How to start a small business – First things first
Before you learn how to start a small business, realize that the detailed steps and techniques are less important than your attitude and focus. Attitude – the feelings, beliefs and behaviors that you will engage in – will determine whether you persist until you succeed. Focus on the key goals and actions that will achieve those goals. When you start out you may be tempted to look for the perfect method or system to ensure success. The reality is that attitude, persistence, plain old hard work and focusing on what really matters are more important.
How to start a small business – Focus
The key focus when determining how to start a small business is to set business goals. I am deliberately stating the obvious since entrepreneurs can easily get distracted by the huge number of details that need to be attended to. Focus on setting Sales, Gross Profit and Net Profit goals to start with, Then you can evaluate every decision and action you take in terms of whether it increases Sales AND Gross Profit AND Net Profit. This will help you maintain focus, and will also enable to you to make a judgment about what works and what does not work based on whether it achieves your key goals.
How to start a small business – Attitude
Before you proceed, you should also assess what you skills, strengths and interests are. To make it simple, what excites you? What makes you get out of bed in the morning? What inspires you? You business should also pass the test in this respect. Your business should be a vehicle to help you live the life you would like to lead. If you only work for the money and don’t enjoy the work, the people you work with and the customers you serve, reflect carefully on what you really want out of life. Your business should support these, and at a minimum not prevent you from getting what you want out of life. Knowing and determining how to start a small business should play second fiddle to leading the life you want to live. My FREE business and personal development program will help you with some of this.
How to start a small business – key focus areas
Once you have made your mind up that you want to start your own business, categorize your task into three areas:
- Activities that will lead to Net Profit right now
- Activities that will lead to Net Profit later
- Activities that has to be done due to legal reasons.
The last one is your local regulations, taxes, employment laws, safety regulation etc. This is stuff that any entrepreneur has to learn about to make sure all compliance issues are adhered to. Everyone has to deal with it, so don’t let it become an obstacle. Get the right advice – legal, accounting etc. Use experts who will help you deal with these issues properly.
The activities that will lead to net profit now will related to sales that can be made right now and where the cash can be collected immediately, or very soon at least. You will need enough cash flow to prevent falling into the unenviable situation of not being able to pay your bills.
The activities that will lead to net profit later will require cash from you. That means you will need to make sure you have enough cash in the bank, or a credit line which you draw from, available.
How to start a small business – budgeting for business success, not a statement of numbers
Many businesses will draw up a budget. That is a more than a good idea – it is essential. However, it is not the number you put down in your budget that matters. It is the actions you take to ensure the budget becomes a reality that matters. Please do not approach this budget as an accounting exercise. It should be a goal-setting and planning exercise.
I will briefly outline key aspect of setting a budget from this perspective: what actions need to be taken?
- Sales – This requires customers, which requires marketing and a plan to sell to them (especially to ask for the order). It also requires products and services that customers will buy. The fact that you like something does not mean customer will like and, even more important, buy it.
- Cost of Sales – Products and Services has a cost and this deducted from your sales will determine…
- Gross Profit – Sales less Cost of Sales. This requires pricing so that you will be profitable and cover your expenses. It also requires that you buy or produce as cheaply as possible without compromising quality and most importantly customer satisfaction
- Expenses – The costs that you will have to pay for regardless of whether you make any sales. Again, attention to keeping it as low as possible is essential, again without compromising the smooth and effective running of the business
- Net Profit – Gross Profit less Expenses. This is the measuring rod against which you should measure your results. However, the focus is not profit but all the preceding actions that will results in profitability.
I probably won’t do justice to getting the question how to start a small business in this short article. However, do not rely on advice from experts only – become one yourself. Become an expert in what you need to do for your specific business. However, you should also have a look at my article on small business planning, which has more detailed planning guidelines.