A lot of people have ideas, but there are few who decide to do something about them now… Not tomorrow… Not next week…. But today. The true entrepreneur or business owner is a doer, not a dreamer. The critical ingredient is getting off your seat after reading this article and doing something reputable for yourself. It’s as simple as that.
Launching a small business can be risky and success is not always guaranteed. Businesses are most vulnerable to failure during the early years of trading, with 20% of new businesses folding within their first year and 50% within their first 3 years.
These figures should not scare you off, but should prepare you for some of the challenges entrepreneurs face when starting a business. With hard work and an awareness of the issues, a new business can be a great success.
A common mistake you can make when starting a business is to try to raise money for an idea that isn’t fundable. I can hear the protests now: “But I need to raise money to pay my bills and eat!”
If you are saying that, not only are you trying to raise money for the wrong reason, but you are also deluding yourself into thinking you’ll raise any money at all.
Why? Because savvy investors like myself aren’t interested in experimenting. We are interested in pouring gasoline on a fire that is already burning. We don’t want to help you start a fire. That’s your job.
If you have some business ideas or likely to set up your own business today which I think you should, today’s article will cushion you and guide you to have and create a successful business in Ghana and beyond. Now let’s start….
How is your business unique, and why will your goods or services appeal to customers? What are the primary differences between your company and your competitors? What are the driving factors to choose your business over another?
In other words, what is the underlying reason a customer would do business with your company?
Define your business and vision
Defining your vision is important. It will become the driving force of your business. Here are questions that will help you clarify your vision:
• Who is the customer?
• What business are you in?
• What do you sell (product/service)?
• What is your plan for growth?
• What is your primary competitive advantage?
Write down your goals
Create a list of goals with a brief description of action items. If your business is a startup, you will want to put more effort into your short-term goals. Often a new business concept must go through a period of research and development before the outcome can be accurately predicted for longer time frames.
Create two sets of goals:
• Short term: range from six to 12 months.
• Long term: can be two to five years.
Explain, as specifically as possible, what you want to achieve. Start with your personal goals. Then list your business goals. Answer these questions:
• As the owner of this business, what do you want to achieve?
• How large or small do you want this business to be?
• Do you want to include family in your business?
• Staff: do you desire to provide employment, or perhaps, you have a strong opinion on not wanting to manage people?
• Is there some cause that you want the business to address?
Describe the quality, quantity and/or service and customer satisfaction levels.
• How would you describe your primary competitive advantage?
• How do you see the business making a difference in the lives of your customers?
Understand your customer
It is not realistic to expect you can meet the needs of everyone, no business can. Choose your target market carefully. Overlook this area, and I guarantee you will be disappointed with the performance of your business. Get this right and you will be more than pleased with the results.
Needs: what unmet needs do your prospective customers have? How does your business meet those needs? It is usually something the customer does not have or a need that is not currently being met. Identify those unmet needs.
Wants: think of this as your customer’s desire or wish. It can also be a deficiency.
Problems: remember people buy things to solve a specific problem. What problems does your product or service solve?
Perceptions: what are the negative and positive perceptions that customers have about you, your profession and its products or services? Identify both the negative and positive consequences. You will be able to use what you learn when you start marketing and promoting your business.
Learn from your competition
You can learn a lot about your business and customers by looking at how your competitors do business. Here are some questions to help you learn from your competition and focus on your customer:
• What do you know about your target market?
• What competitors do you have?
• How are competitors approaching the market?
• What are the competitor’s weaknesses and strengths?
• How can you improve upon the competition’s approach?
• What are the lifestyles, demographics and psychographics of your ideal customer?
Financial matters
How will you make money? What is your break-even point? How much profit potential does your business have? Take the time to invest in preparing financial projections.
These projections should take into account the collection period for your accounts receivables (outstanding customer accounts) as well as the payment terms for your suppliers. For example, you may pay your bills in 30 days, but have to wait 45-60 days to get paid from your customers.
A cash flow projection will show you how much working capital you will need during those “gaps” in your cash position.
I recommend thinking about these six key areas:
• Startup Investment
• Assumptions
• Running Monthly Overhead
• Streamlined Sales Forecast
• Cumulative Cash
• Break-even
Identify your marketing strategy
There are four steps to creating a marketing strategy for your business:
• Identify All Target Markets: define WHO your ideal customer is or target market. Most companies experience 80% of their business from 20% of their customers. It makes sense then to direct your time and energy toward those customers who are most important.
• Qualify the Best Target Markets: the purpose of this step is to further qualify and determine which customer profile meets the best odds of success. The strategy is to position your business at the same level as the majority of the buyers you are targeting. It is critical to figure out who your best customers are and how to best position your company in the marketplace.
• Identify Tools, Strategies and Methods: a market you cannot access is a market you cannot serve. Marketing is the process of finding, communicating and educating your primary market about your products and services. Choose a combination of tools and strategies, that when combined, increase your odds of success.
