Starting A New Business? Six Important Issues You Need To Address.
Starting A New Business? Six Important Issues You Need To Address.
Why worry about this? Because if you choose not to match your strongest skills with the market you are entering, you will quickly find yourself at a huge disadvantage to your competition. What most new entrepreneurs fail to understand, is how competitive business is these days. For example, when I began in the packaging business everything was fun. By the late 1970’s, one of the major west coast markets still only had a total of 15 companies servicing it. When I returned in 1990 to help a troubled packaging business over in Seattle, the market had increased only 5% over that time frame and yet, the number of manufacturers and brokers servicing this sector had risen to 43. Now, that is competition!
As you can imagine, margins had completely deteriorated as the greater number of companies were fighting for an ever-decreasing share of a somewhat stable market pie. Therefore, knowing your strengths, and staying with them when choosing your new business venture, may be your only salvation when the feeding frenzy begins among the sharks. If you cannot find an exact match for your skills, look for a business that will capitalize on many of the same skills. If you do, you will ultimately be glad you did. And do not forget how important it is to write everything down when doing your evaluation.
2. How to choose the BEST name for your business.
Naming your business is another issue where many new owners fail to invest enough “think time’ for creating the marketing impact necessary to survive. On this topic, make sure to understand how your new name will relate on the Internet. Does it speak to what you do, instantly? Could part of your business name be a great search term? Be sure you consider these important issues as the Internet is here to stay, and could have a serious marketing impact on your new venture as time goes on.
Another factor to consider is if your new name will require lots of “branding” investment in order for people to understand what you are about? Is a branding tradeoff warranted, and if you make the investment, is your new name going to establish your company as, “first in customer’s mind” when they research your business category? Or would a more simplistic name speaking directly to your product or service be all that is needed for market impact? Some names look good in the initial business development, but can become highly restrictive for growth or for providing necessary market flexibility, should things not go as in accordance with the business plan. Be aware of this when choosing a name if your intentions are to grow your business in additional directions.
In summary, take the necessary time to select the best business name. It will help you to compete in today’s economic climate, and will help to more rapidly connect your business with today’s more sophisticated customer base.
3. How to review your market, stability of supply, and profit potential for your idea.
Next, and very important, is to research and understand the “realistic” profit potential for your idea. Also, review this in relation to the size of your market base. Too many times, new entrepreneurs see the “huge amounts of money” they are going to make just as soon as everything starts to click. Sadly, in their business plans they forget to accept the possible reduction of margin projections based on competition. Strong competitors have deep pockets! A lot deeper than yours will be. And the truth is they don’t want you getting a strong foothold in their marketplace. So, always allow for this potential margin squeeze when calculating the time and capital required for your startup success and future operations. Also, ask yourself how large your market base really is? Can it truly support my business as a new competitor in this market category? Will there still be enough product margins if I dilute the market even further?
As another point to consider, always analyze the stability of the product or service you will be offering. Remember that business moves at a rapid pace in today’s world, and what appears to be a great idea today, could quickly become obsolete. Make sure you feel comfortable with the longevity of your offering, and supply sources available, for your new business before investing your capital. Lose the emotion and review worst-case scenarios in your business plan. Have an alternative profit plan just in case the competition doesn’t choose to “lay down and die” when you open your doors. Knowing both your market scope and customers intimately beforehand, will help immensely for getting beyond your first year. Do your due diligence here or you may pay a difficult price!
As a final case in point, one of my first businesses ventures was a retail gift store in a major mall using direct mail marketing in combination. This allowed us to quickly reach beyond the store walls and gain a larger customer base. As it were, we were so successful with our meat and cheese gift packages that we stripped all product from our main supplier. He had six stores of his own spread across the state, and finally said he had to “shut us off” … right in the middle of the December rush! I think you can see the impact on sales this was about to have on our business, so we worked out an agreement to get us through the season. However, it was a lesson well learned; that having the correct supply source is imperative if your business is going to show rapid and sustained growth. Be aware of this important point before startup!
