Checklist for Starting a Business

 Owning a business is the dream of many people ... starting that business converts your dream into reality. But there is a gap between your dream and reality that can only be filled with careful planning. As a business owner, you will need a plan to avoid pitfalls, to achieve your goals and to build a profitable business.

The "Checklist for Going into Business" is a guide to help you prepare a comprehensive business plan and determine if your idea is feasible, to identify questions and problems you will face in converting your idea into reality and to prepare for starting your business.

Operating a successful small business will depend on:

a practical plan with a solid foundation;

dedication and willingness to sacrifice to reach your goal;

technical skills; and

basic knowledge of management, finance, record keeping and market analysis.

As a new owner, you will need to master these skills and techniques if your business is to be successful.

Identify Your Reasons

As a first and often overlooked step, ask yourself why you want to own your own business. Check the reasons that apply to you.

1. Freedom from the 9-5 daily work routine. ___

2. Being your own boss. ___

3. Doing what you want when you want to do it. ___

4. Improving your standard of living. ___

5. Boredom with your present job. ___

6. Having a product or service for which you feel there is a demand. ___

Some reasons are better than others, none are wrong; however, be aware that there are tradeoffs. For example, you can escape the 9 to 5 daily routine, but you may replace it with a 6 a.m. to 8 p.m. routine.

A Self-Analysis

Going into business requires certain personal characteristics. This portion of the checklist deals with you, the individual. These questions require serious thought. Try to be objective. Remember, it is your future that is at stake!

Personal Characteristics

  Answer each question with Yes or No

1. Are you a leader?

2. Do you like to make your own decisions?

3. Do others turn to you for help in making decisions?

4. Do you enjoy competition?

5. Do you have will power and self discipline?

6. Do you plan ahead?

7. Do you like people?

8. Do you get along well with others?

Personal Conditions

This next group of questions though brief is vitally important to the success of your plan. It covers the physical emotional and financial strains you will encounter in starting a new business.

Are you aware that running your own business may require working 12-16 hours a day six days a week and maybe even Sundays and holidays?

Do you have the physical stamina to handle the workload and schedule?

Do you have the emotional strength to withstand the strain?

Are you prepared if needed to temporarily lower your standard of living until your business is firmly established?

Is your family prepared to go along with the strains they too must bear?

Are you prepared to lose your savings?

Personal Skills And Experience

Certain skills and experience are critical to the success of a business. Since it is unlikely that you possess all the skills and experience needed you'll need to hire personnel to supply those you lack. There are some basic and special skills you will need for your particular business.

By answering the following questions you can identify the skills you possess and those you lack (your strengths and weaknesses).

Do you know what basic skills you will need in order to have a successful business?

Do you possess those skills?

When hiring personnel will you be able to determine if the applicants' skills meet the requirements for the positions you are filling?

Have you ever worked in a managerial or supervisory capacity?

Have you ever worked in a business similar to the one you want to start?

Have you had any business training in school?

If you discover you don't have the basic skills needed for your business will you be willing to delay your plans until you've acquired the necessary skills?

Finding a Niche

Small businesses range in size from a manufacturer with many employees and millions of dollars in equipment to the lone window washer with a bucket and a sponge. Obviously the knowledge and skills required for these two extremes are far apart but for success they have one thing in common: each has found a business niche and is filling it.

The most critical problems you will face in your early planning will be to find your niche and determine the feasibility of your idea. "Get into the right business at the right time" is very good advice but following that advice may be difficult. Many entrepreneurs plunge into a business venture so blinded by the dream that they fail to thoroughly evaluate its potential.

Before you invest time effort and money the following exercise will help you separate sound ideas from those bearing a high potential for failure.

Is Your Idea Feasible?

Identify and briefly describe the business you plan to start.

Identify the product or service you plan to sell.

Does your product or service satisfy an unfilled need?

Will your product or service serve an existing market in which demand exceeds supply?

Will your product or service be competitive based on its quality selection price or location?

Answering yes to any of these questions means you are on the right track; a negative answer means the road ahead could be rough.

Market Analysis

For a small business to be successful the owner must know the market. To learn the market you must analyze it a process that takes time and effort. You don't have to be a trained statistician to analyze the marketplace nor does the analysis have to be costly.

Analyzing the market is a way to gather facts about potential customers and to determine the demand for your product or service. The more information you gather the greater your chances of capturing a segment of the market. Know the market before investing your time and money in any business venture.

These questions will help you collect the information necessary to analyze your market and determine if your product or service will sell.

