Starting a Business – Realistic Things To Check

After Tony’s discussion with Shina, the tycoon, he decides to adopt a more realistic approach to his plans to launch his own business. Tony has come to realise that leaving paid employment to go into self-employment should not be done simply out of enthusiasm. Starting a successful business that would stand the test of time has to be done systematically. Lots of brainstorming, planning, verification of facts and speculations have to be done.

The market
Tony gets a reputable consultant. He needs a realistic overview of the market for his products. He wants to know the extent of the local, national and international market for his product. Paying a consultant is eating into his savings. But paying a lifeguard is so much better than drowning in the unexplored waters of self-employment, he tells himself.
However, Shina’s advice is that he must not leave everything to the consultant to do. He says, “Some people fail in business because all the planning for the business they are to run was done for them by consultants. You are going to drive your business. The consultant should simply be a guide or instructor and not the person at the steering.”

Competitors
With the consulting firm’s assistance, Tony finds out the existing competitors in the field he wants to enter. He also has information on what each one is offering. He then asks, “What can I offer that they are not offering? Many of them are quite big; I could get partners and come into the market as a giant. On the other hand, I could come in as a small player. If so, being a small player also has certain advantages.” He decides to identify them and enter the market with such superior customer satisfaction.

Target/market size
Working with his consultant, they estimate the market size that he could realistically capture. They are able to do financial projections of the money needed especially at the take off point. Knowing the capital he needs gives Tony some measure of relief. He does not have that much but he is certain he can get enough to make up for the rest from his family members.
The consultant advises that if he does not get the remaining balance, then they could rework the plan. He can produce fewer quantities initially. The production costs would be a bit higher as they would not be taking advantage of economies of scale. But reinvesting the profits until his capital gets to the point they projected would bring in the benefits of economies of scale.

Location
A good location for production with proximity to the customers is good, he is told. Tony, in his usual exuberant manner wants to set up a superb office beside the factory. The cost of setting up the office is so huge. He believes he could get the funds.

Product quality
Shina tells him, “Even if the money is a gift and not a loan from someone, target it towards getting customers. Getting customers is more important than getting a superb office except the nature of the business is such that a superb office would attract customers. That is for those in service business that customers have to come to the office regularly.
But for someone producing goods, the quality of the goods mean more to the customer than your beautiful office. Someone said, ‘The experience of a bad product lasts longer with the customer than the satisfaction the producer deprives from making extra money producing sub-standard products. So much more resources should be channelled towards producing quality goods or services. Afterwards, you can invest in a superb office.” Tony tells the consultant what Shina told him about the office. She agrees.

Hitting the market
Shina also tells him, “No matter how great the products are, if they are not consistently demanded by customers, the business will sink. That also goes for those in service business. Quite often though, the risks in the service businesses are lower than in manufacturing.” Tony has to find out how he is going to reach his target(s) at the least possible costs.

Product type
Tony keeps paying visits to Shina. Thankfully, Shina is always willing to give free what he pays consultants for. For anyone who is interested, there are always successful people willing to share their knowledge.

Shina asks him about his product type. He says this is very important. This is because some products can saturate a market. He continues, “Some products make an entry into a market, their manufacturers and suppliers make huge sums of money but if new markets are not captured, demand reduces.

This is because the type of product is such that the demand is a one-off thing for most individuals. Even when the customer comes back for a repeat purchase, it might be several years later. Such products include heavy capital goods such as houses, personal computers; cookers etc.” He continues, “If you want to continue to operate in a particular market segment, then you have to have an accompanying product or service that would ensure your customers keep patronising you. For instance, phone companies do not just sell their lines; they sell recharge cards and provide other accompanying services.
Food business thrives because no matter the quantity of food consumed, people still need to continue feeding. So in making your business plan, you have to know if the products is such that will enable you to continue earning reasonable profits staying in the same market or if you need to constantly capture new markets. If you have to stay in the same market, is the product type such that will enable your firm to provide accompanying services? Find out.

Passion/Aptitude
Do a realistic appraisal of what you are good at in your current employment. Most times people want to launch a business so they would be able to do what they love doing. But running a business involves so much more. Know precisely the things you love doing. Plan your own job description to include the things you enjoy doing or have the aptitude for. If getting others to do those aspects you are not good at would incur so much cost, then acquire those skills before launching out. You may need to do them at the initial stages of the business.

Training
After having done a realistic appraisal of your aptitude for going into self-employment, you may still need to go for courses on entrepreneurship. You need training in business generally and in context of the line of business.

Buying an Existing Business
Find out if there is an existing business you can buy rather than starting one from scratch. You would therefore not be a new entrant into the market. You will enjoy the goodwill of that business, the loyal customers and so many other things.

But you need to do a lot of checks. These include the reason the owner(s) want to sell, if you can work with the present staff, if the business is in huge debts, its reputation in the market and with is publics etc. If all these things are all right, buying an existing business offering the same thing you want to offer is better. You could then build on the exceptional idea you have.

Family’s capacity to withstand lean periods
He takes Shina’s advice to inform his family of possible financial challenges at the early stages of his business. He tells his wife, “You will definitely become the wife of a multi-millionaire but you may have to make certain sacrifices before then.” Together, they make plans to reduce expenses.

·Juggling paid employment with self-employment
Shina has also advised him to consider the possibility of staying in self-employment in the initial stages of his business. He checks his current work schedule. This enables him to know if he can conduct his business within that time. But testing the water is so much better than drowning in unexplored waters, he tells himself.