4. Learn how to negotiate for better pricing with your vendors, thus helping to increase profits.
There is an old saying, which is extremely true in business … “You don’t make your profit on the sales side, but instead, on the buy side.” What many new owners don’t understand is how important it is to know how to negotiate better price and terms for their new business. In almost every case when I work with a troubled business, it is partly in trouble because their “buy price” is impeding their ability to be competitive. Since a “competitive sales price” is pretty much dictated by the marketplace, you will have little control over gaining more profit in this regard. Therefore, having the ability to buy materials and goods at a better price is where your margins will begin to increase.
Another oversight by the new entrepreneur is how important vendor payment terms become. For instance, if you provide a 30-day net term to your customer, many will not adhere to this, and it is usually your larger companies that take advantage of payment terms when first starting out. If you are locked into 30-days with your vendors, but your accounts receivables are not coming in until the 37th day in most cases, then you will have a serious cash shortfall for operations. You either need a rich uncle, a banker who truly understands your business potential and is willing to lend “risky” working capital (do not count on this one), or an investor who has really deep pockets and is truly committed for helping to build your enterprise.
Instead of placing yourself in this difficult situation at the beginning, it might be a better idea to meet with your suppliers ahead of time and negotiate “extended terms” over the first year of operations if at all possible. By getting 45-60 day terms, you will not be placing your business credit at risk. Your receivables, if you are offering 30-day terms, should all be collected by the time your vendor invoice is due and payable. If dealing with lots of money, and by getting an extra 15 days to pay as in the case of 45-day terms, you also have the ability to earn additional interest income on your “money float.” By keeping your operating capital in an interest bearing account, you can earn additional business income over the year.
As you can see, getting yourself competitive in business and staying that way can take many different forms. Make sure before opening your doors, you explore all possibilities necessary to create the margins and cash flow needed to survive. If you are not comfortable with your understanding of how competitive business works, I would strongly suggest you keep part of your initial budget available for employing an experienced business advisor. Otherwise, by the time you realize you are in trouble, it may be too late.
5. Why you need sales skills to survive, and how you can quickly learn the art of selling.
Too many times a new entrepreneur ties himself/herself to one large core account. In many cases, it is a company they worked for, saw a problem that needed solving, and broke away to start a business for the solution of that problem. This is probably one of the most secure ways to start a new business, however it has a dark side too … lack of sales understanding.
It is one thing to have new business handed to you, as is the case of working with a known company, but quite another when something goes awry and you find yourself having to sell competitively within the marketplace. Therefore, another area in which to invest time and effort before opening your doors, is to learn, understand, and practice the necessary selling techniques allowing you to compete effectively.
In many cases, I see entrepreneurs that are desperately lacking in sales skills and yet, have not provided enough initial startup capital for hiring the sales professional needed for helping them open new accounts. Not only will you need to open new accounts with your selling skills, but you will also be forced to protect the door from, “all the wolves,” once your new account is in house. Having enough sales savvy and the right communication skills is imperative if you are to remain a viable business beyond your startup relationship with a mature company.
Should you be in the envious position of working with an established company as your core account at startup, just make sure you protect yourself by learning, or hiring, people who know, understand, and can compete in a competitive sales environment. Learn sales skills, whether it is for retail or outside selling, or at least hold back enough money for hiring the professional help needed in these areas. By doing so, you will ensure the success of your business, even if things do not go as initially planned.
6. Learn how to price and know why pricing issues and competitive strategies are needed for your business survival.
Pricing? What is pricing? What is a pricing strategy? Questions to know and answer before entering into the world of business. No matter what business category you choose, correct pricing and having a pricing strategy for your business are keys to your success. Here is how they work.
How do you determine the “right price” to charge for your product or service? This is a most difficult question. On the surface and to the beginner, it appears obvious. Just figure what I need for covering everything … add my profit, and bingo … start selling! This seems easy enough, but in many cases your price calculated in this way, might not be competitive for very long. Why? Because you do not have the buying power that a larger competitor will have. Thus, you will not be afforded the same discount structures should margins begin to shrink. Therefore, in order to compete, you may have to “Package” your offering in a more different way. Plus, you will show no market differential if your pricing structure is identical to the competition, so why should a new customer buy from you? But, there is a solution.
