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Starting a New Business

You have a business plan – what now?

climbing small

 

You have spent time putting together a great business plan, don’t waste it

 

It takes time thought and money to put together a credible business plan. You may have needed one to get finance, or to get suppliers to support you, or because you believe that planning your business is the right way to go, which is the best reason. Now the plan is complete, it has goals, targets and projections, mission and vision, marketing promotions, organograms, staff recruitment and training plans, financial projections and all the other characteristics of a great business plan – so what now?

Sadly in even the best intentioned businesses the day to day activities of running the business, and as all that great work fades from memory the plan document remains in a file, never to be looked at aside from out of nostalgia. If this is done deliberately it can be a good strategy, especially if you follow Eisenhower’s motto that “Plans are nothing, planning is everything.” In this strategy the business recognises that merely developing a plan drives the business to more focused and effective actions, but the entrepreneur wants freedom to react to situations on the ground, rather than stringently following the plan. If this is so in your business I have no problem at all.

However if your business is like the majority, the great ideas and lofty goals set down in the plan will slowly be submerged in the sea of day to day tactical management, and very few of the goals of the plan will be met. If this is you, or if you are in a planning cycle and fear this very widespread problem then read on… Continue reading

Quality checks for your business plan

image_thumb2This article was published as the Sanlam Business Market, Business Tips: December 2013 newsletter. The Sanlam Business Tips is an incredibly useful and free resource for entrepreneurs. If you have not yet subscribed you should.

 

Many business plans lead businesses into disastrous situations

 

We all know we should check our cars before travelling. Equally important is the need to check your business plan for faults and potential failures before making it the core of your business, or using it to ask for finance. Here is a 6 point check:

  • Can YOU execute? Failure to convince financiers of this aspect is probably the number one reason for rejection. More critically, it is probably the number one reason for early start up failure. Points to check: Do you have enough knowledge to run the business? The entrepreneur of a business which markets services needs to understand marketing as well as the service. Do you have any experience in this field? Hobbies are often a help in this regard, for instance enthusiastic cooks setting up catering companies. Do you have the time to execute the planned actions, and will your family support that? Entrepreneurship is not for the faint hearted, there will be many late nights and early mornings. Can you take risk? If you are uncomfortable with being daring at times you should plan for safer businesses. Can you lead? You will need to tell people what to do and learn to make uncomfortable, even agonising decisions.

Continue reading

Start-up sales

13 Sept CoverThis article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in September 2013 and is posted here by their kind permission

 

Early sales are vital for start-ups, early bad sales are dangerous

 

 

 

When you open the doors of a new business your immediate thoughts are likely to be about income producing sales. If it is a retail business you will be watching anxiously for the first people to enter the store, restaurant, hairdresser or filling station. If you sell business to business (B2B) you must build new prospects to develop early sales. Expenses mount up, and insufficient sales income means your business could run out of cash and be forced to close before it really got started. Making early sales is that important.

Low hanging fruit

Everyone has heard about ‘low hanging fruit’ and you, the new entrepreneur, should look for those sales which you can most readily close. ‘Low hanging fruit’ is usually understood to mean potential customers which are easy to start selling to, but there is a problem in trying to sell to anybody who will listen. If the prospect is obvious to you it is also obvious to competitors, and they are more established, have customer references and will be more assured than you. They will also be eager to shut out a new competitor.

To really be ‘low hanging fruit’ the prospects should be those which your new business can easily close. This means retail customers who buy rather than browse, and a high ‘strike rate’ – the ratio between sales cycles begun and closed – in B2B organisations. Continue reading

Which business should I open?

13 August CoverThis article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2013 and is posted here by their kind permission

 

 

What is the right type of a new business for young people?

 

 

A young relative asked me: “If you were 23 what sort of business would you open?” I realised what an interesting question this is. Imagine being 23, with the experience to know what to consider and where the opportunities lie. Thanks for the great question entrepreneur-to-be Jean!

The first answer is that if you want to be business owner you should become one. Starting a business is nowhere near as difficult as people suggest. Even desperately poor and illiterate people open sustainable businesses all over the world without business advice, bank loans or advertising. It is more difficult to launch and develop a business that can grow out of the survival phase to provide employment and value or wealth to the entrepreneur, and if that is your dream choose a business that can grow, as opposed to lifestyle entrepreneur businesses like a photographer.

