If it’s your dream to become and entrepreneur, you’ve come to the right place. While the Internet is a wonderful resource for research, the sheer volume of information can leave you feeling overwhelmed and unsure of where to start. So here is your comprehensive guide of how to start a small business, step by step.
Starting a Small Business – Step 1: Talk to small business owners
When you think ‘entrepreneur’, you think Richard Branson, Steve Jobs, Mark Shuttleworth and Zuckerberg. These are big names, even bigger personalities and industry giants. So it is natural for someone wanting to start their own business to be a little intimidated. This is why it’s a very good idea, once you’ve decided to start a small business, to get talking with as many small business owners as you can.
You needn’t confine your conversations to those operating businesses similar to your idea – the more people you talk to, the better idea you’ll have of the basic skills required, some of the common challenges faced by small business owners, what to look out for, how to deal with problems, and developing a network of entrepreneurs you can turn to for encouragement, advice, and guidance.
A small business owner needs to match their passion with their skill set
Once you’ve spent time talking with small business owners, you’ll have a pretty good idea that although the challenges are great and stress can run high, a successful small business is also extremely rewarding and fulfilling. What you’ll also have found is that the very successful small business owners you’ve spoken to haven’t achieved their success by accident: They will have identified their character strengths, skill sets and personal interests, and rolled them up in to a business that harnesses these strengths. And this is what you should do too before you even get started.
It doesn’t matter if you’re fresh out of high school, college, a housewife, are working for a corporate, have been retrenched, aren’t ready to retire, or just want to be your own boss. Take the time to match your passion with your skill set. Do you love people and have HR experience? Do you love restoring classic cars and have experience in sales? These are clear matches, but even those that seem less obvious at first can be paired up to form a business. Successful entrepreneurship is about having a passion and living it every day. If, however, you find you’re passionate about something but lack the necessary skills or depth of knowledge, your next step is to up-skill.
Get skilled: Attend a small business course
The business environment is a highly competitive one. Even if your business idea is revolutionary and nothing like it exists on the market, it won’t stay that way for long (especially if it’s a great idea!). Secondly, a great idea is nothing unless it can be set in motion and for this to happen you need to have the right skills. This is where up-skilling comes in: It can be as simple as day to day Internet research to gain more knowledge about an industry or skill, taking on an apprenticeship or shadowing, attending a short or part-time course, to enrolling in a degree or MBA.
Here are some tips for getting started on up skilling:
- Critically assess your business idea for the skills needed to make it work. Then critically assess yourself and ask others who know you well what skills you should improve on.
- Then allocate time to develop these skills. Be realistic about what you can achieve on a daily, weekly and monthly basis. Over committing yourself can lead to fatigue, burnout and a sense of defeat.
- Network. You can learn a lot from people already in the know. They’ve accumulated valuable time and experience and can help you avoid wasting time and energy in the wrong direction.
- If you’re still feeling like a qualification is needed, get researching to see what courses are available that best suit your time and wallet.
- Keep an eye on the bigger picture. If you spend all your time on up-skilling rather than getting your business off the ground, it defeats the object of up-skilling. Learn just enough to get you going, to know when you’re going wrong, and let the business and the industry inform you of where you have further skills strengths or gaps.
Write a plan for your small business
No matter what your goals are, without a plan a goal is just a dream.
- Step one is to pinpoint your business purpose. Assess why you want to start a business – do you want a business that will suit your lifestyle, give you financial independence, for additional income, to change up an industry, to sell to the highest bidder, to capitalise on an untapped market, to be your own boss, to help create jobs and uplift your community? Once you know the answer to this question you can plan your business goals accordingly.
- Step two is to get to work on a business plan. You’ll find a template for a business plan here. Writing a business plan can seem like a daunting task, but without one, you’re jeopardising your businesses chances of survival and your investment. So what is it? It’s fundamentally the blueprint for your business. And while you don’t have to have a comprehensive business plan from the start, you need at least some elements thought out and planned, and then set about modifying the blueprint as the business evolves. Your plan should summarise what you intend to sell, to whom (including how big this market is and what their profile looks like), how much it will cost you to get going and run, how much you can sell the product or service for, who your competition is (their number, strengths and weaknesses included), who you will need to help run the business and what skills they need (will they be temp, part-time, full-time, outsourced?), what your projected sales and margins are, how you intend to market your product or service, and how you plan to operate and grow.
Stress test your small business idea
You’ll only know the strengths and weaknesses of your business idea if you put them to the test. A stress test, by definition is simulating stressors to see how something reacts and performs. In business, these stressors can be financial, by changes in the industry and target market etc.
Ways to stress test your idea is to walk through the entire process detail by detail to find gaps or weaknesses in the processes, to pinpoint who your best and worst customers would be, to analyse your marketing campaigns and any mistakes you might make, to meet with advisors for an outside perspective, to cut costs and see how the business performs, and set ambitious goals as these will not only help you determine what your business can tolerate, but can help you keep a competitive advantage.
Starting a small business = A slow transition
Starting a business can seem like a risky move, particularly when you have a secure salary as an employee. While many entrepreneurs decide to dive straight into their new businesses by resigning from their jobs, this isn’t the only way. It’s possible to start a business of part-time while still employed. This route requires a lot of energy and discipline as you juggle responsibilities, and you must manage your expectations by understanding that a part-time business will take longer to reach its stride than a business you devote your full attention to. Many companies support employees working toward their own business goals provided it’s doesn’t impact on the hours and productivity you’re hired for, so it’s advisable to inform your employer of your intentions.
Know about legal agreements
In keeping with the transition from employee to entrepreneur, take a careful look at your terms and conditions of employment such as confidentiality clauses, non-compete clauses, and intellectual property agreements. The fastest way to end your entrepreneurial dreams is to come into conflict with the law and find yourself in court and/or bankrupt.
Have money in the bank
While many businesses can start with very little capital and run with low overheads, the rule of thumb is that a business can take up to three years to breakeven and see a return on investment capital. This means that while you may not need much to get started, you will need enough capital saved up to have working capital, kick start your cash flow, have emergency funds for repairs or purchases, and keep up with personal expenses like rent or a bond, school fees, medical aid etc.
Small business owners need to reduce personal expenses
Having said you need to have enough funds for business and personal expenses until breakeven, it’s advisable for would-be entrepreneurs to scale back their personal and business expenses as much as possible to reduce the pressure on the business. Making sacrifices to discretionary spending and scaling back on living expenses also applies to members of your family, which can cause tension and conflict. Make sure everyone understands the purpose of reducing expenses to minimise conflict and help motivate saving.
