SCORE Small Business Blog

Ready to Start Your Dream Business? Figure It Out
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Do you have an idea for a business that you’re convinced will be the greatest thing since sliced bread, the biggest innovation since Google and the answer to all your customers’ prayers? Here’s what you need to do.

Figure out what you’re doing. What exactly will your business do, make and sell? Think through all the steps involved. How will you get your product or service to the end-user? Will it be sold in retail stores, sold online, provided personally by you in one-on-one relationships with customers or wholesaled to huge global chains?

Figure out who your competition is. Even if you think your idea is groundbreaking, you have some type of competition. The inventor of the printing press was “competing” with people who told stories and passed down knowledge orally. The inventor of the fax was competing with the Postal Service and the overnight delivery services. You get the idea. Who’s your competitor? What do they offer? How much do they charge? What can you do differently (and better)?

Figure out the overhead. Will you need employees? An office? A store? How about pizza ovens, delivery trucks or computers? How much rent can you expect to pay? Will you need employees? Add up your overhead—the day-to-day costs of things like rent, electricity and insurance. How can you keep it down?

Figure out how much money you can make. How much can you sell your product or service for? How much does it cost to make, buy, store or ship? What’s left over and how much of that goes to overhead? What’s your profit?

Figure out your profits. If you’re lucky your business has low startup costs and high profit potential. If you’re unlucky, it’s got high startup costs and low profit potential. That’s when you need to start over. How can you lower your startup costs? How can you increase your profit potential? Ideally, how can you do both?

Figure out how to pay for it. Once you’ve got your business idea where you want it, you need to know where the startup money’s coming from. If you can’t finance your startup on your own, maybe friends or family can help. If you need to look beyond that circle, banks, credit unions or private angel investors could all be options. Think creatively and consider partnering with companies that have what you lack or bartering your products or services for what you need.

Overwhelmed? Don’t be. SCORE has tons of tools and templates you can use to figure all this out. Check it out here and then get yourself a SCORE Mentor. They can help you come up with the answers to all the questions above…and more. Visit the SCORE website to get matched with your mentor and get free help with your business 24/7.

Rieva LesonskyCEO, GrowBiz Media
Rieva is CEO of GrowBiz Media, a content and consulting company specializing in covering small businesses and entrepreneurship. She was formerly Editorial Director of Entrepreneur Magazine and has written several books about small business and entrepreneurship.
www.growbizmedia.com | @rieva | More from Rieva

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Discussion (2) Comment

  1. I would recommend starting a business quite differently.

    1) Take your product or service to market, put a high price on it (it’s always easier to come down than go up) and see if someone will buy it. If this doesn’t work, don’t do any of the other steps above – they are a waste of time. And if it does work, most of the other steps above will force themselves on you at the appropriate time.

    Finding someone to buy your product is the first and only thing you should do before you do anything else. It should have been #1 on the list above.

    2) Don’t do a business plan – they are nonsense and fortune-telling, and they keep you from going out and trying to sell your product to see if you have something viable. They also make you think you know what you’re doing, and they uncover 127 things that COULD go wrong (not WILL go wrong), which causes you to spend precious time and resources mitigating things that will never happen, and paralyzing you with all the bad things that might happen if you go into business.

    The second worst thing you can do starting a business is to do a business plan. The absolute worst thing you can do is follow it. Check out the story of Webvan – a $2billion startup that is the classic case of a company that built an incredibly elegant business plan, then followed it right off the end of the earth (and they didn’t do #1 above until they were $1 billion in debt).

    3) Figure out how much money you will make by selling something at as high a price as you can – well above your minimum margin. Again, you can always come down. I worked with one client whose product cost $.35 all in (including marketing). They made a few of them, put it on the market for $8.50 and it didn’t sell. Over a period of a couple months they got the price down to two for $6.50 and they sold like hotcakes. Once they knew that their margins were huge, they had real data to determine their profitability. Do not determine your profitability in the ivory tower of a business plan – it’s voodoo.

    4) And never take outside money unless there is no other way. 84% of the Fortune 500 companies never took VC or other early stage funding. It’s a myth that you need money to grow your business. VCs want you to believe that because they want to grow your business REALLY FAST so they can sell it out from under you and run off with cash.

    5) You don’t have any competition except your own head. Do NOT look at what other people are doing to find out how to be successful. If you don’t have enough creativity and uniqueness to enter the market without looking at what others are doing, you shouldn’t be in business. See my blog titled “Your Competition, Isn’t” – http://chuckb.me/x4i

    I’m working with a business owner who made the mistake of doing all of the above first. She has 80+ products defined and produced, a warehouse, financing, a great retail location, and $250,000 in inventory. When she finally started taking her products to market, the market wanted them packaged in entirely different ways and amounts, at different price points, and about 70 of her products were not selling.

    We got her to dump the warehouse, the retail shop and 75 of her products. She is now flying places selling her five products to major retailers and learning her “business plan” in the trenches. She is now making money and profit. She would have been out of business in six months the other way.

    Real businesses do not start with thinking, planning, researching, compiling, statistical analysis, or marketing – not HP, Apple, HonesTea, 37Signals, Facebook, a plumber, or just about any other real business you can name.

    Go sell something. If it doesn’t sell, sell something else. Once you have something that sells, your “business plan” will unfold in front of you in real time, in the real world. It’s counter-intuitive and doesn’t follow the mantra of the Cognitives who think you should get it all figured out ahead of time, but it’s the way real businesses are successful. Stop planning – get moving (cheaply).


    • RasyaVisitor

      This is very basic, but I usually start with this format:The Business Idea What are you selling? The Product/ Service Who are your customers? Is the market growing? What makes your product so unique from the competition? Marketing strategies to expand your marketshare? Packages and pricing? Manpower: What skills are needed to run the business? Production: What capital, resources and materials are needed for the business? Targets/ realizable goals Finance: Where will the money come from to start the business? SWOT(Strengths, Weaknesses, Opportunities, Threats)

 

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