• Test Marketing Strategy and Tools: the assumptions we do not verify are typically the ones that have the potential to create business problems. Take the time to test all business assumptions, especially when you are making major expenditures.
You may also find inspiration in the marketing strategies used by other businesses—sometimes the best ideas are already out there, and free for the taking.
Finding Financing
Before applying for a loan, ask trusted friends or professional advisors to review your plan to make sure you’re not overlooking anything critical or making inaccurate assumptions. You could ask:
• A friend who owns his or her own business
• A loan officer at the bank where you do business
• An accountant (ask for an estimate – preferably a flat-rate fee – for reviewing your plan)
In addition to securing financing for your new enterprise, come up with a financial back-up plan both for your business and your personal finances if you fail to hit your initial revenue projections. You should also build up your own personal cash reserves so that you have enough to live off of for six to 12 months, and budget carefully to make sure you can continue making your most crucial payments (i.e. rent/mortgage, insurance premiums, etc.). Finally, check your gut – and your bank balance – to make sure you’re ready to start your new venture.
Market Smartly
Starting a new business when the economy is on the downturn takes creativity and ingenuity. Marketing is vital in getting ahead of the game – and your competitors. Take your business plan and really flesh out the marketing components. What exactly are you going to sell, who are your targeted customers, how will you price your products or services, and what is your plan for promoting your business?
You stand a better chance of succeeding by thinking niche. Slice and dice your original customer base to come up with smaller segments to market more strategically. For example, if you offer a professional service geared toward women, could you narrow it to target women within a specific age range, career type or geographic location?
Or, alternatively, think about ways to alter your products or services to broaden your businesses’ appeal and customer base. For example, if you have invested in opening a “make your own dinner” franchise, could you also offer dinner delivery or premade/prepackaged dinners for customers who want “grab and go”?
Remember to keep a close eye on the competition. Do ongoing competitive analysis and watch what other providers are doing and what marketing techniques they’re using to build their business. Are they tweaking the product? Lowering the price? Using creative promotional tactics? You’ll need to know where your competitors are so you can differentiate yourself and gain market share. For example, think about where your competitors aren’t operating or which potential customers they’re missing – then be the first to capture that segment of your market.
Start Small … With an Eye to Expand
Manage your expectations and your expenses by starting as small as possible, with an eye to expand when business takes off. Review your business plan and reconsider what you need to start. For example, could you start in a smaller – and less expensive – location, or stay “virtual” and eschew a physical office completely.
After deciding upon the best, most affordable space for your business, think about your staffing needs. Before hiring full-time employees think about filling needed positions with contractors, temporary workers or part-time staff. If you’re opening a business in an area that has seen local businesses fold, you may be able to pick up some great talent for less compensation than in an “up” market.
Be realistic about what employee benefits you can offer and shop competitively for the best prices. It’s better for your employees to offer fewer benefits up front and then add benefits as your profits increase.
Use Technology to Your Advantage
Technology can provide you with numerous ways to save money and increase profits. For example:
Expand your market by selling through multiple online channels.
Do email marketing instead of more expensive electronic or print advertising.
Optimize your website for search engines to keep your site coming up at the top of your customers’ searches.
Produce affordable marketing vehicles like podcasts or webinars through your website.
Create an online customer loyalty program offering advanced notices of sales, discounts, referral bonuses and coupons.
Network, Network, Network
Get to know other people in your community who can refer customers and help build your business. Don’t know where to start? Find a local business networking group or contact your chamber of commerce. Look into joining a professional association – either a local one where you can meet people in person or even an online group – to tap into others’ ideas.
Ideas for Lowering Costs
A gloomy economy can actually disguise some great ways to save money. Creative ideas to lower your start-up costs include:
Using the economic situation as leverage when negotiating rents, equipment leasing agreements, etc. Leasers, developers, and vendors need businesses to pay their rent and fulfill their contracts. You may be able to get a lower price if you can demonstrate an ability to pay on time and in full at the lower rate.
Buying supplies from businesses that are closing or need to reduce inventory, particularly for big-ticket items like electronics, office furniture, etc.
Bartering with other business owners. Look for business alliance possibilities and suggest offsetting costs by trading products or services.
Doing your own legal homework. Before shelling out big money to a lawyer for business startup costs like incorporating or obtaining a trademark, use online sources like Findlaw.com or Legalzoom.com, which provide free resources and low-cost services.
Conclusion
There are unique benefits and opportunities to starting a business in a tough economy. If you do your homework, think strategically and take advantage of every opportunity to minimize costs while maximizing the value you add for customers, you can build a foundation for long-lasting business success.
Instead of coming up with excuses, be brave and look at your startup business with honesty: does it look and feel like a fundable company? The sooner you answer this question, the more effective you will be in moving your startup business forward to success.
Author: Gabriel Ofori Yeboah
Fund Manager, Investor, Broker, FX Trader, Consultant (Investment, Financial Analyst, Banking)
Email: gabbynanaoforiyeboah@gmail.com
Tel: 0246751535
