A GUIDE TO STARTING A BUSINESS

Definition of “Business”

A business may be defined as an activity of buying and selling goods and services for profit.  Business can be done by exchanging goods for goods, goods for services or by exchanging goods for money.

Purpose of doing business

Any business undertaking aims at making profit.

Profit is the amount that remains after subtracting the cost of providing the service or product from what one gets after selling. When production cost is higher than sales it should alarm the owner because the business is making losses.

A great small business always starts out as an idea, but you have to transform that idea into action

Every year, hundreds of thousands of people across the country take a leap of faith and start their own business. This path requires a lot of hard work, and many end up failing. But for those who survive, the rewards of entrepreneurship are well worth the obstacles they face on the road to success.

Information on this page will enable the learner to demonstrate basics for starting a new business with fewer hassles. It will enable the business owner to identify the type of business to engage with, how to give it a name and how an entrepreneur can find a niche in the planned business.

BECOME AN ENTREPRENEUR

Entrepreneurship is recognized as the ability to create and build something from practically nothing.  It is initiating, doing, achieving and building an enterprise or organization, rather than just watching, analyzing or describing one.  It is the knack of sensing an opportunity where others see chaos, contradiction and confusion.  It is the ability to build a founding team to complement your own skills and talents. Finally, it is the willingness to take calculated risks, both personal and financial, and then to do everything possible to get the odds in your favor

Definition of an “entrepreneur”

A kind of  person who organizes, operates and assumes the risks for a business venture; a person who rather than working as employee runs his /her own business and assume all the risks and reward of given business venture, idea or good or service offered for sale.

PERSONAL ATTRIBUTE FOR AN INTREPRENUER 

1. Self Disciplined: These individuals are focused on making their businesses work, and eliminate any hindrances or distractions to their goals. They have overarching strategies and outline the tactics to accomplish them. Successful entrepreneurs are disciplined enough to take steps every day toward the achievement of their objectives.

2. Self Confidence: The entrepreneur does not ask questions about whether they can succeed or whether they are worthy of success. They are confident with the knowledge that they will make their businesses succeed. They exude that confidence in everything they do.

3. Open Minded: Entrepreneurs realize that every event and situation is a business opportunity. Ideas are constantly being generated about workflows and efficiency, people skills and potential new businesses. They have the ability to look at everything around them and focus it toward their goals.

4. Self Starter: Entrepreneurs know that if something needs to be done, they should start it themselves. They set the parameters and make sure that projects follow that path. They are proactive, not waiting for someone to give them permission.

5. Competitive: Many companies are formed because an entrepreneur knows that they can do a job better than another. They need to win at the sports they play and need to win at the businesses that they create. An entrepreneur will highlight their own company’s track record of success.

6. Creativity: One facet of creativity is being able to make connections between seemingly unrelated events or situations. Entrepreneurs often come up with solutions which are the synthesis of other items. They will repurpose products to market them to new industries.

7. Determination: Entrepreneurs are not thwarted by their defeats. They look at defeat as an opportunity for success. They are determined to make all of their endeavors succeed, so will try and try again until it does. Successful entrepreneurs do not believe that something cannot be done.

8. Strong people skills: The entrepreneur has strong communication skills to sell the product and motivate employees. Most successful entrepreneurs know how to motivate their employees so the business grows overall. They are very good at highlighting the benefits of any situation and coaching others to their success.

9. Strong work ethic: The successful entrepreneur will often be the first person to arrive at the office and the last one to leave. They will come in on their days off to make sure that an outcome meets their expectations. Their mind is constantly on their work, whether they are in or out of the workplace.

10. Passion: Passion is the most important trait of the successful entrepreneur. They genuinely love their work. They are willing to put in those extra hours to make the business succeed because there is a joy their business gives which goes beyond the money. The successful entrepreneur will always be reading and researching ways to make the business better.

Successful entrepreneurs want to see what the view is like at the top of the business mountain. Once they see it, they want to go further. They know how to talk to their employees, and their businesses soar as a result.