Be capable of running it

You should be capable of operating the business. At 23 you may lack business experience but business owners need to be able to handle finances, marketing, sales, HR and administration. Don’t choose a very complicated business or one in a highly regulated sector, like food or medical supplies. Choose an area you know or have a passion about. Continue reading

Staring at failure

13 May Cover

This article was written by Ed Hatton, the Start Up Coach for the South African edition of Entrepreneur magazine, as the My Mentor column published in May 2013 and is posted here by their kind permission.

 

 

That terrible time when it looks like the business cannot continue

 

There comes a time in almost every business’ life when failure seems inevitable, and the entrepreneur fears that they are unable to continue. His or her self confidence nose dives. Prospects for success or even survival appear to be extremely limited and a sense of hopelessness sets in. It is a terrible time, and often happens within the first year of operations, sometimes near the launch.

There is a real basis to this fear. Businesses frequently fail and start-up businesses are especially vulnerable, with many never getting beyond the first year of operations. Entrepreneurs may not have the skills, knowledge, risk taking ability or drive to manage their businesses profitably.

Rational thinking

The key to managing through this stage is to decide rationally whether the business is really doomed or whether the entrepreneur has just hit that painful wall that left so many others bruised and shaken but stronger and thriving. Many business owners quit in despair at this stage when with the right tactics they could have succeeded. Decisions have to be made only on facts and stripped of emotions, pessimism, and blame. This is extremely difficult for an entrepreneur to do alone at a time when they are swamped by doubt about the whole business concept, their own abilities and their fears of the consequences of failure including catastrophic financial loss and shame. This is a great time to have a mentor to turn to.

An old business saying suggests that the best loss is the one taken early. If a rational analysis of the state of the business shows that there really is no likelihood of the business succeeding then plans must immediately be made to close the business with as little damage as possible. It is not smart to continue to ride a failure into yet more debt and broken promises.

Finding out why

An assessment of the current situation is vital, write down cash resources, sales prospects, market reaction, product and service quality and fitness for purpose and all the things a buyer would look at it he were thinking of buying the business.. These must be compared to the business plan to see what has changed. Why were the expected returns not made? Are the causes fundamental or can they be reversed? Be certain that the real causes have been identified; this is not a place for rose tinted spectacles. Once the causes of the distress are identified it is a whole lot easier to make a close or survive decision. Often the crisis is brought about by something as simple and reversible as the failure of marketing promotions to attract potential customers, deviating from plans to satisfy unreasonable demands by early customers, trying to attack too many markets or spending too much time on product development and not enough on selling. This is where a mentor can bring an impersonal outsiders view, especially if the mentor has experience in managing similar situations. Continue reading

What do they want to hear?

13 March coverThis article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in March 2013 and is posted here by their kind permission.

 

The subject must be important to potential buyers

 

 

 

 

 

Challenge
This entrepreneur was the victim of a horrific motor vehicle accident that left him brain damaged. He has beaten the odds and gained several tertiary qualifications. He asks how he can turn his inspiring story, as well as information about brain injuries into a career as a speaker.

Response
This entrepreneur is very passionate and knowledgeable about his subject and has researched the high prevalence and management of brain injuries. He believes everyone should be aware of this information. He also has an inspiring story to tell, of overcoming huge obstacles on his way to his qualifications. His problem is getting paid speaking assignments.
Many entrepreneurs have products and services in which they believe passionately, and think potential customers should share their enthusiasm, but consumers at every level have the choice of more products and services than they could ever buy. They select those which are important, which may not be the services the entrepreneur believes in so passionately. So they do not come asking for the entrepreneur’s services and that can leave the him bewildered and frustrated. Continue reading

Talents and weaknesses

13 Feb coverThis article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in February 2013 and is posted here by their kind permission.

 

 

Capitalising on strengths and overcoming problems are essential entrepreneurial abilities

 

 

Challenge

This entrepreneur asks if it is advisable to start a clothing business without the ability to sketch or draw designs. She has a good eye for trends and understands the clothing manufacturing process.

Response

This entrepreneur-to-be has identified her major strengths and weaknesses. She then asks for advice about a significant weakness. This is smart thinking. All too often would-be entrepreneurs simply dive into their dreams without evaluating their talents and skills and then become frustrated when they cannot get start up finance, or attract customers because they lack a vital skill or simply do not understand the complexities of the business they wish to enter.

