Important Things To Consider Before Starting a Business: So, you’re thinking of establishing your own business. This has both advantages and disadvantages. Owning a business will provide you with a sense of independence and achievement. You’ll be the boss, and you won’t be dismissed, no matter how much you’d like to be. You anticipate a good income once your company is up and running since you will be able to pay yourself a salary and keep the profit or return on your investment.
You will experience pride in ownership, just like you would if you owned a home or a car. Offering a market-valued product or service might provide you with a lot of satisfaction. You can easily accept new ideas if you are the boss. Because your company will almost certainly be a small one – at least at first – you won’t have a vast, cumbersome organization to retrain or a board to seek approval from every time you want to try something new.
If the concept doesn’t work out, you may immediately abandon it. One of the most valuable qualities of small firms is the ability to be flexible. Take a look at the other side. If you have employees, you must do payroll week after week. You must always have money on hand to pay creditors like the man who sells you goods or materials, the dealer who furnishes fixtures and equipment, your landlord if you rent, your mortgage holder if you buy your business, the publisher who runs your advertisements, the tax collector, and many others. You must pay for all of your “profits” before you can call them yours.
All final decisions must be made solely on your own. You might lose money not just to yourself, but also to your employees, creditors, and customers if you make a bad decision. Furthermore, you must deal with adversity on your own due to events that are usually beyond your control. Long hours of hard work are required to overcome these business failures and maintain your firm success. It’s possible that this isn’t the type of work you want to undertake. You learned a talent while working for someone else.
Now, if you establish your firm, you may expect to use that talent for 40 or more hours each week. Instead, you must also execute managerial duties. You must manage the books, study accounting records, sit back and perform long-range planning, jump in and handle expediting, and, after everyone has gone home and you have finally caught up with the paperwork, jump in and handle expediting.
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16 Important Things To Consider Before Starting A New Business
1. Kind of Business: Whether you’ve made a decision or not, continuing your self-evaluation will be beneficial. Begin by giving a brief overview of your history and experience. Include occupations, education, and interests in your list. Then make a list of things you believe you’d want to do. Is what you want to do in line with what you’ve already accomplished? It’s advantageous if your previous skills and training can be put to immediate use in your new business.
What are your future requirements? What are the requirements of your potential customers? If people are willing to pay for something you don’t enjoy, you might be able to make money doing it. On the other side, no matter how pleased you are doing it, you will never generate money if others don’t need your product or service. Most companies fail, according to business experts, because they are in the wrong business rather than “doing business poorly.”
To put it in other words, even if you are a fantastic contractor, you should not launch a contracting firm in a population-declining region. Match your strengths and skills to the most relevant aspects right now. If the job criteria and your background are incompatible, search for work with a firm that provides a crucial product or service to obtain the experience you need. Look for a job with a well-managed, lucrative company in the field you want to work in.
Then, as you develop technical skills, try to suck up as much management information as possible. Education might also help. While no formal schooling is required to start a business, the more knowledge you have in the relevant areas, the more equipped you will be.
2. Your Prospects for Success: What are your odds of becoming successful if you start your own business? Every day, new enterprises are launched. Nearly as many are failing or being phased out. A year of bad business circumstances is more likely to result in a higher-than-average number of failures or closures.
Following a year of favorable economic circumstances, the overall number of firms tends to rise dramatically. In general, the number of enterprises grows in lockstep with growth in the human population, total personal income, and per capita income, and because these elements have all grown steadily over time, the overall number of small businesses grows every year.
However, there are certain growing pains associated with this expansion. At the same time, as new enterprises are being formed, old ones are being phased out. Some of these halts are legally defined as company failures; others are voluntary exits by owners seeking to avoid or minimize losses and are not considered failures in the legal sense. Younger businesses are more likely to close down.
Many businesses do not complete their first year. Those who make it through the first year’s struggles have a steady fall in their discontinuation rate until it is considerably lower at the end of many years. As a result, the longer you’re in business, the better your odds of success become. The most common reason for a company’s demise is poor management. Year after year, a lack of managerial experience and competence has been blamed for almost 90% of all business failures.
3. Financing/Capital: Put all of your projected revenue and expenses into a spreadsheet or form to figure out how much money you’ll need to start a business. Even if you feel that establishing a small business does not need this level of planning, starting with this management style is a smart move. Notwithstanding, a similar method may also work in a well-established company.