1. Do you know who your customers will be?

2. Do you understand their needs and desires?

3. Do you know where they live?

4. Will you be offering the kind of products or services that they will buy?

5. Will your prices be competitive in quality and value?

6. Will your promotional program be effective?

7. Do you understand how your business compares with your competitors?

8. Will your business be conveniently located for the people you plan to serve?

9. Will there be adequate parking facilities for the people you plan to serve?

This brief exercise will give you a good idea of the kind of market planning you need to do. An answer of no indicates a weakness in your plan so do your research until you can answer each question with a "yes".

 

 

Say that you're the type who's starting new small business. You Have given attention to the overall chances for success, and have
chosen the new business you want to establish.

What technical issues will you face in establishing the organization? How Much money will you need for beginning new small
business? Where can you get it? What kind of business organization does one have? Where should you locate the company? (start
business tips to follow)

The very first question you want to answer is: How much money will I need? But this question can not be answered until several
other questions are answered and many choices are made.

To Determine how much cash is needed to start a business, enter all Of your prospective income and all of your planned expenses on
a work sheet or form.

Though you may feel that This Type of planning is more than You have to start a simple small business it's useful to begin with
this particular approach to management which puts figures down in black and white. You'll discover exactly the same approach
valuable within an established business.

First, estimate your sales quantity. This will depend on the total Quantity of business in the area, the number and ability of
competitors now sharing that business, and your capability to compete for the customer's dollar. Obtain assistance in producing
your sales quote from wholesalers, trade associations, your banker, along with other business-people. Several business and
statistical books could be useful in making sales volume estimates.

In reaching your final quote of earnings do not be over-enthusiastic. A brand new company generally develops slowly at the
beginning. If you overestimate sales you are likely to spend too much in equipment and initial stock, and commit yourself to
heavier operating expenses compared to your actual sales volume will warrant. As you are just starting up you might have no sales
for the first couple of months. At any rate you may expect your first few months to be quite low.

You must also decide what proportion of your earnings will be cash And what percentage will be offered on credit. If you guess
that a particular portion of the sales are going to be on credit then you have to figure whenever you're going to get the money
for all these sales. 1 month? Two months? More? Never?

In our guide to beginning new small business, estimate how Much cash will be paid out. Bear in mind in starting a company you may
be purchasing gear, paying fees and licenses, making deposits on rent, utilities and so on, several months before you open the
doorway. Some of these expenses are easy to estimate. If you have opted to rent a building (more about this later) then you know
what your deposits will be and how much you'll need to pay out monthly. You are probably able to get the expense of fees, permits
and utility deposits with a couple of telephone calls.

Other cost figures may take a little more work for you. One way Is to obtain typical operating ratios for the type of business in
which you're interested. Among the resources for such ratios are Dun & Bradstreet, Inc., trade associations, publishers of trade
magazines, technical accounting firms, industrial companies, and schools and universities. The normal ratios for your type of
business multiplied by your projected sales volume will serve as bench marks for estimating the several items of expenditure.
However, do not rely exclusively on this way of estimating each cost item. Verify and modify these estimates through investigation
and quotes in the particular market place where you intend to operate.

Do not forget to cover yourself also. You may need cash to live on if You need to quit your job. If your partner is working and
can encourage the household for a while you might not need to withdraw cash from the company. The longer you can go without taking
cash from, the faster you will build up a strong cash position. Now that you have estimated your money receipts and expenses,
write down the amount of money you will put in the business to begin. This goes on line 1 in the case below. Then add lines 1 and
2 for the first month to find line 3. Then add up all of the expenses to get line 5. Subtract line 5 from line 3 to find line 6.
This money in the end of month 1 then goes to line 1 for the beginning of the following month, etc.

If you continue this for the entire year, very soon you'll find You have negative amounts or a negative cash flow. About this time
you will also realize that you should be working on this form with a pencil that has a fantastic eraser.

In this overly-simplified illustration, you notice that by the end of June you are minus $200 in cash. Two solutions can be
attempted - reduce your purchases at June by $200 or start with $200 more. You may be unable to reduce expenses (they will
probably go up as your business starts). That means you'll need to put in $200 more to start with. If all you've got is 4000 then
the extra $200 you need is funding you need to get from somewhere else.

Don't be fooled by this simple illustration. Many small businesses Begin with the $200, and attempt to get the $4000 from
somewhere else. Since a Major cause of failure in the first stages of a business is Under-capitalization, be very careful on your
preparation at this stage. You can Almost always plan on several unexpected expenses and a few flaws in anticipated income.

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