?
Have you done research on market demand, or have you just assumed that people need or want your product or service?
Are the rewards from the business, both momentary and personal, worth the effort and investment you are going to have to make?
What is the worst thing that could happen if you go into business for yourself?
Are you capable and willing to deal with the worst possibility, should it occur?
BUSINESS REQUIREMENTS
If you are operating a home-based or service business, you may think it inconceivable that you would have to comply with any of the numerous local, state, and federal regulations, but in all likelihood, you will.
Avoid the temptation to ignore regulatory details. Doing so may avert some red tape and money in the short term, but it could be obstacle as your business grows. Before you do anything, take the time to research the applicable regulations and structure your business so that it will be in compliance from day one.
Below is a checklist of the most common requirements that effect small businesses, but it is by no means all-inclusive. Bear in mind that regulations vary by industry.
If you're in the food-service business, for example, you will have to deal with the health department. If you use chemical solvents, you will have to meet environmental compliances. Being out of compliance in any aspect of your business could leave you legally unprotected, lead to expensive penalties, and jeopardize your business.
BUSINESS LICENSES
There are many types of business licenses: state, local, and professional. Depending upon what you do and where you plan to operate, most businesses will be required to have a license of some sort.
Licenses are administered by a variety of departments, so first check with the Business License Office or the Tax Collector in the city or county where you plan to do business.
FICTITIOUS BUSINESS NAME
Registering your business name, after doing a search to make sure it is not already being used, protects you from others who might be using the same name. It also gives you grounds to prevent your competition from using your name.
BUSINESS FORMATION
You must decide if your business will be structured as a sole proprietorship, partnership, or corporation. Partnerships and corporations should be legally established using an attorney to develop the contracts. If you have decided to incorporate your business, contact the Secretary of State:
EMPLOYER IDENTIFICATION NUMBER
If you have employees, you are required to have an employer identification number(EIN). You may also get one if you prefer not to use your Social Security number in business tranactions. Contact the IRS to obtain an employer identification number.
STATE TAXES
You must file your state business taxes separately if you are a partnership or corporation. If you are a sole proprietorship, you file through your personal income taxes. You can obtain the necessary busine
ss tax forms and general information from the Franchise Tax Board, which has local offices throughout California.
SELLER'S PERMIT
You will need a seller's permit or a resale number if you plan to sell products. The permit allows you to purchase inventory from suppliers without paying taxes. To obtain a permit, contact the State Board of Equalization.
PREPARING YOUR BUSINESS PLAN
BLUEPRINT FOR YOUR BUSINESS
Developing a business plan is widely considered to be the most important thing you do before going into business. The business plan is a personal management tool that you should comtinue to use after start-up; it will assist you in the ongoing development of your business. Many refer to the business plan as being the blueprint or roadmap for your business. A thoroughly researched and well-thought-out business plan will clarify your goals, focus your energy, give direction to your work, and help you gauge your progress. For business seeking finance, it is a tool for raising capital. To obtain a loan or attract investors, you will need to present a cohesive picture of your business, the management team, why it will succeed, and how you intend to repay the investors. www.sba.gov/starting/indexbusplans
THE FORMAT
There is no magic formula. No business-planning outline is totally comprehensive in its content or coverage. The following outline will get you started in the right direction; not every question will apply to you or your type of business.
YOUR BUSINESS PLAN
I. EXECUTIVE SUMMARY
The Executive Summary is the first component of your business plan but is prepared after all other elements of the plan. It succinctly summarizes (in no more than two pages) the Organization Plan, Market Plan, and Finacial Plan. It should be thoughtfully written, because potential investors often will not get into the body of the plan if their interest interest is not captured at this point.
II. ORGANIZATION PLAN
The Business
Describe the business, including history, legal structure, major products or services, and personnel.
Discuss the business' major strengths and limitations and its goals for sales, new product develoopment, growth, etc.
Operations
Describe the hours and days of operation, equipment and supplies needed, and inventory storage and maintenace.
Management and Organization
Describe the current and anticipated legal structure for your business: sole proprietorship, partnership, or corporation.
Describe the personal and management expertise of all principals (append resumes) and the percentage of interest or stock that each principal holds. Discuss your succession plan ini case of the loss of key personnel.
Describe your proposed organizational structure (include an organizational chart), and specifically indentify the respondibilities of and compensation for each position ( append position description).
Describe professional resources (attorney, accountant, consultants and advisors) available to the business.
Discuss your personnel policies (append a copy) and compensation packages.
III.MARKET PLAN
Industry
Describe the size, maturity, and competitive nature of your industry, any barriers to entry and growth, and the effect of economic swings upon the industry.
Discuss the role of government regulations in the industry as current and future trends in the industry, technologies being used, and seasonality (if appropriate).
Describe your location in terms of geography, customer access, proximity to competitors and to transportation, distribution of goods, and zoning.
Product or Service
Describe all the products and services the business offers, the cost and profit of each, and the break-even point.
Discuss patents, trade marks, or proprietary features.
Market Analysis
Describe your target market--who will buy your product or service and why--and your target market demographics and trends.
Discuss your competition--who has what share of the existing market--and where your business will fit into that picture.
Market Strategy
Describe the difference between your product or service and that of your competitors, your pricing scheme or fee structure in light of competition, and your product or service.
Discuss the type and number of sales staff needed.
Describe credit policies for your customers.
Describe your advertising plan, and include an advertising budget.
IV. FINANCIAL PLAN
Include monthly financial projections for the first year and annual projections for the next two years. Use the following financial tools:
Income statement (also called a profit and loss statement)
Balance sheet
Cash flow projection
Include a financial analysis, prepared by using the following financial tools:
Break-even analysis
Analysis of key business ratios
No comments:
Post a Comment