In this case her strengths of having an eye for trends and understanding the manufacturing process are significant advantages  in a business where being the first with a trend is a huge competitive advantage. She worries about her inability to get her ideas on paper, and correctly so. If she cannot overcome this weakness then all the talent for spotting trends cannot be turned into saleable garments. Continue reading

The very first thing

12 November cover This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in November 2012 and is posted here by their kind permission.

 

The first actions can turn a dream into a business – or a nightmare

 

 

Challenge

This entrepreneur has what he believes to be a viable idea for a new magazine. He asks what the very first step should be, in order to bring the idea to fruition.

Response

Of the many things that have to be done to convert an idea into a start up business, which is the most important first step? I suggest there are two equally important considerations; ensuring real passion to launch and run a business, and testing for commercial viability of the venture.

Starting up and running a new business is not easy. It is extremely hard work, risky and unrewarding in the early stages. Start up entrepreneurs work long hours and are confronted with unexpected problems. They need to become instantly proficient in marketing, finance, HR, production, negotiation cash flow management and motivating staff. They risk family disruption, business failure and the loss of substantial amounts of money. Continue reading

How do I get started?

Image: www.freeimages.co.uk

Image: www.freeimages.co.uk

You have the idea, but what are the steps needed to turn the idea into a business

I meet and communicate with many people who have an idea that they think can be turned into a payable business but do not know where to start, and many such ideas never become enterprises, which means no new economic boost or jobs, and we need both to take the focus from large organisations and ever increasing government bureaucracies.

So here are a few steps to convert ideas to enterprises.

Who will buy it?

Without sales there is no business and yet too many start ups have only an optimistic guess at sales income. To reduce the risk of early failure the target market has to be clearly identified, it has to have the disposable income to buy the product or service and it has to be one that the new business can communicate with and sell to.

Break that sentence down into its components and you will see the need for a whole lot of research, thinking and planning. The advantage of doing this is it is easier and less expensive to communicate the values of a product to a tightly defined market and much easier to attract them to the ‘storefront’ – whether that is an actual store, an internet site or a salesperson. Continue reading

Starting alone

12 September coverThis article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in September 2012 and is posted here by their kind permission.

 

Leaving the security of the corporate world to start your own business requires more thought than expected

 

Challenge

A prospective entrepreneur asks how he can make the transition of leaving full time employment in the corporate world to make a career as an independent IT consultant. He does not have enough funds to cover expenses in the early months.

Response

The entrepreneur must have a very clear idea in his or her mind why they want to take this step. Some of the right reasons are a desire to make much more money, to build something lasting, to taste business ownership or to enjoy creativity which is stifled in the corporate world. Wrong reasons include an inability to get on with the boss, grievances about underpayment or a desire to work less. If these or similar thoughts are the reasons for going alone it may be better to change attitude, or change jobs.

Staying alive

A crucial part of the transition from the corporate world into self employment is having or generating the funds to pay for essentials in the early months. This means either having an income stream or having access to money from savings or borrowings. In either case it is wise for the entrepreneur to have a lean, low cost lifestyle, and cut out any extra expenses. Pay off debt, close accounts and trade in the high cost vehicle, but do not cut to the point where there will be pressure from the family to return to the corporate world.

The best strategy is to make these changes well before the start up is launched, and save the excess so that a reserve is available when there is no corporate salary. At the same time initial customers can be developed and serviced out of business hours. Do not take a loan to support living costs. Continue reading

Getting started

12 August coverThis article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in August 2012 and is posted here by their kind permission.

 

Turning an idea into a viable business is not as difficult as it seems

 

 

Challenge

This entrepreneur has a business idea which he thinks will make a viable business, but is unsure of how to go about commercialising the idea. He asks how to execute this transition.

Response

Many people have a business idea. Very few ideas actually turn into commercially viable businesses. This is sad when our country so desperately needs all the new businesses possible to address the terrible unemployment situation. A part of the reason for this failure is highlighted by this month’s challenge; many potential entrepreneurs do not know which steps must be taken to commercialise an idea.

The first step is the business model, including the source of income. This entrepreneur will provide a service to a tightly defined market, and make his money from fees. In other enterprises the income could be commission on sales, sponsorship of an activity, rentals, royalties or from advertising income. The source of products for resale and other necessary services must also be identified. Continue reading

Marketing in the digital world

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in May 2012 and is posted here by their kind permission.