 START UP REQUIREMENT

After ensuring that you have the above personal features then consider the following in starting your business

• Business Idea
• Capital
• Location
• Market
• Business plan
• Human Resource
  
  
  HOW TO START A SMALL BUSINESS
  
  
  Starting and managing a business requires  motivation, desire and talent. It also takes research and planning.   Like a “Draft Board game”, success in a small business starts with decisive and correct opening moves. And, although initial mistakes will not destroy  your business, it takes skill, discipline, hard work and at times additional resources such as time, labor or funds to fix them.
  To increase your chances for success, take  time up front to explore and evaluate your business and personal goals. Then use this information to build a comprehensive and well thought  business plan that will help you reach these goals. 
  The process of developing a business plan will help you think through some important issues, that you may not have considered yet. Your plan will become a valuable tool as you try to raise money for your business. It should also provide milestones to keep track of your success.
  Get Started
  There are four factors that are required in any given business endeavor.  Before starting, list your reasons for wanting to go into business. Some of the most common reasons for starting a business are:
• You want to be your own boss.
• You want financial independence.
• You want creative freedom.
• You want to fully use your skills and knowledge

What type of business is right for you?

To determine what business is “right for you.” Ask yourself these questions:

• What do I like to do with my time?
• What technical skills have I learned or developed?
• What do others say I am good at?
• How much time do I have to run a successful business?
• Do I have any hobbies or interests that are marketable?
• What niche will your business fill?
• Is my idea practical and will it fill a need?
• Who are my competitors? What is my competitive advantage?
• Can I deliver a better quality of service?
• Can I create demand for my business?

Based on your response to the above questions, you can clearly start to see through the noise of many business ideas.

Pre-Business Checklist

Before starting a business, it is always important to think of how your business is going to turn out. Below is a summary of some of the questions to help you start preparing by considering most of the requirements.

• What business am I interested in starting?
• What services or products will I sell? Where will I be located?
• What skills and experience do I bring to the business?
• What will be my legal structure?
• What will I name my business?
• What equipment or supplies will I need?
• What insurance coverage will be needed?
• What financing will I need?
• What are my resources and how will I compensate myself?

Your answers will help you create a focused, well researched business plan that should serve as a blueprint and provide details on how the business will be operated, managed and capitalized.

What business structure, do I want?

When organizing a new business, one of the most important decisions to be made is choosing the structure of a business. Factors influencing your decision about your business organization include:

• Legal restrictions requirements
• Liabilities assumed
• Type of business operation
• Earnings distribution
• Capital needs
• Number of employees and management
• Accounting/Tax advantages or disadvantages
• Length of business operation (business cycle)

 UNDERSTAND YOUR MARKET

In this topic entrepreneurs will learn how to identify needs in their local community using their skills. Knowing customer needs is very crucial in ensuring that your business grows and generates revenue. Here  entrepreneurs are required to use their own skills and talents to assess the market needs. The skills needed are mostly those we use in our daily lives to mingle with the community. Proper identification of market needs provides a powerful force to launch a viable business enterprise. Below are key items to consider

1. a) Assess demand

The first step in starting a business is to identify a need in the community. Establishing the size of that need is called assessing demand. It is a waste of time to jump into developing a business plan before undergoing a thorough and proper demand assessment first.

Demand refers to the willingness to go out and buy a certain product/service. Hence, market demand is the total of what everybody in the market wants.

How can an entrepreneur assess demand of a product/services?

There are several ways to assess the demand of a product / service in the community. Some of the most common  ways include;

• Listening to peoples’ complaints about a specific need in the community
• Conducting informal survey especially at the market place
• Sending out questionnaires to sample population
• Scoping by reading and listening for highlights of needs in local newspapers or radio programs as well as other sources of information.
• Complaints or demands highlighted on social platforms.

Accessing demand is amongst the biggest milestone you will make before establishing your business. This will help you establish the right business for the right people.

Assessing your target market

Before you are able to sell anything, you have to understand who you are selling to. You have to create a complete portrait of your customer and know why they want your product and how they will use it. By determining who will buy your products, you can fine tune the various aspects of your marketing message to appeal to this group and to avoid wasting time, money and other resources on non-customers. One needs to assess the kind of customer attracted in buying their products /service and from which demographic segment they come from such as their age, gender, occupation, education level, location and socio-economic status  amongst others.

