So you want to start your own Business, you have been thinking about it for years, you know how to put together an organization that "does it right", you are motivated, have saved some money, and are passionate about your offering.
Now may be the right time for you to make your move.
Business Cycles
Business cycles are a fact of life, and while predicting them is impossible, recognizing them is as simple as paying attention. We are currently in a down cycle and this can be used to your advantage. Bargains are available.
I am on record as being optimistic about the outlook for 2009; I say this because we have faced a severe correction over the last few years. Housing prices and company stocks are at a six year low and smart investors are picking up distressed assets for pennies on the dollar.
Opportunity
The gas price spike of the past year, coupled with a pro environment administration and fueled by the next generation of venture capital investment will create an unprecedented opportunity in sustainable energy in the near future.
Do you think the U.S. auto industry is on its last legs? Think again, sure heads will roll over their lack of innovation and preparation, but I would not be in a hurry to bet against American ingenuity, check out this article in the New York Times for a glimpse of the future.
Aerospace, transportation and medical devices will continue to be growth areas for U.S. manufacturers, it is important to look at your industry and asses your competitive position. Asia will continue to grow and will control the markets for high volume consumer goods. The critical factor, when competing with low cost, offshore companies is to stay away from labor intensive processes, you cannot compete on price, where labor is involved, instead focus on areas where you can command a premium price for premium service.
In the machine tool industry you must be investing in automated equipment and the knowledge workers to make that equipment function. If you have an integrated machining center with sub spindle and live tooling, you can machine components with very little labor expense, this eliminates the labor advantage of your competitor, however, you must have the trained workforce, software tools, and customer demand, to utilize that equipment to its full capacity
Management
Whether you are planning on starting your own business, or climbing the ladder in your firm, there are some basic skills that you need to master.
- Personnel Management
- Business accounting: AR/AP and balance sheet
- Understanding your market and your competitors
- Understanding the costs associated with running a Business
- Building a detailed business plan, including growth and cash flow projections
Capitalization
The single most important factor in your success is Capitalization. Without sufficient Capital, nothing else matters: No profit, no Mission.
The best way to capitalize a small business is to save money. It may take five years, but owning a business is like buying a Puppy. It's not for Christmas, it's for Life. Don't be caught in the trap of thinking "I need to start it now or the opportunity will disappear." If one opportunity disappears a new one will surface.
Save first. This does not mean you need a huge amount of cash, but make sure your initial assets are paid for, so that you can focus on generating cash flow, not making Payments. You should be able to survive for six months without pulling capital out of the business for living expenses, if your spouse works and you can get health benefits through their company, your odds are much better. These small details can be the difference between the 10% who make it and the 90% who don't.
Financing
Your savings are an important first step in showing discipline and initiating your enterprise with equity, however, once your business is up and running, and especially if it is successful, you will require additional capital to cover working expenses, inventory, and to grow
We've all heard of venture capitalists, if you have an impressive resume with years of experience and a Harvard MBA, and your team includes a computer scientist from Stanford, you may be a candidate for venture capital. The funders will, of course guide your ship with a tight reign and expect their investment to be returned 3-5 fold in the next five years. In the world of venture capital, amateurs need not apply. Banks are a more realistic source of capital, but banks loan money based on collateral, not ideas, they also expect their money to be paid back, plus interest and within a particular time frame, they are not very understanding when your receivables are over 45 days, your customer seems to have lost your invoice and you don't have the monthly payment. Beware of high interest loans or short payback periods, these will drain your profits in the first case and in the second may cost you your business. Be even more wary of factoring your accounts receivable, Sharks and Dolphins occupy these waters, and it's difficult to tell them apart, if you find yourself in this position, take a hard look at your business and make a short term plan to exit the strategy within three to six months.
In some cases, funds from friends and family members are pooled together to build a successful business. This can be a good strategy, but be sure everything is in writing, including the doomsday scenario and be sure that everybody involved does due diligence and has full knowledge of the risks. If the business fails, there will almost certainly be damaged relationships and worse. Think this through carefully before proceeding.
Am I ready?
How do you know when you are ready? It depends on your goals. If you are starting a landscaping business, invest in a lawnmower and an old truck and start knocking on doors today (just don't give up your day job yet.) If you are building a manufacturing facility, it will be much more complicated, begin by talking to people in the business, talk to your bank manager and your accountant and your lawyer and your Grandmother, drop me a line, if you are so inclined.
Your most important asset is to have the desire and motivation to have your own business and to think through the tradeoffs. Assuming your business is successful, after 20 years will you be better off financially than if you had kept your steady job? When calculating this, keep in mind salary, benefits, holiday and vacation pay and your retirement plan.
Next, consider your motivation to own your own business. Do you want to be your own boss? Fair enough, but realize that your customers and employees will be tougher to please than any boss. Still want to own your own business? Go for it. The rewards are plentiful, you may become wealthy, but the real value is in what you will learn.
How do I find customers?
That is the $64,000 question. How do you get customers knocking on your door? The answer depends on your particular situation. If you have been honing your craft for many years, you probably already have the contacts to get started, if you are a young up and comer, It will be more difficult, .
The two most important factors are persistence and luck, persistence in gaining knowledge and in completing the tasks that are required, which leads to luck, which is "where preparation meets opportunity."
Roman Philosopher-Seneca
You will get customers, here is an article with some insight. The trick is in keeping them. Treat good customers with kid gloves. Word of mouth will grow your business faster than the best advertising campaign.
This article just touches on the fringe of the challenges you will face, and these issues apply to anybody who wishes to assume responsibility for people and an organization, if you have read this far, chances are, you are one of those people. There are many ways to climb the ladder of success and I recommend careful consideration, because the path you choose will affect you and your loved ones for years to come.
Time passes quickly, so take opportunities when they present themselves, but never loose sight of the important things in life, especially the people who count on you, keep your integrity intact, re-examine your goals periodically and do good work.
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