Instead of meeting price issues head on, you may have to offer something extra such as a Free service. This can help to maintain a higher sales price and make your new product or service look more attractive to a potential customer, a soft product so to speak. By doing this, a customer that may not look at you otherwise, may be willing to give you a try. Instead of offering a discount in price, you can hold your higher price and offer an additional FREE service, which in essence is a discount, but may present much better to your prospect base. This additional and perceived customer value can create a strong benefit for your business in a highly competitive selling environment. Therefore, if new in the marketplace, look to see creative ways for packaging your offers differently.
When looking at your new price structure, you will also need a pricing strategy. This is one in which you will look at how your overall profit structure could change by discounting certain items or services for increasing cash flow and volume sales more quickly. By offering other “high end” products and services for helping to maintain your operation, items or services providing something better and of higher perceived value and quality … something more unique to the marketplace, your pricing strategy will also become one of the important legs supporting your marketing strategy. Bottom line … if you think about what was just said, it is important your pricing and marketing strategies be considered jointly to see how they mesh before launching your business.
By packaging your products and services correctly, pricing them in such a way as to create interest and a marketing advantage, you will find your business to be much more stable and profitable, and growing at a much faster rate than by not doing so. Therefore, make sure you look at all pricing possibilities and their impact before your start date, weigh all advantages to offering alternative price options, review all possible “marriages” with other companies for being able to possibly offer a Free service, and be sure to create a secondary pricing and marketing plan should your first one falter.
In closing, by reviewing and securing the proper direction for your new business enterprise, you will give yourself a much better chance for success. Look at these things as challenges to be overcome, and not fearful walls to stop your dreams. In short, may your pioneering spirit continue, and your business achievements prove great.
Starting A New Business Six Important Issues You Need To Address - To learn more about this author, visit Greg Bacon's Website.
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1. How to choose the best business for fitting your particular skill set?
Why worry about this? Because if you choose not to match your strongest skills with the market you are entering, you will quickly find yourself at a huge disadvantage to your competition. What most new entrepreneurs fail to understand, is how competitive business is these days. For example, when I began in the packaging business everything was fun. By the late 1970’s, one of the major west coast markets still only had a total of 15 companies servicing it. When I returned in 1990 to help a troubled packaging business over in Seattle, the market had increased only 5% over that time frame and yet, the number of manufacturers and brokers servicing this sector had risen to 43. Now, that is competition!
As you can imagine, margins had completely deteriorated as the greater number of companies were fighting for an ever-decreasing share of a somewhat stable market pie. Therefore, knowing your strengths, and staying with them when choosing your new business venture, may be your only salvation when the feeding frenzy begins among the sharks. If you cannot find an exact match for your skills, look for a business that will capitalize on many of the same skills. If you do, you will ultimately be glad you did. And do not forget how important it is to write everything down when doing your evaluation.
2. How to choose the BEST name for your business.
Naming your business is another issue where many new owners fail to invest enough “think time’ for creating the marketing impact necessary to survive. On this topic, make sure to understand how your new name will relate on the Internet. Does it speak to what you do, instantly? Could part of your business name be a great search term? Be sure you consider these important issues as the Internet is here to stay, and could have a serious marketing impact on your new venture as time goes on.
Another factor to consider is if your new name will require lots of “branding” investment in order for people to understand what you are about? Is a branding tradeoff warranted, and if you make the investment, is your new name going to establish your company as, “first in customer’s mind” when they research your business category? Or would a more simplistic name speaking directly to your product or service be all that is needed for market impact? Some names look good in the initial business development, but can become highly restrictive for growth or for providing necessary market flexibility, should things not go as in accordance with the business plan. Be aware of this when choosing a name if your intentions are to grow your business in additional directions.
In summary, take the necessary time to select the best business name. It will help you to compete in today’s economic climate, and will help to more rapidly connect your business with today’s more sophisticated customer base.
