Aspiring entrepreneurs often have well defined ideas about the sort of business they want to have, those plans are often well formed in their mind. A retailer would be dreaming of dealing only in carriage trade goods, while the manufacturer to be wish to confine production to a few basic items. In some cases, the business concept may be so innovative that the business person has no choice but to start from scratch because there is no precedent to follow.
Starting a new business rather then buying an established venture has appeal to many entrepreneurs as you can design your business the way you want it, where you want it, and to conduct business with the clients you choose. When coupled with the opportunity to be your own boss and make a profit, the opportunity to fulfill your dream is often irresistible.
PLANNING ESSENTIAL
None of this is likely to occur just because you are ready to open your doors to the public. Careful preliminary planning is crucial in ensuring the long term success of your new business.
Planning is important and to help us understand why, we will consider what's involved in starting a restaurant business. The hours are indisputably long, and the work can be tough and repetitive. Investing thousands of dollars to provide a unique decor and in purchasing equipment, the new restaurant definitely still faces a huge gamble. According to hospitality industry statistics, 80 percent of all new restaurants opened in Canada fail within the first three years. That should be good reason for the prospective owner to pay close attention to planning detail.
No matter what type of business you plan to launch, it's not enough to think there will be a ready market for your goods or services. You must be sure that you have a market out there. Studies in advance of opening will help you determine the availability of your target market. Such studies will include detailed costs of the operation relative to projected sales. Projections of costs and sales should be made at least three years ahead. You should also update them regularly because they are bound to change as trends in the market place affect your business.
Of course, all planning must be done with your personal financial resources in mind. Since you'll be making a major financial commitment and probably turning to lenders for additional resources, you must gauge the potential profitability of your venture. If your initial research suggests that your business is not financially viable, it would certainly be better to find out early rather than after you have made serious financial commitments like purchasing inventory and other assets.
SET UP CONTINGENCY FUND
When you start your new business, you will probably make a number of purchases. Depending on your business, your start up costs are likely to include capital expenditures like equipment, leasehold improvements, tools, furniture, cash register; opening expenses such as lease deposit, licenses, utilities, advertising and publicity, wages, legal and accounting fees and inventory. You also should plan for a substantial contingency fund and a reserve fund to cover a minimum of three months of overhead and salary costs in the event of slow cash flow period.
When it comes to starting a new business, direct experience is just as important as adequate financing to the success of your venture. You may have little opportunity to learn by doing when you first start and any mistakes may have a serious effect on your bottom line.
ASSESSMENT OF YOUR SKILLS
Before you begin, you must determine whether you have the skills necessary to make your business work. You may have the skills to design and produce an innovative product, but are you prepared to price and market them at a profit? Many other skills are needed in business and your answers to questions like:
- Do you know how to pay and motivate staff
- Do you know how to keep the records you will need to make sound decisions
If you need help in assessing your personal business skills or the feasibility of your new venture, consult your management consultant, lawyer, accountant, and bank manager. These people will help you assemble the material you need, or they will be able to recommend other professionals who can. Firms like Cathedral Group have assisted aspiring entrepreneurs for many years. They have become a valuable resource to new business owners. Low cost market research and planning assistance may be available through government organizations like Canada/Manitoba Business Service Centre, Economic Development Corporations and Community Futures Development Corporations.
Starting your new business won't be easy, but careful preliminary planning can make the difference between a respected, profitable business and one that disappears almost as quickly as it begins.
