Thinking Small: Business plan among keys to successful startup

Thinking Small: Business plan among keys to successful startup

Wednesday, March 08, 2006

By Paul Tulenko

Have you been selling your products or services to friends, and have come to feel you should "go public"? Are you concerned that striking out on your own might not produce enough income to feed your family, much less make you a fabulous success? Do you wonder just what you are getting into, and more importantly, what your chances for success really are?

 

Thinking Small: Business plan among keys to successful startup

Wednesday, March 08, 2006

By Paul Tulenko

Have you been selling your products or services to friends, and have come to feel you should "go public"? Are you concerned that striking out on your own might not produce enough income to feed your family, much less make you a fabulous success? Do you wonder just what you are getting into, and more importantly, what your chances for success really are?

It would be nice if we could wave a magic wand and find out how successful we will be as entrepreneurs, but that's beyond our ability. Fortunately, there are enough statistics to develop guidelines that may be able to predict success. While having all of the success attributes will not assure you of instant success, not having them could spell failure.

 

Money
Having enough money (above and beyond what it takes to start your business) to survive year one is a major success factor. Successful business owners understand it takes money to exist as a person or family while the business income is building. Existence money means rent, car payments, food, and similar items. Saying, "I'll pay for those out of the profits of the business" is usually fatal. New businesses seldom generate enough cash to keep the business doors open the first year or so of operation, much less provide a profit for the owner.

A good rule of thumb is to have (or borrow) nine months of personal expense money and six months of operating money in addition to the basic cash start-up funds. If that sounds like a lot of money, measure it up against losing your home, car and dignity.

 

Record Keeping
Several years ago, the Ohio Business Institute studied 5,000 businesses to determine whether bookkeeping was an important ingredient of success. Its study indicated 70 percent of successful business owners had a fundamental understanding of basic accounting, while only 10 percent of failed business owners had the same understanding.

These facts indicate that ignorance of accounting could mean a nine in 10 chance of failure, while taking a basic bookkeeping class could provide a seven in 10 chance of success. This means you should start with knowledge of bookkeeping before you spend a nickel on your business.

 

 

Start Small

If at all possible, start your business from your home. Practically any business can be started from a basement, garage, spare room or even the kitchen table. Let's not get ourselves tied up with ego; be pragmatic. If you absolutely must go outside the house for your business, try sharing a location with a similar or complementary business.

Your goal in the first year should be to concentrate on establishing a presence in your community. Only then should you consider expanding your business to generate a larger market share.

 

 

Personal Traits

Successful business owners spend much of their waking time running their businesses. This means anywhere between 50 and 80 hours a week! Running a business can be fun, and the best scenario is where it's hard to separate the work part from the fun part. Families of successful owners understand this factor and expect a certain degree of isolation.

You will have to deal with impatience with the way money comes in, overeagerness to make a sale, immaturity in handling adversity, poor judgment in whom to trust and a feeling that the big guy is "out to get you." Successful owners overcome these traits and go on to manage successful businesses.

 

Planning for Success

Successful business owners are not risk-takers. Successful business owners plan for success — they don't hope for success. The Small Business Administration tells us that developing a business plan can do more to ensure your success than anything else. Help with this aspect can come from your banker, lawyer, accountant or SBA office.

Good planning means success. If you doubt this, interview a couple of startup successes in your area, then do the same with a couple of failures. There are plenty of the later. They show up in the bankruptcy notices in your local paper. You will discover a comprehensive business plan is the success factor. Don't start without one unless you plan to fail!

 


(Paul Tulenko is a small business success consultant based in Albuquerque, N.M. Additional tips and suggestions are available at www.tulenko.com.)

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