Now may be the perfect time to start a new business. That’s right; so if you’ve been hesitating to start a business due to the current state of the economy, you may want to reconsider. I believe the economy now only has one place to go—up. It’s only a question of when. So with the right timing and the right planning, your business can be poised for success when the economy turns around.
In fact, growing a business during a slow economic period can have many advantages. While some of the giant corporations are suffering through layoffs and bankruptcies, smaller companies usually fare better. They are able to turn on a dime to adjust to any short term market swings, while larger companies generally have a much harder time reacting to change. When the market finally does turn around, established companies are often still cowering under their desks while the new company is potentially ready to spring on the opportunity to get more business.
Timing alone, though, is not enough. You shouldn’t jump into your new business blindly. Having a successful business requires advance research and planning to help ensure your business will succeed. If you complete the following series of steps, you should be better prepared to start your business and build it into a successful one. Here is what you need to start your business off right:
STEP 1: DO YOUR HOMEWORK
Before you start your business, you need to learn more about it. You can turn to several places in order to get the help you need:
Local colleges. Many offer courses in small business. Even the founders of Ben & Jerry’s Ice Cream, according to their Web site, took a $5 correspondence course in the art of making ice cream from Penn State University before they started their own ice cream company.
Local chambers of commerce. They, along with economic development foundations, also offer courses in starting a new business.
Successful businesses in other locales. Visit other cities and study companies that are working well in that market. Consider bringing that idea to your city.
STEP 2: DEVELOP A BUSINESS PLAN
No matter how confident you are that your business will be successful, you need to have a business plan. Commit it to paper. Make sure your business plan is well written and professional. If you need help writing one, check with local colleges or your Chamber of Commerce to find someone who can assist you. Consider hiring a professional to write your plan. This can make a huge difference when you go for loans or try to get investors. You want everyone to know that you are professional and that you take your new business seriously.
Professionalism can pay off handsomely. I, personally, know of one business owner who needed a refinance loan and approached a local bank. He had spent a great deal of time and effort preparing his business plan, which was complete with pictures.
He didn’t technically qualify for the loan, but the banker was so impressed with his business plan that the loan was approved anyway. The image of success that you present may be half the battle.
STEP 3: TEST-DRIVE YOUR PLAN
Before you present your plan to the big prospective clients, first give it a test-drive. Don’t just ask your friends if they like it. They’ll likely tell you “it’s great” just to be nice. Rather, talk to potential clients. They are much more likely to be honest and give you advice on what could make your offer more appealing to possible clients.
Survey the area where you want to locate your business. Many people neglect to do this, but it is important for the future of your business. Hire some college kids to do a survey. Arm them with questionnaires and have them make calls or visit target clients to get their input. The desired result is to make sure you are locating your business in an area that wants or needs your product or services.
Sell your product or services on a small scale first. For example, if you want to make and sell pies, try initially selling them at a local farmer’s market.
See how they sell.
You can experiment by adjusting the price, the sizes or the packaging to see what sells best. It’s easier to make changes on a small scale than once you begin mass production.
The same goes for construction. A new residential contractor should start with a small house, not a 15,000-square-foot mansion.
STEP 4: SECURE FINANCING FOR YOUR BUSINESS
Self-financing is one option to pay the start-up expenses of your business, but if you plan to fund the entire venture yourself, be careful. You don’t want to spend all your savings up front only to discover you need more cash in the early years for expenses you didn’t anticipate.
Be careful using too much short-term debt, such as credit cards. They can come back to haunt you when times get tough in your market. Short-term credit will have higher interest rates or variable rates that could go up if the economy goes into a recession. Instead, consider using a home equity loan or using your brokerage and margining against your stocks and bonds, as they often have lower interest rates and longer repayment terms.
Partners are another option to help with financing. If you do decide to take on a partner, choose carefully. Your relationship will likely come under a lot of stress as you grow your business. Make sure your partner is someone you really like, shares your vision for the company and is trustworthy. Even so, there should be a legal contract, no matter how simple.
Private investors or venture capitalists are another possibility for funding. If you find one who likes your idea, he might give you some start-up money. Finally, another option is to get a Small Business Administration loan from a local bank.
STEP 5: PLAN THE DAY-TO-DAY OPERATIONS
Once you have the funding secured, consider starting your business on a part-time basis. When your new business gets too big and your income approaches that of your full-time job, it’s probably time to make the leap. It is now that you can make the transition to running your new business full-time with a fair degree of confidence that things will be okay.
Be aware that your needs starting out may not be your needs a few years down the road. It’s better to be conservative in the beginning. You can always make adjustments as your business grows. You may be able to add on to your location or move if you get too big for your surroundings.
Keep your overhead low to start. Don’t spend large sums of money to have the best of everything, especially when it comes to your work environment. Clean and friendly surroundings work much better than fancy and expensive. Your office doesn’t have to have a river view, fancy carpeting and expensive leather furniture.
When selecting an office location, you can make it more inviting by simply giving it a fresh coat of paint and some reasonably priced, comfortable furniture. You’ll find that your clients will stop by more frequently if your office is comfortable and accessible more than if it’s fancy and ornate. Ample parking is also an important consideration.
Additionally, most of the business world works a standard 9 to 5 schedule. If you are willing to expand your hours to include some evenings or weekends, you can have a leg up on your competition. If appropriate, you may be able to meet clients at their home or place of business, offering another convenience for them.
STEP 6: MARKET YOUR BUSINESS EFFECTIVELY
Networking is one of the best ways to market your business. People do business with people they know. Join a Rotary Club, the Lions or a Chamber of Commerce.
Introduce yourself and be active within the organization. Ask key people to introduce you to other potential clients, and return the favor.
Focus your marketing efforts on the businesses or individuals who would be your best clients. Don’t waste your marketing on the whole world. The quality of your customer base is far more important than the quantity. Consider buying a mailing list of the best possible clients. Screen them based on where they live, their income, occupation, etc. Then mail materials or market only to that group. Be persistent in your efforts to recruit them as your customers.
Finally, build your brand identity. Get a logo and display it on all your ads, mailers, vehicles, clothes, etc. You want your clients and prospects to think of your logo when they think of you. You should also have a flyer created that describes you, your company and your services and products. Spend enough money so that it looks professional and includes some pictures. Distribute this flyer to every prospect so they can learn about your business and how it can benefit them.
THE JOURNEY BEGINS
The economy is in your favor. You’ve done your research and planning and have taken the necessary steps to get your business off to a promising start. Don’t let fear of failure hold you back. Now is the time to put your knowledge into action.
With all you’ve learned, you’re at least one step ahead of the competition. Now is the time to start living your dream of having your own business.
About the Author
This information is provided courtesy of Doug Charney, vice president/investments of Wachovia Securities in Harrisburg, Pa. For more information, phone Charney at 888.529.2973, e-mail him at [email protected], or visit his Web site at www.charney.com.
Wachovia Securities LLC,, member NYSE/SIPC, is a registered broker/dealer and a separate non-bank affiliate of Wachovia Corporation. Securities and Insurance Products: Not insured by FDIC or Any Federal Government Agency; May Lose Value; Not a Deposit of or Guaranteed by a Bank or any Bank Affiliate
