Getting a small business started

A question I get asked frequently by entrepreneurs interested in owning their own business is: how do I get started? They usually get caught up in some of the detailed tasks, such as thinking of company names or obtaining permits, before they have given any thought to the more global issues.

Before getting into business, every business owner must be clear on some of the key concepts that will be critical to their success.

Vision

Every business owner needs to have a vision of what they will be trying to achieve. In other words, what will they be going into business to do and where do you want to end up?

This vision, which should be able to be articulated in a paragraph or two, describes what products and services you will offer, why you are offering them, how you plan to distinguish them from the competition, and where you eventually want to be if you are successful.

Here is an example: "We will be forming XYZ company for the purpose of manufacturing widgets. We are doing so because we feel that the wholesale prices of widgets are far too high and that by utilizing improved design techniques and technology, we will be able to sell widgets 40% lower than our competitors. Our strategy is to market directly to large wholesalers who are the primary purchasers of widgets by offering lower pricing and better terms. This will allow us to capture market share and eventually become the largest worldwide supplier of widgets."

Critical success factors

Another important issue is to develop an understanding of what it will take to be successful. This will vary from business to business, situation to situation. Here are some typical examples.

Say you want to sell a product that is currently considered a commodity in the marketplace, such as office supplies or computers. In this environment, being able to offer these commodities at a competitive price would be considered a critical success factor. If you cannot do this, it would be very difficult to capture a share of the market from your competitors.

Taking this example a step further, you may feel that you can still succeed by occupying a niche market, for instance by offering a specialized product that the competition doesn't offer or being in an area that is conveniently located for a local market. In these instances, choosing the right products to specialize in or the right location for your store can be considered critical success factors.

Another critical success factor for many small businesses is finding access to capital, which may be needed for equipment, advertising, hiring employees, or just a means of paying household expenses until the business becomes profitable.

First steps

Once your vision is clear and you have identified the factors critical to your success, the first steps that need to be taken should become obvious.

If the vision for your business pits you squarely against some large and well-established competitors, and you realize that a critical success factor will be your ability to offer the product at a lower price, then your first steps should be to determine whether you can indeed do that. This may involve research on your competitors, negotiating with suppliers, or re-designing your product.

If raising the necessary funds to start the business is a critical success factor, then a number of steps may have to be undertaken. Some examples include: developing a detailed financial plan to determine how much you need, talking to banks about what it would take to get a loan, reducing other debts so that your credit looks good, or discussing possible partnership ventures with friends or co-workers.

Behind every successful business was a vision and a plan for that success. Whether you are just getting started or already have a well-established business, it is always a good idea to know what you are trying to accomplish, what factors will determine your success, and how you will go about achieving them.