Linda Jenkins, January 16 2016
Hindsight is 20/20 when it comes to many things, and being an entrepreneur is no exception. There are plenty of things that seem counter-intuitive when you're first starting out, and only after years of experience do they make sense. Figuring these things out can take a lot of time, and it can feel like time wasted. After all, many others have made those same mistakes. You could have avoided a lot of heartache if only you'd known earlier. Here are a few things many entrepreneurs wish they had known at the start.
1. Increase Your Estimate of How Much Money You Need
It is sad but true. You've spent countless hours estimating your startup costs, meeting with your partners, researching supplier pricing, and filling in spreadsheets and dashboards of all types in your quest to come up with your best estimate for startup expenses. The sad truth is you've woefully underestimated how much money you will need to get your small business off the ground! Do yourself a favor - take that number and double it. Nothing in business will ever go exactly as planned, and you will need ample protection against unanticipated events.
2. Delegate Whenever Possible
There's always something to do as an entrepreneur. Every day there's an issue to resolve or something to discuss with your partners and/or employees. You can easily run out of time trying to keep the plates spinning, and in many cases, it's impossible to do it alone. That's when you delegate. Just make sure you delegate with follow up
Delegating gets important tasks done while freeing you up for other tasks. It's a difficult process, especially if this is your passion project, but it's necessary. You'll only have more responsibilities as the start-up grows, and if you keep insisting on handling everything yourself, you'll quickly burn out.
3. Keep Track of Relevant Metrics
When people go on a diet or exercise in an effort to lose weight, they're encouraged to keep track of their weight periodically. This tells them what works best for them. As an entrepreneur, you should do something similar.
Keeping track of your metrics
gives perspective, which is something you may lose as the excitement of a start-up turns into a grind. It allows you to make informed decisions and do what's best for the company. It can be a chore, but if you want to succeed it's absolutely necessary.
4. Start with One Product or Service
It's good to pattern yourself after successful businesses. They're doing something right, so you can learn from them and improve your start-up. The problem is that many things large companies can handle are not applicable to you as a start-up; chief among them, multiple offerings. Well-established businesses can afford to produce, market, and sell several different products and/or services at the same time. You may be struggling to get just one off the ground.
Instead of firing a product shotgun and hoping something hits, focus on improving and marketing a primary offering. You can use that product's success to power project development. It's difficult and scary to do what seems like betting the farm on that one product, but it's often better to start with one amazing product than to offer mediocre options.
5. Focus on Relevant Sources of Information
There are plenty of things to process as a business owner, but not all of them are important to you. If you try hard enough, you can spend months examining a single day's worth of information and trying to figure out how it relates to the rest of your business. Make sure they're relevant, not just to the start-up but to you. Some information is more useful for your accountant, for example.
These are far from the only things you'll want to learn early in entrepreneurship, but they'll serve as a good start. You're bound to make a mistakes, and that's OK as long as you learn from them. The aim shouldn't be to avoid making mistakes at all - that will keep you from innovating and trying new things. The aim should be to make as few avoidable business mistakes as possible.
(top photo courtesy of nenetus & freedigitaphotos.)
Linda Jenkins, March 16 2015
If you have been involved with running a small business for any length of time, you already know that things never go as planned. Sometimes sales come easily and sometimes they don't come at all, despite all of your efforts. The point is, you must do your best to guide your business, prepare for possible outcomes and respond to reality effectively. The best way to do this, aside from regularly tracking analytics, is to prepare detailed financial projections anytime you start a business, start a project, or launch a new product.
Why do projections at all? The answer to that is apparent when you don't do projections. If you enter into a project naked, it is more likely that you will end up mid-project without enough money to complete it, or without any plan for getting back on track.
Even if you have a financial background, it is best if you seek qualified help from a reputable accountant or other consultant that has significant experience in this area. This will ensure that your projections are done objectively and aren't just based on your own delusions of grandeur. Professionals that offer these services use a variety of terms to mean the same thing, for example, risk advisory services, benchmarking, forecasting and budgeting strategies. If you cannot afford to hire a consultant, consider using a web-based business planning application.
At a minimum, your financial projections should include:
- Cash flow for years 1 through 3 (and details of month-to-month in-flows and out-flows for the first year)
- Management responses to:
A - what to do if sales are on track
B - what to do if sales are lower than expected
C - what to do if sales are higher than expected
Although no forecasting method is fool-proof, you will be much better off if you plan for various business outcomes. You can bring greater accuracy to your projections by studying your competitors' experience in your market, and by compiling the accounting data you already use in the management of your own business.
Linda Jenkins, March 30 2014
Starting a small business? Here are the essential steps you need to complete on your journey to business ownership:
Selecting a name for your business is a task that requires care. Although the name may not be as important as the marketing effort behind it, an effective name can naturally attract customers, so take the time to choose the right one. Here are a few things to consider first:
- Avoid regional names (think big, your company may expand beyond its current location).
- Avoid initials and numbers (these can be confusing to communicate to potential customers).
- Avoid long names (ones that are complex or will not fit into a web address).
- Avoid using your own name (not a good idea for legal reasons).
