Dreaming of Being an Entrepreneur? Start it Right
By Alisa Kirk
Do you dream of running your own business? You imagine cooking your special dishes for a restaurant filled with appreciative people, or selling beautiful clothes to stylish customers. In your mind, you plan the details of how your store will look or the way customers will hang around and interact. You picture one of those great small businesses where everything runs smoothly, people seem happy, and lots of money is changing hands.
What you don’t see is behind the scenes where you work 12-hour days and spend your evenings buying supplies or updating spreadsheets. Your business may be bringing in a lot of revenue, but make little or no profit. Many new businesses don’t survive the first year.
Does this mean you shouldn’t open a business? No, but you should only do it after you’ve researched, planned, and fully funded your new enterprise. Failure to take these steps is the top reason new businesses fail.
Let’s say you’ve decided to take the plunge and open that bakery you’ve dreamed of. What’s the first thing you should do? Here’s a hint: getting a business license and signing a lease are near the end of the start-up process. Research comes first. Visit as many bakeries as you can and pay attention to details. How many different items do they sell? What kind of equipment do they have? What are their prices? Who is buying their products?
The importance of understanding your potential target market is huge. Who are your target groups for the bakery (keep your target markets as narrow and detailed as possible)? Let’s pretend that your primary target customers are parents with school-age children. Start with demographics of your target groups, and ask questions like: Where do they live, and how close is that to my bakery? How many children do they have? How much money do they make?
Next, think of their motives. What do they really want? Why do they go to a bakery, and what exactly are they looking for? Maybe the parents will go to a bakery to buy breads for their children’s sandwiches and will be looking for breads that are healthy, are easy to slice, and will stay fresh for several days. Maybe their children don’t like the crust on bread.
Research your competition thoroughly and come up with a reason that people should buy from you rather than them. Do you offer products they don’t, or do something differently? This is where knowing the motives of your target market comes in: what do they want that they’re not getting anywhere else? Two big rules to remember here are: don’t compete on price (a competitor with deeper pockets can put you out of business) and don’t claim that your difference is that you’re better, more dependable, or other things people expect from any business. In the example of the bakery, your advantage can’t be that your bread is cheaper, or that it tastes good (people expect bread to taste good). Maybe your advantage could be that you sell crust-less bread that kids will love.
When you have finished your research and defined your target market and competitive advantage, you’re ready to put your plan into words. There are business plan programs and templates you can use, but the most important thing is that the plan be yours. If you can’t describe on paper exactly how your business will work and how you will market it, you can’t sell your ideas to investors and lenders.
Your plan should be thorough and include how you will staff your business and price your products. You should be realistic about how much of the work you can do yourself and the hours your business can operate. If you have to get up at 4:00 every morning to start the dough for your breads, is it realistic to say you will be at the store each evening at 8:00 to close?
Your plan will also include a marketing strategy of how you will reach the people in your target market and what it will cost. Your logo, brand identity, and message will all be part of the strategy. What combination of traditional advertising and online tools will you use?
The final part of your plan is the financial section. Here you will figure start-up costs, including enough cash to run the business until it makes a profit; sources of the money to start the business; expected revenues and the costs of producing those revenues (for instance, the costs of the flour and other bread ingredients for your bakery); and expected monthly expenses. Be realistic, and make sure the expected profits will cover your personal expenses.
Now you’re ready for the part where you actually form your business. You’ll need to decide which legal structure your business will take, secure financing, find a location, obtain the necessary permits and licenses, and purchase equipment and inventory. You will open a bank account, obtain insurance, set up your accounting and record keeping, and start executing your marketing plan.
Need help? Resources like the Small Business Development Center and SCORE offer free counseling for small businesses, and the Fayette County Chamber of Commerce can help you find local attorneys, CPAs and other resource partners.
Investing the time to properly research, plan, and fund your business pays rewards. Rewards like satisfied customers, cash in the bank, and above all, fulfilling your dream.