Since the recession, the thought of opening a business has crossed the minds of more than just a few Americans. In fact, 558,000 new businesses were created each month in 2009 alone according to a report by the Kauffman Foundation for Entrepreneurial Activity. Starting a business is easy, but keeping that business profitable and growing is another prospect entirely. From food service to fashion, there are a few hidden details that many entrepreneurs don’t consider or even know about before they hang a sign and welcome customers to the registers.
Loving cooking, auto repair or construction is a great way to seed a business idea. As a business owner you’ll also need to be equally as enthusiastic about bookkeeping, payroll, taxes, and legal issues surrounding your business’ products or services. Without those critical areas of business management, the company can quickly derail or collapse entirely. Don’t even hang the open sign in the window until a solid business plan including profit margins, packaging, shipping, and labor and all other costs to produce the product or service are fully understood and covered each month.
Determining the type of business you want, including the niche markets served, and your vision for the business will emerge throughout the process. Do you want a small business that’s highly personalized or a huge conglomerate that sells to the masses through large retail stores? Without a clear image of what the business will be, business owners can easily become sidetracked with other aspects of business growth like sales, marketing and product development. In the meantime, issues that were originally small can mushroom leaving the business vulnerable.
It may feel a little over protective to request confidentiality agreements from prospective business partners like your accountant, marketing consultant or even your suppliers, but if you have a unique process, custom fabric or even a secret recipe it’s important to protect those areas of your business that differentiate you from the competition. This is one of many business areas where consulting an attorney can pay off in the long term.
Just because you’ve always been taught that failure isn’t an option doesn’t mean that the original business idea you have can’t morph into something different. Through failure we learn many things. Thomas Edison made 3,000 attempts to create the light bulb. Each attempt taught him something that spurred him onto the next attempt. Without his tenacity where would we be today? If your original business concept isn’t working the way you projected, that doesn’t mean you should close out the books and find a full time day job. Instead retool and closely examine what the market is doing. This type of business model shifting, coined as a “pivot” by tech entrepreneur and blogger, Eric Ries, is very common among business start-ups. “Through pivots,” said Ries in an Inc.com interview on the subject, “we can build companies where failure of the initial idea isn’t the failure of the company.”
Television producers are famous for using the pivot strategy. A new pilot for a half-hour situation comedy is taped and then shown to a test audience for their reactions. The writers sit near the audience during the showing and listen for laughter, comments made to seat mates, and then talk directly with the audience after the show. Once the audience has left, the writers go back to their computers and begin to incorporate the audience feedback to ‘retool’ the show before airing it on the network.
Pivoting requires the business owner to relinquish his or her ego and to do first what’s in the best interest of the company. For pivots to be successful, Inc.com offers a few steps that may help you through the process.
- Spend as little as possible. “Refrain from hiring employees or investing in new product features in case a new strategy or business model is needed”
- Talk to your customers. Like the television producers, it’s so important to get consumer feedback so you don’t open your business with a flop. Guessing at what your consumer wants will only take your business part way. Opening a dialogue and listening to honest feedback - especially if it’s not what you want to hear - will enable the business to make corrections and see profitability.
- Study the numbers. While you’re meeting with clients and hearing first-hand feedback, you should also be reviewing your marketing data. Using sources like Google Analytics can reveal important consumer behaviors with regard to web site accessibility, page popularity and even a shopper’s experience (did they purchase, leave the page or the site entirely, etc.)
- Run concurrent plans. While you may need to pivot and develop a new business plan, you may also be able to preserve the current business model. This will help you in the event that your Plan B is unsuccessful as well as generate income while you launch a new effort. Also be willing to put more than one plan to the test to see which idea will work the best.
- Be flexible. Change doesn’t come easily or without a tremendous amount of flexibility.
Whatever choices you make about your business and its future know that you don’t have to face them alone. Surround yourself with experts that can help guide you through decisions and prepare for changes.
To learn more about starting a small business, talk with a Fiducial Advisor by calling 866-Fiducial or visit the web site at www.Fiducial.com.