3. How to review your market, stability of supply, and profit potential for your idea.
Next, and very important, is to research and understand the “realistic” profit potential for your idea. Also, review this in relation to the size of your market base. Too many times, new entrepreneurs see the “huge amounts of money” they are going to make just as soon as everything starts to click. Sadly, in their business plans they forget to accept the possible reduction of margin projections based on competition. Strong competitors have deep pockets! A lot deeper than yours will be. And the truth is they don’t want you getting a strong foothold in their marketplace. So, always allow for this potential margin squeeze when calculating the time and capital required for your startup success and future operations. Also, ask yourself how large your market base really is? Can it truly support my business as a new competitor in this market category? Will there still be enough product margins if I dilute the market even further?
As another point to consider, always analyze the stability of the product or service you will be offering. Remember that business moves at a rapid pace in today’s world, and what appears to be a great idea today, could quickly become obsolete. Make sure you feel comfortable with the longevity of your offering, and supply sources available, for your new business before investing your capital. Lose the emotion and review worst-case scenarios in your business plan. Have an alternative profit plan just in case the competition doesn’t choose to “lay down and die” when you open your doors. Knowing both your market scope and customers intimately beforehand, will help immensely for getting beyond your first year. Do your due diligence here or you may pay a difficult price!
As a final case in point, one of my first businesses ventures was a retail gift store in a major mall using direct mail marketing in combination. This allowed us to quickly reach beyond the store walls and gain a larger customer base. As it were, we were so successful with our meat and cheese gift packages that we stripped all product from our main supplier. He had six stores of his own spread across the state, and finally said he had to “shut us off” … right in the middle of the December rush! I think you can see the impact on sales this was about to have on our business, so we worked out an agreement to get us through the season. However, it was a lesson well learned; that having the correct supply source is imperative if your business is going to show rapid and sustained growth. Be aware of this important point before startup!
4. Learn how to negotiate for better pricing with your vendors, thus helping to increase profits.
There is an old saying, which is extremely true in business … “You don’t make your profit on the sales side, but instead, on the buy side.” What many new owners don’t understand is how important it is to know how to negotiate better price and terms for their new business. In almost every case when I work with a troubled business, it is partly in trouble because their “buy price” is impeding their ability to be competitive. Since a “competitive sales price” is pretty much dictated by the marketplace, you will have little control over gaining more profit in this regard. Therefore, having the ability to buy materials and goods at a better price is where your margins will begin to increase.
Another oversight by the new entrepreneur is how important vendor payment terms become. For instance, if you provide a 30-day net term to your customer, many will not adhere to this, and it is usually your larger companies that take advantage of payment terms when first starting out. If you are locked into 30-days with your vendors, but your accounts receivables are not coming in until the 37th day in most cases, then you will have a serious cash shortfall for operations. You either need a rich uncle, a banker who truly understands your business potential and is willing to lend “risky” working capital (do not count on this one), or an investor who has really deep pockets and is truly committed for helping to build your enterprise.
Instead of placing yourself in this difficult situation at the beginning, it might be a better idea to meet with your suppliers ahead of time and negotiate “extended terms” over the first year of operations if at all possible. By getting 45-60 day terms, you will not be placing your business credit at risk. Your receivables, if you are offering 30-day terms, should all be collected by the time your vendor invoice is due and payable. If dealing with lots of money, and by getting an extra 15 days to pay as in the case of 45-day terms, you also have the ability to earn additional interest income on your “money float.” By keeping your operating capital in an interest bearing account, you can earn additional business income over the year.
As you can see, getting yourself competitive in business and staying that way can take many different forms. Make sure before opening your doors, you explore all possibilities necessary to create the margins and cash flow needed to survive. If you are not comfortable with your understanding of how competitive business works, I would strongly suggest you keep part of your initial budget available for employing an experienced business advisor. Otherwise, by the time you realize you are in trouble, it may be too late.
5. Why you need sales skills to survive, and how you can quickly learn the art of selling.
Too many times a new entrepreneur ties himself/herself to one large core account. In many cases, it is a company they worked for, saw a problem that needed solving, and broke away to start a business for the solution of that problem. This is probably one of the most secure ways to start a new business, however it has a dark side too … lack of sales understanding.
