Starting a New Business
The 7 (8) Essential Startup Steps
If you wish to start a new business, then you must take the 7 Essential Steps as indicated in the excellent article from Entrepreneur. I added another step, Create a Business Plan, so now we have 8 steps in total. Well, the article includes business plans in the step number 2, Show Yourself the Money. But only of you are looking for investors. Instead I think that creating a business plan is important especially for you, and it will be foolish going into any business without it.
At this point you may think that I’m obsessed with business plans, as I already wrote a couple of posts on this blog about planning. Well, I’m sure you’ll understand how important is to test your business model. In simple words this means: take the product or service you want to sell, check the competition, determine the right price that the market will accept, decide how many personnel you need to produce and/or deliver the product, how much the product will cost to you, add your overheads, and finally see if your gross margin can at least cover your overheads, or fixed costs. And of course how much working capital you need to make this business model work, that is covering your expenses during the sales cycle.
This is not rocket science, in fact it can be exciting, as you visualize the different parts of the puzzle of your business, coming together and forming a coherent aggregate: the business model MUST make sense financially, otherwise it would be foolish to invest in it, isn’t it?
And, what is the most critical and difficult task in creating a business plan? It’s the Sales Forecast. Everything else is pretty easy to put together: costs are costs, you just need to collect them. But how can I estimate my future sales, if I haven’t even started the business yet? The only way to do it is to analyze your target market, and the niches that you can actually reach in the course of time, determine the precise marketing tactics by which you’ll make your product known to those prospects, and then project the sales numbers as realistically as possible, in relation of the marketing activities that you are going to implement, month per month. How many people will you reach with your marketing message and how many of those will become clients, every month? The more detailed you are, the more realistic the numbers will be.
Don’t worry, the numbers will be wrong. Not even a genius can forecast the sales precisely. But definitely you will get a sense that the business will be viable. And then, business plans are never static, you will fine-tune them constantly.
