1. Be Honest with Yourself.
This a simple but terribly important concept. Ask yourself if your product or service fills a desperately needed void in society? How will your business create value for the customer? A great litmus test for this is simply by putting yourself in the customer’s shoes. Would you spend money on this yourself? If the answer is ‘yes,’ then you have something definitely to work with. If the answer is a shallow ‘maybe,’ then you have to probe the reasons as to why the skittishness and work the issues out first. If a hard ‘no,’ then it is perhaps time to rethink your strategy altogether.
Would your business be viable or self-sustaining over the time period you have envisioned? Timelines change, we get it, but you really have to play Devil’s Advocate with yourself to be prepared for the challenges you are about the face. A solid business plan with an accompanying market analysis will at least give you an idea of what sort of efforts and capital will be needed to eke out your piece of market share. If you are operating on just intuition and sheer exuberance for being an entrepreneur (with little to no preparation or planning), then invariably your optimism will be replaced by self-doubt and confusion at some point. This could even lead to an abandonment of the endeavour altogether.
Be realistic in terms of expected revenue and have multiple streams to fallback on. The money spigots aren’t going to be turned on right away. Even if your product or service is great, it is likely no one will know about it in the early stages of your business. Have revenue streams that you can alternate with to ensure that your overall profitability is not riding on a single source. This way if something goes wrong (like a product is out of stock or there is a service interruption), you have contingencies in place to make up for it.
You really need to be willing to stick your neck out and put long hours and considerable effort to create a successful business. Look at Tesla, for example. Elon Musk is widely attributed to the company’s creation, but this simply isn’t true. He was a high-level investor who eventually took control of operations and made it into the phenomenon it is today. The initial product was great, but only scaled and marketed to a small niche that bought into its novelty. With Elon Musk taking over the reigns, it has now catapulted to a global behemoth brand. Point is, you can have a great product or service, but you also need to have strategy.
2. Start-up capital
Whether you are offering a new product or service, capital is needed to lay a foundation toward creating value and revenue streams. If you don’t have that framework already in place, then it is going to take time, effort, and above all—money.
I would recommend saving at least 6 months to a years’ worth of income before deciding to take the plunge. This will carry you as expenses are incurred and your business income is non-existent or only trickling in. A lot of entrepreneurs will ask friends and family members for start-up loans, which isn’t necessarily a bad thing as long as you intend to pay them back and there is no expectation to give away sizeable portions of equity. Increasingly, new businesses are seeking funding from venture capitalists or crowd-sourcing platforms like Kick-Starter. Do your research on these sources to find out if they would be a good fit.
Your typical banking institution will largely avoid lending to risky new businesses without solid plans and directors with the necessary skills. If they do, it usually means you become personally liable for any debts. Prospective businesses that are incorporated will still need a personal guarantee (backed by collateral). Even then, they prefer lending to established business with at least 2-3 years’ worth of financials, as most banks are cash-flow lenders and don’t really care how valuable your assets are.
Conduct a market analysis of your industry to determine if barriers and the existing competition would necessitate a large input of capital. A lot of businesses fail simply because they did not properly gauge the costs of entering an established market and thus run out of money.
3. Brand/Trade Name & Trademarks
Every new business starts with a brand name. This will be your enduring mark on the commercial landscape. You need to ensure it is catchy, unique, memorable, preferably on the short side, and conveys exactly what sort of industry you are in. It is always advisable to make sure your name is not already existing in a corporate or trademark register, as copying would directly infringe upon the namesake of another business and could potentially put you in legal hot water.
Trademarking is relatively easy. Businesses can enlist the services of trademark attorneys who will lower the probability that a trademark gets rejected because of filing errors and will conduct a search on your behalf to confirm no existing mark holders exist for your particular name. You can also just search a trademark database and submit yourself.
Simply sign up with your national intellectual property office and submit a new trademark application (the site will walk you through the process). From start to completion, a new application can take 12-18 months to become registered, given that there are no oppositions (existing trademark holders who feel your name would infringe upon their brand). The filing application is a few hundred dollars, with that number growing as you add more classes (segments of business you are operating in, like consumer electronics, for example).
If you plan to operate locally (within your city or province/state), you can simply register your business with the government and most times your name will be protected by common law rights (requiring a fee of a few hundred dollars but can be done electronically and in a matter of a few business days). If you plan to operate internationally, then you can extend mark protection in foreign countries through the Madrid Protocol (an international intellectual property rights & trademark system recognized by over 100 countries that comprise 80% of global trade) using a single application. This is done through your national intellectual property office. Costs for international applications can quickly rise as there are individual filing fees for each country.