To get started, prepare a quick assessment of how much money you’ll make. The volume of business in the area, the number of competitors currently competing for the consumer’s money, and your own ability to compete for the consumer’s money will all impact this. Wholesalers, trade groups, bankers, and other business people can all help you estimate your sales. A variety of business and statistical journals may help estimate sales volume.
Don’t get too excited while calculating your ultimate sales forecast. A new company’s growth is usually modest at first. If you overestimate sales, you’ll likely overspend on equipment and initial inventory, as well as incur higher running costs than your actual sales volume warrants.
Because you’re just getting started, you might not make any sales for the first several months. In any case, you may anticipate having a very modest income for the first several months.
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4. Obtaining Funds: Where will you receive the money now that you’ve calculated your first capital requirements? Your personal savings account is the primary source. Then you could find family, acquaintances, or other people who are prepared to “invest” their money in your company.
Before getting a substantial sum of money from a third party, keep in mind that you should have personal control over enough to ensure ownership. A lending institution may be ready to fund part of your running needs if you can prove that you have thoroughly worked out your financial requirements and can demonstrate experience and honesty.
This may be done over a period ranging from 60 days to a year. Any institution with money to lend is concerned with security first and foremost. While security may be a corporate asset, the best security is generally your house or another personal asset while you’re first getting started.
A business strategy is the second item the lender will want to see. If you provide a business plan that includes a cash flow prediction, the lender will see that you have given your business some serious thought and will be more inclined to evaluate your request.
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5. Location: The location of a firm has a significant impact on its performance. Your business’s location has the power to make or ruin it. You must consider accessibility while choosing a site for your firm. Consider the traffic that surrounds that location, the roadways, and its proximity to consumers and raw resources.
You must also examine the workspace; you will want a facility that is suited for your business and allows for development, as well as your rivals and the availability of labor in the region.
6. Competition: You won’t be able to be in business for long if you don’t know who your competitors are and what they’re up to. When your product is a monopoly, competition doesn’t matter. Otherwise, you’ll have to come up with a good strategy to close the demand-supply gap.
Gaining a market share should be your first objective if you’re starting a business. If your product is in great demand, this shouldn’t be too tough. If not, you may need to strengthen your company’s position to compete. Understanding your competitors, figuring out how they’ve positioned themselves, figuring out their pricing and marketing strategies, and assessing their strengths and weaknesses are all part of the competition analysis process.
7. Regulations, Rules, and Laws: Compliance with many rules and regulations is required when starting a new firm. Each country has its own set of rules and regulations that require each new firm to be registered with the appropriate authorities and comply with specific requirements.
As a result, registering the company’s name with the Ministry of Commerce, for example, may be necessary. More information on the workforce is necessary, and specific deductions (such as tax) may be requested from the employees, which must be deposited with the appropriate government agencies.
Before starting a new business in an unfamiliar area, it is usually a good idea to contact a lawyer. Noncompliance with the law might result in hefty fines and penalties, stifling the growth of a new company.
8. Return on Investment: Divide net profit by the amount spent to get the return on investment (ROI). Although the initial return on investment is small, it is expected to grow every year.
The return on investment must be examined against the returns on investment from other business prospects. It might be compared to any other form of income, such as money earned through stock market investments.
9. Timing: You must consider the time when launching a business. The time it takes to establish and grow a business, as well as the time it takes to manage it and the optimal moment to present it. If the required time commitment does not match your lifestyle and there is no way around it, then that business is not for you.
If the timing for the business or its product isn’t appropriate, then it’s not the correct time to launch it right now; perhaps later. Also, the amount of time it will take to create the business before launching it will be taken into account when deciding whether or not you want to start it at all, because patience is a virtue, and you may not have that time.
10. Resources: You’ll need resources to establish a business. Material, human, financial, and other resources are all possible. Before you establish a business, you should think about the resources you’ll require. Resources should be easily accessible, available, cost-effective, and useful to the company. Starting a business may not seem like a good option if your resources do not fulfill the bulk of your business requirements.
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11. Taxes: Before you go ahead and start a business, be sure you understand the tax implications. Your business will be subject to federal, state, and local taxes. You may be responsible for federal taxes such as social security, excise taxes, and if your firm is formed corporation income tax.
You must ensure that your employees’ share of the old-age survivor, hospital, and medical insurance contributions, as well as their unemployment compensation contributions, are collected from their pay. You must also deduct from their paychecks their current share of federal, state, and local income taxes. If you work for yourself, you must comply with the social security and individual income tax withholding obligations.
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12. SWOT Analysis: SWOT is on entrepreneurship principle of consideration for the establishment of an enterprise. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. After a business proposal has been initiated, the next primary evaluation is the SWOT analysis.
The strengths are the advantages that are inherent in the business, the weaknesses are the disadvantages, opportunities are the chances of positivity in the business, and threats include factors outside the business that can affect it negatively. SWOT analysis may not be fully evaluated at the inception of a business but it is necessary to have an outlook before starting the business.
13. Business Identity: Often times, people start up a business without putting into consideration its identity. This is mostly seen in small businesses. It is important that every business should have an identity. Identity here goes beyond nomenclature.
But then, it is also very important to choose a great business name, for this makes promotion and market acceptance easier. Proper research should also be made in order not to use an already existing business name, trade mark or any identity capable of conflicting with that of another’s business.
This aspect of necessity is often neglected or carried out less diligently. Sadly, such conflicts attract liability. Having a great business identity increases you business audience and as well protects its standard and uniqueness. It is also very beneficial to have business identities such as your business name and trademark duly registered, especially if it is a large scale business, partnership and Corporation.
14. Insurance: Another task to do before you can establish your business is to ensure that you have enough insurance coverage. Otherwise, you risk losing some or all of your investment. Insure against hazards over which you have no control, such as fire, windstorm, liability judgments, and key employee death.
On the other hand, do not insure against a loss that would be insignificant if it occurred, and do not pay for protection when the premium represents a significant fraction of the insured property’s worth.
Fire, general liability, automotive liability, car physical damage, workers’ compensation, crime, business interruption, glass, group life; group health, and disability are some of the key forms of insurance to consider. There is a discussion about adequate insurance coverage. Seek counsel from more than one insurance agent, broker, or company representative.
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15. People’s need: The purpose of running businesses is to satisfy people’s need. It is from satisfying people’s needs that profit is made. People can only patronize you and pay you after you have satisfied their need. One who intends to start up a business must therefore study the need of the people. By satisfying people’s need, a business owner solves problems in the society. The society is dynamic, and also, people’s need may vary from place to place. Thus, people’s need may change from time to time.
This implies that the act of studying the people’s need is a continuing process; otherwise, one may find his business audience reducing. The whole sum of this is that one who intends to run a business must be innovative. By being innovative, there should be a gap he seeks to fill up and not just what is regular. The gap does not need to be much. The innovation could be a deviation from the regular style in any respect which of course retains the ability to satisfy the need of the people.
16. Your need: Again is the need of the business owner. This simply has to do with the interest and principles of the business owner. The general need of every business is surely to make profit. But this need is not personal. One must consider if he has passion for the area of business he intends to venture into. Passion makes business fun and seamless. One who does not have interest in his area of business will have a difficult time sustaining it. The stress and commitment required in running a business is intensifying, not to talk of one running a business without passion. Again is the principle of the business owner. This will better be explained with an instance.
One whose religious belief is against alcohol and who vehemently subscribes to that belief may have a difficult time venturing in alcohol business. In that case, he would be running the business with more than the required effort. This should not be the case in businesses. One who intends to open a business should therefore consider his own needs; that is, his interests and principles.
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Examine your objectives and expectations before deciding to work for yourself. Several decades ago, English poet and writer Alexander Pope stated that “Hope springs forever in the human breast.” He wasn’t referring to those who were growing or creating businesses, but he could have been. Everyone who starts a business for oneself aims to achieve or exceed a set of personal objectives.
There is no business that is so flawless that anyone can start it and generate a guaranteed profit. A talented, devoted proprietor, on the other hand, can often turn a business around while others have failed. Remember that your potential clients will only give you their money if they believe you will provide them with their money’s worth. That implies you’ll need to be well-versed in your field.
Edeh Samuel Chukwuemeka, ACMC, is a lawyer and a certified mediator/conciliator in Nigeria. He is also a developer with knowledge in various programming languages. Samuel is determined to leverage his skills in technology, SEO, and legal practice to revolutionize the legal profession worldwide by creating web and mobile applications that simplify legal research. Sam is also passionate about educating and providing valuable information to people.