There are two types of naming processes - natural and coined. A natural name uses words that can be found in a standard dictionary, and usually conveys an understanding of what a company produces (ie., Conquest Graphics). A coined name is created by combining or altering words (ie, SynaGro). Regardless of whether you choose a natural or coined name, be sure to do a trademark search to ensure that you do not run into future legal problems for using the name of another business post-launch.
Selecting a Business Structure
This is a crucial step since your business structure will determine how much tax you will pay and how you will report income to the IRS. Essentially, you have the following choices when setting up a new company: Sole Proprietorship, LLC, Partnership, C Corporation or S Corporation. It is best to seek the professional advice of both a Certified Public Accountant (CPA) and Attorney. Make sure the professionals you choose are used to dealing with small business owners. For more detailed information, see our blog post on selecting a legal entity.
Every new business owner should write a business plan since it is used to highlight the potential strengths, weaknesses, competition, and expected performance of the business. It is also the key document bankers and potential investors will review when deciding whether or not to invest. You can also use spreadsheets for completing financial projections. A CPA can help you to project realistic startup expenses. The final document should demonstrate your planning skills and communicate how the company will reach profitability. You should know how all the facts and figures were derived, be able to defend them, and understand how you are going to operate the business in order to meet your projected goals. Learn more about what to include in a business plan.
Looking for a simple way to complete your first Business Plan AND Marketing Plan in a one page document? Try our 2-in-1 simple template.
First, research your business idea. Does it fulfill an unmet need in the marketplace? In other words, is there sufficient demand for whatever service or product you intend to sell? If there are existing businesses providing similar products or services, you must identify why yours will be more attractive to customers. You should start by doing some online research, reading leading publications in your industry and sampling your potential customers. Google Keyword Planner is also a great way to find out what people are searching for online. It may even help you discover a new business idea. New to market research or not sure if your business idea will sell? Download our video course on how to do market research.
Many small business owners do not see the need for this, but it is crucial to have a document which clearly details marketing goals. Your marketing plan does not have to be a formal document, but you should take the time to write a page or two for your own reference that defines the following:
- A monthly ad budget and projected revenue
- Target demographics - What distinguishes your target customer (age range, education level, interests, etc.)
- A slogan you will use in advertising and/or on your website
- Types of marketing projects you will pursue (press releases, online ads, print ads, etc.)
- Advertising sources you will use
- How you will track and measure your results
For detailed information on marketing techniques, see our blog post How to Promote Your Business.
Applying for Licenses & Permits
If you live in the United States, you will need to register your new business with your state or county registrar. Since licensing rules vary by location, start with your state or county government website (such as Michigan.gov), and search for information on business licensing. You will likely have to fill out one or two short forms and submit a licensing fee. Depending on the type of business you intend to operate, your city government may require you to purchase additional permits.
Funding Your Business
How will you finance your business? You can ask friends and family to invest, pursue a loan at your local bank, seek out angel investors, or pursue social lending online. If you have previously applied for a business loan at a bank and been denied, you can apply for a SBA loan. For detailed information on funding your new business, see our blog article, How to Finance Your Business.
Check out this read for specifics on peer to peer lending, crowdfunding and other alternative financing:
Finding a Location
Whether you are looking to rent or own a space, you should be sure to do some due diligence before committing to any property. You especially want to ensure that you are operating in a space that is safe, accessible to both employees and customers, and free from a high concentration of competitors. A commercial realtor can help you to narrow options. Once you determine an attractive and affordable location, be sure to check your local city zoning requirements to ensure that your type of business can operate legally in the location you have chosen. It is also a good idea to consult an attorney prior to signing any commercial lease.
No matter what industry your business operates in, risk is unavoidable. However, you can minimize your exposure to risk by maintaining a safe workplace and buying business insurance. The main categories of business insurance include: workers compensation, health, disability, interruption, property, automobile and liability insurance. You can get free customized quotes from leading insurance companies online. Learn more about commercial insurance.
Outsourcing & Employees
As your business grows, you will have more work to do than you can handle by yourself. At that point, you will need to hire your first employee or outsource tasks to others. Use a resource such as Guru.com to find freelancers that can complete projects and help you reduce stress while keeping your operation running smoothly.
Accounting - Maximize Profit & Minimize Tax
Every purchase you make for your business is potentially deductible. By using savvy tax strategy and an efficient accounting system, business owners can save thousands if not millions of dollars annually. First make sure you understand which expenses are legally deductible. Here are the most common expenses business owners deduct: professional accounting & legal fees, utilities, equipment purchases and repairs, postage, office supplies, advertising, insurance, rent, travel, bank fees, and employee wages. The smartest way to handle business taxes is to educate yourself on basic business tax deductions, keep all receipts, track income & expenses using a spreadsheet or accounting software , and seek out a CPA to help with your tax strategy and preparation of tax forms.
Metrics - Measuring the Results of Your Efforts
This will be your most important ongoing task during the lifecycle of your business. Whether you need to know the Cost of Customer Acquisition or which recruiting strategy is bringing in the most productive employees, you will use metrics to get that information. Learn the 10 metrics every business must track.
Starting a small business for the first time can be overwhelming. There are so many things to learn sometimes you feel as if you will drown in the details, but it doesn't have to be this way. You just need to get a grip on your strategy and mindset.
Take the stress out of startup and get the help you need to succeed. Read the New Business Owner Handbook: