You must learn how to start a small business before you can grow it.
Do you want to know how to start a small business? Idea is the starting point for every small business. If you are yet to locate a suitable business idea, I suggest that you come up with a viable business idea first. Then, you can learn how you can transform that idea into a profitable business. If you are very observant, you will notice that the rate at which people start small businesses nowadays is very high. Unfortunately, the rate at which these small businesses fail is also very alarming. It is not that the owners wanted their businesses to fail. Perhaps they didnt know what it takes to start a business that can stand the test of time. This article will throw some lights on how you can turn your business idea into a profitable business.
Before I go into the details of how to start a business, I like to highlight why small business is very important.
Why Small Business?
- Small business provides immediate employment for the owner: In this era of mass unemployment or lack of job security, starting a small business has proved to be a good pathway to prosperity. It does not only provide immediate employment for the owner, it assures job security if managed well. As the small business grows, it will also provide employment for other people. Therefore, it can be said that teaching how to start a small business is the solution to the unemployment crises confronting various nations globally.
- Small business requires little capital to start. One attractive point here is that you don’t huge capital to start a small business. There are various small business ideas one can easily start and run from home. This means that the costs of renting of shop or office and that of daily communting to work are eliminated.
- Small business provides supports for large corporations. Without small businesses, the large corporation cannot function effectively. Large corporations need the support of small businesses to handle various aspects of their businesses. Some of these large corporations have discovered that it is more economical for them to outsource some functions to small businesses. Therefore, you can start a small business to provide a support service to large corporation.
- The risk for running a startup is very low. When you start a small business, the risk of managing the business is low when compared with when you start in a very large scale. Even when you make mistakes, the impact on the business is not much. You can easily learn from your mistakes and forge ahead.
- The growth rate for startups is very high. It is no longer a news how small businesses were started kitchen table business and later grew to become a large network of companies. If a large company records a growth rate of twenty percent in a year, this can be described as excellent performance. But startups has the capacity to grow one thousand percent within a year. Ypou can see that the growth can be phenomenal.
- Small business contributes to Gross Domestic Product. No matter how small, small businesses contributes to the Gross Domestic Product of a nation. The contribution may seem insignificant when you look at their contributions individually. When you consider their cummulative contribution, you will realise that they cannot be easily shoved aside. Therefore, if you start a small business, you will be contributing to the growth of the economy.
Having mentioned why we should encourage people to start a small business of there own, below is the general guideline that will help you turn your small business idea into a profitable startup. Even though the guideline is adaptable to any kind of small business, you still need to carry out your research so as to determine the feasibility of your small business idea.
Determine and take up one small business idea that is right for you
The first point you should know on how to start a small business is the need to pick the right business idea. Among the numerous startup ideas you will find in this website or elsewhere, you need to decide which one is okay for you. You cannot be a Jack of all trade.
Take up one idea. Make that one idea your life – think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success. – Swami Vivekananda
Even if you identify more than one small business idea that you can do, it is better to start from one You need to select a business idea that will meet your objectives. Some people start a home based business so that they can spend more time with their growing children. It this is your objective for starting your small business, it will be wrong to choose a business idea that will take much of your time. Also, choosiing a small business idea that sychronises with your passion, talents and skills will be helpful. Building your small business around your passion will imcrease your chance of success. After you have started one business, you can easily replicate what you have learnt to start another one.
Also Read: How To Choose The Right Small Business Idea
Acquire Necessary Skill
Passion is not enough to succeed in business. Don’t rush to start a small business so that you don’t get your fingers burnt. In the business world, everyone is paid in two coins: cash and experience. Take the experience first; the cash will come later, said Harold Geneen. If you start your small business without adequate relevant knowledge and experience, you are going to lose customers and money. If you are good at what you are doing, it will promote your business. You will enjoy referrals from satisfied customers. If you have a passion to start a particular small business, you can acquire skills needed by going for training. You can also attend specialised courses. Also working with someone in that line of small business will help you gain hand on experience. On the job training will give you confidence to start your own small business. Another area you can gain vital experience is by working with a mentor. A mentor can be a successful entrepreneur. However, if you are fortunate to locate a good mentor, you need to respect his time.
Develop a Business Plan for your small business
If you fail to plan, you have planned to fail. In actual sense, no one like to fail but failure to plan is an invitation to failure. One of the reasons small businesses fail is the lack of adequate planning.
The reason most people never reach their goals is that they don’t define them, or ever seriously consider them as believable or achievable. Winners can tell you where they are going, what they plan to do along the way, and who will be sharing the achievement with them. – Denis Watiney
A business plan will give direction to your small business. It will help you start your small business on paper. It is better to fail on paper than for your business to fail. Your business plan will cover vital aspect of your small business such as management, employees and their required skills, market analysis, operations and financial matters etc. From the business plan, you can easily determine your breakeven point and your margin of safety. I like to mention that you should not rely solely on your own judgement. You should have someone to review your business plan with you. This independent review can help you discover vital issues which you might have left out. It could be fatal to start small business on wrong assumptions.
Choose Legal Structure
If you want to start a small business, you need to choose legal structure that is appropriate for your business. It will determine a lot of things such as the tax payable and the fulfilment of some regulatory requirements for filing etc. The most common legal structures are sole proprietorship, partnership and limited liability companies. There are some factors that determine the choice of legal structure of a business. These include the extent to which you are willing to share control with others. If you are the type that doesn’t like to share control, sole proprietorhip will be a good option for you. If you are unsable to raise enough initial capital for your small business, you may consider entering into a Partnership with other people. Contribution from other partners will help you generate more capital to kick start your small business. But if you are going through this route, it is always advisable to have a Partnership Deed in place. Partnership Deed will clearly spell out the rights, roles and responsibilities of individual partner. On the other hand, forming a Limited Liability Company will help you protect your personal assets in case the business fails and the business is unable to pay off its debts. However, this option is the most expensive of all the three types of business legal structures mentioned. If you don’t know the right option for you, it is better to contact a consultant or a lawyer.
Register Your Business name
There is need to give your small business an identity. It is not enough for the business to have a name. You must ensure that the business name is properly registered. You will have to conduct a search to confirm the availability of such name. If you are finding it difficult to form a name for your small business, you can use business name generator online. Please note that every country has their own procedures for the registration of businesses and companies. You can register a business name by yourself but you will need the service of an attorney or an accredited agent to register a limited liability company for you.
Source for capital
One popular musician entitled one of his songs “Without Money, Nothing Can Be Done”. No matter how promising a small business idea might be, if you don’t have capital to execute it, it will remain a mere dream. You need capital to actualise your small business. It is not compulsory that you should personally have all the money. If you don’t have enough money, you can consider other sources. You can raise funds from friends and relatives. You can bring in additional partner(s). This should be done with care. Don’t just bring anyone to join you just because of money. Bring on board people that have something to offer in addition to money. This can be skills or ability to bring contracts
Choose a Location
The choice of location is primarily a function of the type of business you do. If you operate a home business. location may not be a consideration for you. Also, you may decide to start your small business from home if you don’t have enough money to rent a place. It is not prudent spending all your money acquiring a space and having nothing left as working capital. Many giant companies we see today started as kitchen business. However, if it is important that you need a location, then you need to choose the location that is suitable for your business.
Start Your Business Small
Take pride in starting your business small. Even though you have all the resources to start your small business in a large scale, you will do yourself good by starting small. This will help limit your risks.When you start a business small, you can easily be on top of situations regarding the business. If anything should go wrong, you can easily dust off yourself and get back on your feet again.
Market your product or service
A good business idea will not sell itself. It is your responsibility to market your product or service. Create awareness about what your startup offers. Have a marketing budget no matter how small it may be. It is equally important that you monitor the effectiveness of different marketing campaigns you run. This will help you to focus your marketing efforts on the one with highest returns on investment. Develop a good marketing strategy that will help you capture good market size for your startup. Word of mouth and the use of social media (like Facebook, Twitter and Instagram) would be cheap ways of letting your friends and relations know about your startup
Setting the right price for your product or service is very important. There are different pricing strategies you can adopt. But whatever pricing method, you want to use, you should ensure that your price covers all your costs with the profit element. You are running a business and not a charitable organization. If you want to give out discount for a certain reason, let your customers understand what the real price is. Let them know why you are giving a discount so that they won’t think it applies to all purchases. You should not choose your price arbitrarily. If you have a pricing policy, as times go, you will learn what works and what doesn’t work. With better understanding of your customers and your cost structures, you can adjust your price to maximize your profits.
Manage Your Finance
You should be able to justify all your spendings. In fact, every cent you spend should be seen as an investment. You cannot afford to lavish your cash on frivolous thing. The starting point is for you to separate your business expenses from personal expenses. This means you need to open an account for your startup business. This will promote transparency and accountability. Don’t fall victim of ‘it is my money’ syndrome. It does not matter whether you have worked in multi national companies, you should understand the basics of financial management in small business.
Keep Proper Record of financial transactions.
I mentioned that you should open a bank account for your startup business. This is not a substitute to bookkeeping. You need to keep proper records of all your income and expenses. There are open source or affordable accounting software you can use to keep your accounting records. If you can’t do it yourself, you should consider hiring somebody whether as full time or part time staff. You can also outsource this function to an accounting outsourcing firm. Apart from the fact that outsourcing options will give you access to quality professional services, this option can be also be cheaoer. Whatever the option you choose, the most important thing is that you should keep accurate records of all financial transactions for your startup. Any expense incurred on this is not a waste. When you have proper bookkeeping, you will be able to prepare financial statements for your small business. At any given time, you will be able to determine the financial position and the profitability of your small business. With this, you will be able to make informed decisions. If things are not going the way you expected, you will be able to quickly put things in order by taking necessary corrective action.