Assess your market  size

The starting point for estimating the market size is to understand the problem you solve for customers and the potential value your product generates for them . You need to analyze whether the market is growing in numbers or declining and how to reach them? In addition to this you need to examine trends which are relevant to the target market.

Competitive arenas

 You need to demonstrate how your product/service differs from that of your competitors. Here you may try to ensure that the quality of your products is superior to that of your competitors. You may also want to package your goods in a more attractive package and brand it better than your competitors.

1. b) Sizing up the market

Sizing the market is a necessary task for business planning and budgeting for all start ups. If you wish to invest in a certain business then you need to understand the potential market size. In order to determine the market size for your start up, you need to ask yourself the following questions.

• What problem are you solving?
• Who is your target customer?
• What competitors’ products/services exist in your space? And
• What is the estimate number of target customers?

Marketing Strategy

Customers must be made aware of availability of a new product or service and should be able to obtain it. Helping customers to understand the product and service and how they can obtain it is referred to as a marketing strategy. It is very crucial for any business to have an effective marketing strategy.

Any marketing strategy must take into consideration the following factors:

The location of the business – The business must be located at a place easy to reach, it must have enough space to accommodate many customers at once, and with enough car parking lots.

Advertising – A special budget can be set aside for advertising your new business. The advertisement can be done through social media, blogs, local newspapers or placing posters to road junctions and at areas where people meet.

Packaging – Make sure that your products are well packaged and branded. The package must make it comfortable for customers to carry and needs to be neat and attractive.

The need for good relationship with other businesses – Establishing your business doesn’t mean that you don’t talk with your competitors. You need to be close to them and have a good relationship, competitors are members of your community hence having a good relationship is key for your social wellbeing.

Reputation in the community (word of mouth) – In normal circumstances it is not easy to please everyone, but try as much as you can to be close to members of your community. Talk nicely and set time to participate in social activities.

Competitor’s price – You need to examine clearly prices for the same goods as yours, which are present in the market. This will guide you to set competitive prices for your products.

All in all any entrepreneur should be willing to adapt products or services to customer preference, taking into consideration local safety and security regulations. A new product may have an initial period of high demand. However, a saturation point may be reached and demand may stay stable or even decrease. A sustainable market is one in which demand price keeps on increasing or stays stable with a steady rate of replacement.

1. c) Estimating cost and setting a price

A product or service may be exchanged for money or for another product or service. Most businesses will want to make profit on product or services sold. Profit is the difference between cost price and selling price. A part of the profit can be reinvested or used for expansion of the business. A reasonable margin of profit enables the business to continue and even expand.

Definition of “Costs”

An amount that has to be paid or given up in order to get something. All expenses are costs, but not all costs are expenses.

Types of Costs

There are two types of costs;

Direct costs: These are costs directly related to the product or services that business produce or sell. E.g. the money we pay people who work in making or selling product; transport of materials or product; and consumable bills.

Indirect costs: These are all other costs for running the business. They include; rent, license, security, utility among others. Indirect costs are also known as overhead costs as they are paid whether the business is producing or not.

Factors to consider in setting a price and formulating an  effective price strategy

When setting a price for product or service one needs to consider the following:

• Total production cost (direct and indirect)
• How much customers are willing to pay
• Competitors price
• Short supply of product /service “Scarcity”
• Product/ service demand
• Government policies

It is therefore important to accurately calculate each of these, so that the final selling price is realistic. Selling price can be established using the below formula

Cost of production + overheads + profits = selling price

The entrepreneur should be careful in setting the level of profit intended to be made on the sale of a product or service, by also taking into account the relationship between demand of the product and the available supply. If demand is higher than the available supply, the price (and thus the profit) may be increased. If there is a large supply, but few people want to buy, then prices may drop. An excessively high price due to a big margin of profit will dissuade customers. When sales increase, profit margins may be reduced. This can enable the entrepreneur to lower the selling price, therefore allowing the business to ‘capture’ the market and even expand it.