Truisms for Starting a Business
Here are a few truisms can help guide you in starting your small business. (In a second column, we'll take a look at truisms that can help guide you in running your small business.) They represent lessons learned by entrepreneurs like yourself. The road to success will be much smoother by being aware of the messages they represent.
It takes a leader to successfully start, run and grow a business. The difference between managers and leaders is sometimes subtle, but when the going gets tough, it's easy to tell the difference. While consulting for a large manufacturing company, I met with the founder and owner. It was easy to see he was an excellent manager and organizer. He had effectively set up his company, found satisfactory help, and was quickly manufacturing small runs of high quality product.
When he called me, the company was in trouble. . .poor sales, decreasing order backlog, etc. The problem was determined to be that the market had been slowly moving toward a similar, more effective product type. In overlooking (or not being aware of) this fact, the owner, although a good manager, was not leading the company in a successful direction.
A business is likely to operate at a loss for the first year of operation. Make sure you have adequate resources! Plan for the unexpected. Remember that most businesses fail due to lack of capital! If possible, keep your regular job during startup.
In order for a business to be successful, it must provide a service or product that people want to buy. Pretty obvious you say? Well, it is forgotten by many. Times change and your business must change with them.
Dave, a good friend and fellow amateur radio operator, started a radio equipment and accessory retail store. Certainly not a new idea, since there are hundreds of such stores throughout the country and, in fact, there were three within 50 miles of Dave's location. However, in less than a year, he was outselling the other two stores and had acquired a good share of their former customers. Why? Dave knew he needed to provide something unique that would make his store more useful than his competitors. Knowing that communications was "going digital" and there was high interest in combining computers and radio equipment, Dave provided custom software to marry the customer's computer with the radio equipment he sold. He's still going strong.
A really good idea will not last long before someone else runs with it. If you are confident of an idea, move off dead center and get on with it! Plan carefully but get going. If you wait, someone will beat you to the market!
Business success will be directly proportional to how much you love what you are doing. Don't get involved with any business activity for the money only! This is usually a recipe for failure.
Nancy bought a fast-food franchise because the opportunity looked too good to pass up. It might have been, but Nancy knew absolutely nothing about the food business or the restaurant business, and as far as I know, didn't even like fast food! Care to guess how successful the operation was? Or how long it lasted? Care to guess what happened even though the franchise dealer advertised that "all the details are taken care of for you." Nancy never had a chance.
A friend or family member does not necessarily make a good business partner. I believe in partners. It's good to have someone to bounce ideas off of and to have common goals, but choose a partner for the right reasons. Make sure the partner supplements your knowledge and that you share a common commitment. Being good friends is not enough!
I started a business some time ago with a friend who, like myself, was an electronics engineer. We were going to design and market an innovative telecommunications product. The partnership was a fiasco. First, since we were both design engineers, we argued forever about the "best approach" for the design as well as the design details. After much pain, we got the unit prototyped and were ready to do some marketing. Of course, neither of us had the slightest idea of how to market. Finally, we gave up. . .another great idea bites the dust. Why didn't I find a partner who had expertise in marketing? I knew from day one I had to sell my product! I also knew that I had the expertise to design the product myself. So, while friendship is important, what value was my friend as a partner?
A well thought-out and formally executed partnership agreement is a must for a successful long-lasting partnership. Because many partnerships are formed between individuals who know one another quite well, this formality is often overlooked. An agreement is required to address a number of items, including continuation of the partnership in the event one partner withdraws, buy/sell provisions, initial contributions, profit/loss division, compensation and responsibilities. These important elements must be discussed and agreed to by the partners at the very beginning of the venture.
Planning is mandatory for business success. Fail to plan and you plan to fail. This is the most important truism of them all! Planning is difficult since there is no immediate feedback as to its value. However, in order to be ready for the contingencies that are sure to confront you, planning is essential. You may or may not need a formal business plan but you do need a strategic plan. This plan, properly formulated, will define your business mission, your present situation, and where you want to be in the next few years. You will address assumptions and risks, goals and objectives, and how you will report progress.
A plan that is not periodically reviewed is nearly useless. You must identify a way of periodically reporting your progress as it relates to your planning documents. Your business is constantly changing and your plan must be reviewed and modified accordingly. The plan must be kept current for you to effectively measure your performance.
A successful business looks successful. An acquaintance started an engine rebuilding business in a small bay of a warehouse. The location was good in terms of convenience and delivery of materials, but the bay itself was typical--cinder block from floor to ceiling, open metal roof girders with hanging industrial florescent fixtures. Although my friend had an excellent reputation and was an excellent engine man, the business didn't do well.
We literally turned the business around overnight by painting the entire place brilliant white (including the ceiling and girders), painting bright graphics on the walls, organizing everything in the place, and holding an open house. Suddenly, it was the place to go for engine work. The business looked successful.
[Robert Sullivan is the author of "The Small Business Start-Up Guide." For more information, visit The Small Business Advisor.]