 

Getting a response from initial e-mails is a challenge

 

 

 

Challenge

This entrepreneur started a company to market advertising for digital publications and mobiles. Like most start-ups he has a challenge in making initial sales, and he has identified a weakness in his initial e-mails to generate interest.  For instance his e-mails promoting a new product for organisations sending electronic statements has produced no response. He asks what he should include in the e-mail.

Response

This entrepreneur actually faces two challenges: He needs to attract attention from potential customers who do not know his business or his products. To do this he has tried using e-mail as an inexpensive way to communicate his offer, but has been unsuccessful. His second challenge is that he is promoting advertising in the digital world, so his digital communications have to be arresting and effective, he cannot use traditional media to market his products.

E-mail is incredibly efficient at sending messages but this has brought about the major problems of e-mail overload and spam. As a result defences against unwanted mail have been built. Many of this entrepreneur’s e-mails will never be read, victims of spam filters or the delete button. If they are read, it will be a quick scan, so messages which don’t immediately attract attention will be ignored. Continue reading

Penetrating the market

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in April 2012 and is posted here by their kind permission.

 

 

Start ups in small towns need excellent marketing strategies

 

 

 Challenge

This entrepreneur plans to start an event business that will offer wedding and party planning and a catering service offering African gourmet meals with a twist.  He requests advice on marketing and penetrating the limited market in his small town. As an unknown young black entrepreneur he has concerns about succeeding in marketing to a predominantly white and older community.

Response

The first step is market and competition evaluation, to determine if there is enough market, and whether his business could win against established competitors. If either of these are negative then the entrepreneur needs to answer totally different questions.

Assuming this has been done and the market is available, then there is a mix of good and scary news. The good is that he is thinking of how to be different. The idea of gourmet African meals is exactly the sort of unique selling proposition that great businesses are made of.  The scary part is that any market is really hard to penetrate. What is usually in the target’s mind on first approach is something like:

  • I don’t know you, I don’t know your business and I don’t know why I should talk to you;
  • I have never heard of your products, and I am not sure why they should interest me;
  • I have existing suppliers and I am generally happy with them;
  • Now what was it you wanted to sell me? Continue reading

If you are an entrepreneur you are in sales

image courtesy of imageafter.com

Entrepreneurs are frequently great salespeople

It is rare to meet an entrepreneur who thinks they are a great salesperson or sales manager. Most times they will use language like “I just don’t have the gift of the gab” or ‘I know my products but…”. But usually at start up the entrepreneur has to be a salesperson – there is nobody else around!

It is also rare for entrepreneurs to take steps to develop selling or sales management skills, which is odd. They will frequently take financial courses, read marketing ‘how-to’ books and study HR and staff management. The business is totally dependent on sales being made, and yet it is the one art that entrepreneurs seem to shy away from.

Let’s back up a bit. At the time the business launches, the entrepreneur talks to prospective customers, defends the price, negotiates terms, enthuses about the qualities of the products or services and spends lots of effort to think of ways he can make initial sales. Contrary to the usually-expressed belief by entrepreneurs that they cannot sell, they are often really good salespeople. They work really hard and are determined to make sales because they have to. Their product knowledge is awesome; they have the ability to shave a price and the knowledge of when cutting further will hurt the business. They make very sure that what was promised gets delivered, and attend to any customer complaint with vigour and immediacy. Continue reading

Failing to deal with failure

pic courtesy of imageafter.com

This article was first published in the South African edition of Entrepreneur magazine as an opinion piece.

Eighty percent of all start up small businesses will fail within two years, right? Or is it 94% within a year? Franchised businesses are safer, are they not? But by how much seems to be a closely held secret.

Into this catalogue of failure and uncertainty a large infrastructure of very smart people and institutions devote huge amounts of money, thought, assistance and support to educate and support entrepreneurs to open up new businesses and grow existing ones. Banks vie for attention, great publications have large circulations, business coaching is one of the fast growing sectors. Against these supposed market results I have to ask: ‘why’?

One reason is that we individually experience much higher success rates than those quoted so universally. I have yet to find anyone associated with the SME sector whose clients’ exhibit the level of failure quoted. It seems that the failure rate only happens to the other guys.

Another reason is confusion about what constitutes a business failure. We identify the surviving businesses, not the failed ones. If only 6% of businesses survive and employ staff then what happened to the other 94%. Did they fail? Did the entrepreneurs die, emigrate, remain sole traders or close their companies when they accepted a job offer? Did they merge with another company or relocate offshore? We don’t know. Continue reading