It is one thing to have new business handed to you, as is the case of working with a known company, but quite another when something goes awry and you find yourself having to sell competitively within the marketplace. Therefore, another area in which to invest time and effort before opening your doors, is to learn, understand, and practice the necessary selling techniques allowing you to compete effectively.
In many cases, I see entrepreneurs that are desperately lacking in sales skills and yet, have not provided enough initial startup capital for hiring the sales professional needed for helping them open new accounts. Not only will you need to open new accounts with your selling skills, but you will also be forced to protect the door from, “all the wolves,” once your new account is in house. Having enough sales savvy and the right communication skills is imperative if you are to remain a viable business beyond your startup relationship with a mature company.
Should you be in the envious position of working with an established company as your core account at startup, just make sure you protect yourself by learning, or hiring, people who know, understand, and can compete in a competitive sales environment. Learn sales skills, whether it is for retail or outside selling, or at least hold back enough money for hiring the professional help needed in these areas. By doing so, you will ensure the success of your business, even if things do not go as initially planned.
6. Learn how to price and know why pricing issues and competitive strategies are needed for your business survival.
Pricing? What is pricing? What is a pricing strategy? Questions to know and answer before entering into the world of business. No matter what business category you choose, correct pricing and having a pricing strategy for your business are keys to your success. Here is how they work.
How do you determine the “right price” to charge for your product or service? This is a most difficult question. On the surface and to the beginner, it appears obvious. Just figure what I need for covering everything … add my profit, and bingo … start selling! This seems easy enough, but in many cases your price calculated in this way, might not be competitive for very long. Why? Because you do not have the buying power that a larger competitor will have. Thus, you will not be afforded the same discount structures should margins begin to shrink. Therefore, in order to compete, you may have to “Package” your offering in a more different way. Plus, you will show no market differential if your pricing structure is identical to the competition, so why should a new customer buy from you? But, there is a solution.
Instead of meeting price issues head on, you may have to offer something extra such as a Free service. This can help to maintain a higher sales price and make your new product or service look more attractive to a potential customer, a soft product so to speak. By doing this, a customer that may not look at you otherwise, may be willing to give you a try. Instead of offering a discount in price, you can hold your higher price and offer an additional FREE service, which in essence is a discount, but may present much better to your prospect base. This additional and perceived customer value can create a strong benefit for your business in a highly competitive selling environment. Therefore, if new in the marketplace, look to see creative ways for packaging your offers differently.
When looking at your new price structure, you will also need a pricing strategy. This is one in which you will look at how your overall profit structure could change by discounting certain items or services for increasing cash flow and volume sales more quickly. By offering other “high end” products and services for helping to maintain your operation, items or services providing something better and of higher perceived value and quality … something more unique to the marketplace, your pricing strategy will also become one of the important legs supporting your marketing strategy. Bottom line … if you think about what was just said, it is important your pricing and marketing strategies be considered jointly to see how they mesh before launching your business.
By packaging your products and services correctly, pricing them in such a way as to create interest and a marketing advantage, you will find your business to be much more stable and profitable, and growing at a much faster rate than by not doing so. Therefore, make sure you look at all pricing possibilities and their impact before your start date, weigh all advantages to offering alternative price options, review all possible “marriages” with other companies for being able to possibly offer a Free service, and be sure to create a secondary pricing and marketing plan should your first one falter.
In closing, by reviewing and securing the proper direction for your new business enterprise, you will give yourself a much better chance for success. Look at these things as challenges to be overcome, and not fearful walls to stop your dreams. In short, may your pioneering spirit continue, and your business achievements prove great.
Starting A New Business Six Important Issues You Need To Address - To learn more about this author, visit Greg Bacon's Website.
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Joe DagerJoe Dager is President of Business901, a progressive coaching company providing no-nonsense direction in areas such as Lean Six Sigma Marketing and organized referral marketing. What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe’s ability to combine his expertise with “out of the box” thinking is unsurpassed. He has always delivered quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with.” - James R. If you want to learn more about Business901, start a conversation with us. We can be found @ Web/Blog: Business901.com Web/Blog: FundingYourNonprofit.com LinkedIn Profile Follow me on Twitter - Visit Joe Dager's Website |
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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