Starting A New Business – Article Two

September 17th, 2010

This article is a continuation of the one on 10 September which was about starting a new business.

To me systems run businesses and then you get top quality people to implement the systems. The same applies when you are looking at starting a new business – take a systemised approach and you’ll get much better results rather than just going on gut feel or haphazardly going about finding out if the business is suited to you or not.

Due Diligence

This is the fact finding stage when you are looking at various options. Things to consider in a due diligence process may be:

  • Competitors
  • Analysis of your strengths and weaknesses
  • Analysis of the businesses strengths, weaknesses, opportunities or threats
  • Identifying potential client base
  • Your point of difference in the market
  • Financial analysis
  • Review of current clients (if any)
  • Understanding of any staff you may employ if the business is already established and if they will fit into your standards
  • Any regulatory requirements
  • Insurance requirements
  • Environmental issues
  • Take an objective view of the product or services you will be supplying
  • Public perception if buying an existing business (google can reveal a lot)
  • And the list goes on ………….

Role Identification

All too often people start a business because they have very good technical skills – that is they are very good at a specific task, but they fail to recognise that for a business to succeed a lot more is required than just the technical aspects.

Role identification in the early stages can help you decide what is important, who is responsible for doing an activity and who is accountable for ensuring it gets done. For a new small business quite often everything is done by the owner, but that is no reason not to look at individual roles. Consider:

  • What are the key tasks that are required to be done on a regular basis
  • Who is responsible for completing each task
  • Who is accountable to ensure the tasks are completed
  • Identify what area the task falls under – is it a task that helps drive sales, delivers the operational part of the business or around the financial side
  • How will the roles be measured
  • What will the consequence to your business if the role isn’t completed
  • Do you need to employ or outsource for the role
  • Speak with others in the same industry if possible

Know your numbers

Before you start your business you should know the key numbers that drive it. Look at:

  • Previous financial reports for at least a 3 year period if possible (if buying an existing business)
  • Look for trends and patterns (charts help for a visual picture)
  • Benchmark against industry standards
  • Make sure you compare ‘apples with apples’
  • Compare financials against projections of what you think the business will achieve
  • Decide what return you want for your investment of both capital and time
  • Understand how many GP$ you need to run your business from a cashflow perspective
  • Run projections on a best case, average and worst case scenario and see what difference that makes to your bottom line

Who can help you

Starting a new business can be a very lonely exercise. Build your team around you and make sure that they add value to your operation. Consider where you can get support from – it may be:

  • Lawyer
  • Accountant
  • Banker
  • Business Consultant
  • Sales trainer
  • Admin support
  • HR support
  • Sales training and support
  • Web design
  • IT support
  • Other people in the same industry as you
  • Industry groups
  • Local networking groups
  • Insurance broker – both from a fire and general and personal risk aspect
  • Recruitment expert
  • Research specialist
  • Marketing support
  • Websites such as IRD, NZ Trade and Enterprise

Build a strong team and don’t hesitate to ‘fire’ anyone that is not delivering to your required standard.

How will you get your message to market

You can have the best idea, the best product or service, but at the end of the day you need people to come and do business with you. Consider where you clients will come from. It may be from:

  • Existing clients
  • Referral Business
  • Word of mouth
  • Media (print, online, radio, television)
  • Databases
  • Competitors’ clients
  • Having a proactive sales process

Ensure that your message to the market is clear and people understand what you do and why they would come and do business with you.

Once you develop a pattern for examining and analysing a business you can apply this template over any business in any industry – that way you can quickly look at opportunities, decide quickly what may not fit into your criteria and if something does look like a fit, drill into it in more detail.

Like any activity planning often underpins success, so in the next couple of articles I’ll look at the various stages of the planning process from a strategic perspective right down to an activity level.

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