Please note that some countries accept applications based on a first-to-file system, which can carry an intent to use–meaning the business does not really exist, but plans are in motion toward starting it up. This means that if you are already operating under a trade name but have not filed for protection, someone else can beat you to the punch and legally challenge you from using your own name! File for protection as soon as you can.
4. Online Presence
A presence online is a must-have for any modern-day business. It is how all the global brands engage and market their wares and services. It is essential to get your brand online as quickly as possible to start opening new marketing channels through social media and other advertising platforms. No one is really going to know you exist until you get your name in front of as many faces as possible. This is where you are really going to inform customers of your value proposition, brand, and compelling story. An online presence can be used to create a community of followers and an influx of new leads to propel your business forward. The best part of it all–it is completely free. A paid strategy can also get you in front of more eyes, but this option can be utilized later once your revenue and expenses are finally inline.
Creating a digital space will involve registering a unique and available domain name, which can be viewed as your internet property and base for online operations. Domains that exactly match your business name may be hard to come by, as the industry is plagued by cyber-squatters and other seeking to profit on private domain sales. The .com top-level domain extension is recommended, as it remains the most recognizable and trusted, but there are alternatives in the marketplace that are equally as strong. Make sure your internet domain passes what is called the “radio test.” This means that if your domain were broadcast over the radio, would consumers have a hard time looking up the spelling of your site on the internet? Always make things simple as possible, if you can.
Hosting will also be required but is usually bundled together with a domain at popular internet registrars like Godaddy. Definitely do your research on which providers will be a good fit for your business needs. Take into account affordability and capacity (the ability to conduct your business online without a lot of prohibitive restrictions, like data or bandwidth).
Once setup with a domain and hosting package, you will need to create a website that is attractive, easy-to-use, and professional. Often, this is the first time a potential customer is going to be engaging with your product or service. If you bungle this part, then say goodbye to the customer. Luckily, you can get started with a simple template site offered by your hosting company (usually involving pre-packaged software that just need to be installed). Many online tutorials exist to walk you through getting setup with the basics. It always helps if you have some practical HTML 5 or CSS skills (these are coding languages for building and styling your website).
One can also enlist the services of a developer that can create a website that is engaging and has all the necessary bells and whistles to perform your business functions. This is going to require money and could range from a few hundred dollars to many thousands of dollars, depending on your needs. The idea here is not to get too bogged down in the details that don’t directly relate to the business itself. You can outsource these to the professionals if the budget allows. This frees up your time and gets rid of the frustrations that can result from entering a space requiring an unfamiliar technical skillset. Get into the habit of leveraging other peoples’ skills. You can’t do it all by yourself.
5. Be Regimental.
Going it alone will require a whole new set of time management and organization skills you may not be accustomed to. For instance, no one is going to be expecting you at work at a certain time of the day and your coffee breaks are open at your leisure. Nice right? It can be, but this sort of thinking can also do your business harm as one can take a blasé (unconcerned) attitude toward your work. The reason why companies expect their employees to be at work on time to put in effort immediately: a typical 9-5 shift covers the most productive hours a human being will have. Keep that in mind as you balance work and life on your own accord. What you get out of your business will be commensurate with how much work you put in. Just like with just about everything in life.
Your new business will not have an accounting or payroll department. This means you have to keep your own receipts and paperwork, file annual tax or GST/HST returns with the government and have a solid awareness about your fixed and variable expenses. In these regards, Microsoft Excel and other readily available software programs are your friends. Keep your computer files organized and tidy for easy retrieval of information. You want to keep a record of just about everything you do as it relates to business expenditures and revenue generation.
For those businesses involving the sale of tangible products (including those that are perishable), inventory records are essential. For every business, information on a Profit and Loss statement should be inputted daily as operations gain traction. Not only for tracking the key metrics of your business, but also to allow you to gain insights on ways to cut down on loss, maximize efficiency, and ultimately grow your profit margin. Those businesses that are not in control of their cash flow find themselves drunk at the proverbial wheel. Again, if you don’t feel comfortable with numbers-crunching and have the available cash, you can hire a person do it. Often times an accountant or finance professional can be a really shrewd business consultant whose skills you can take advantage of.
Taking the Leap
The tips outlined here should give you more knowledge and preparation for what a business start-up entails. They are what I’ve learned over the course of several years managing a small franchise business, earning a bachelor’s degree with a focus on finance & general management, as well as working for several years in the finance industry. This is by no means a comprehensive list of everything you should consider when starting a business but should serve as a good primer. You cannot necessarily pigeon-hole all business start-up strategies into one general form, so if you are an existing entrepreneur with lessons to share that have not been previously mentioned, please contribute them below. Also, for new entrepreneurs, we want to hear your stories!