So, you want to be your own boss, and use all of your experience to benefit you rather than an employer? Great, then there are quite a few practical aspects to consider:
Before you even start to plan your own business you need to have thought carefully and come up with the idea you will be using. This concept can be original or something that has been done many times before. Remember, there are very few ideas that are completely original, and most concepts will be in practice by somebody somewhere, if not lots of people. This does not, however, mean that you can’t do the same thing as others, but using the basic idea with a variant. Your idea may not be new, but with a different USP (Unique Selling Point) then the idea becomes something else, for example setting up a restaurant – the unique idea might be to serve Cuban food! It need not be something you are qualified in, but of course whichever business you choose, the more you already know, the easier the whole process will be.
You do not necessarily need to think of your own idea – you can purchase an existing business as an ongoing concern, or you can buy into a franchise operation where the business model is tried and tested by someone else, but you will still need to address all the issues below.
Once you have settled on an idea, your next step will be to begin conducting market research.
Market research needs to be thoroughly carried out before you even think about trading, so that you are following the right path through the rest of your planning. The type of your chosen business will determine just how much research you will need to do, but the basics should not be neglected. As with so much else, the internet is a great place to start. The most important research is your market. Explore:
Who are your customers?
What are the demographics of your customers (where do they live)?
What age group would your customers be?
What is the market share, how many customers? (e.g., if you were selling TVs into the UK, then how many TVs are there in the UK and how many are you expecting to sell of the total told in the UK?
Another aspect of market research to explore is that of you competition. A complete analysis of your existing competitors is crucial to your new business and will help you to anticipate how much of the market share you can hope to take. A great way to test the field is to be their customer, so that you can see their levels of customer care, pricing and quality, and then begin to work out which areas you will be able to improve.
Once you have done your research, you can begin to test the outcome. The best method here is to actually approach potential customers and get their feedback. This will provide invaluable information to help you fine tune the product or service you will provide, and who knows, you may even get your first customer at the same time! After completing the above you should now be excited at the prospect of starting your own business, assuming of course you have established there is a market for the products and / or services you are going to provide. From here you can begin to move forward into your next steps.
Estimate the sales that you hope to do in the first 5 years of setting up your business. You can use the results of from your competitor analysis or market research to give you a starting point in your estimations. The first year should be a fairly accurate representation of what you believe you can achieve, and it is wise to be somewhat pessimistic here so that you are well prepared for any eventuality. The ideal is to plan out a best and worst case scenario to prepare your reaction to either outcome.
How will you finance your operation? What you need to do first is work out how much finance you will actually need. Think about:
Will you need employees when you initially start up?
If so, what will you need to pay them either hourly or annually?
What equipment (e.g., tools, computers, desks, stationary, etc.) do you need to start your business?
Who will your suppliers be and how much will they charge you?
Will they provide a credit account on start-up?
Do you need a warehouse, office or can you initially set-up and work from home?
What costs will be associated with any of these options even working from home where you may use the telephone or use the gas and electricity more than usual now that you are based from home.
Do you need transport? How much will this cost?
Do not forget to separate your day to day running costs and your initial (capital outlay) set up costs, as well as estimating how long you anticipate it will be before you actually begin to be paid by your customers.
Although much of this seems like guess work, if you have researched thoroughly and accurately, it will now give you an insight into your cash flow. Once you have estimated your sales and determined your costs, you should be able to prepare an analysis of your predicted cash flow. This will in turn determine your breakeven and profits on a month by month basis. The best way to prepare a simple cash flow analysis is using a spreadsheet. If you are not yet computer literate, ask a friend or family member to assist you so that you can see every last details clearly.
Marketing / Advertising
Finally, you will need to consider the marketing and or advertising that you intend to use. Your marketing is another vital aspect of preparation, and not something that should be left until after you have started the business, as no matter how well prepared you are, you need to tell people who and where you are! You may have a product which could be marketed or sold at trade or public shows and exhibitions there. It is worth considering the possibility of using mail shots, but do bear in mind the statistical positive results from mail shots are generally about 3% which may not be the best use of your marketing budget. You may be able to send out emails to new customers, but do be aware of the laws that now surround spam in the UK. Considering how much shopping is now done on the internet, advertise online as well as in traditional media, even if you don’t yet have a website, in facet especially if you don’t as you will struggle to keep up with the competition if you have no other internet present. It is still very much worth considering having a company website, even a simple one, which does not have to cost the earth and can be updated at a later date. Your business will be easier to find providing the site is well positioned on all the major search engines for example Google and Yahoo, and you may find you are able to use the site to physically sell your services online.
When all the steps are completed, you will have determined whether your business will work, who your audience is and what kind of finance you require be it from friends or family or the bank. Even if you won’t be turning to your bank, it is wise to convert all of your research and planning into a detailed business plan, which you will be able to return to time and again, and which all investors, even family (never mind the bank manager!) will be pleased to see.