Here we outline these mistakes and give you tips to avoid them. It’s still a lot of...read more
Deepali Nangia gives some advice on how to set up a business.
Understand Your Audience
Write-up a Business Plan
Know your Competition
How many “Dollars and Pounds” do you need
Have an Exit Strategy
Build a Financial Model
Have a “Go-to-market” strategy
Have a thick skin
For many years, I evaluated business ideas for big corporations in many different sectors. I also managed to set up a homegrown business in India called Tiny Feet, Giant Leaps with a local partner using a lot of the sensibilities I had learned while in the corporate world. We ran it from my partner’s home like many other women-led Indian businesses, but the key reason behind this was that I wanted to start small and make it big. I always thought it was easier to upscale rather than downscale. Even though it was run from home, we managed to run it very professionally and effectively compete with others who probably had a much bigger overhead structure than ours.
I now run a consultancy in London, Empower, through which I provide female entrepreneurs with the building blocks of starting up and converting their ideas into businesses. Through Empower, I also provide business support to charities. While I know that creativity knows no bounds, successfully harnessing it and building a business does have a formula. Here are a few tips that I hope help each one of you:
Here’s what’s happening
It is key in any business to understand who your target market is. Everything from the way you price your product to the way you market it will depend on who you are selling to. An easy way to begin would be by talking to your friends about your concept; ask them what they think of the product or service you plan on offering. Brainstorm with your family. You should also do some market research and I personally used a free online tool (Zoomerang), which helped me do a quick survey of my target market. When creating the survey, remember to keep most of the questions multiple-choice and closed-ended (yes or no). This makes analysis of the results easier and also prevents misinterpretation of the questions. Keep your survey short and sweet while ensuring that you have covered your concept and competition in enough detail.
Writing up your product or service idea crystallises your thoughts. Sections of your plan should include market opportunity, product/service, business vision, competition, pricing, marketing and cost structure/financials. Try and size the market opportunity by doing your research. For example, if you want to sell diapers, try and size out the market for diapers in revenue terms. Data on some markets are more easily available than others; for some you might have to do some “finger in the air” exercises and come up with guestimates. Alternatively, understanding your competition and their revenues will give you a good estimate of the market size. Each of the above mentioned section of the business plan warrants a lot of thought, which would ultimately differentiate your business from others that are out there.
“Keep your friends close but keep your enemies closer”. Understand who else is out there who provides a similar product or service. This will help you better differentiate yourself to your audience. You can also learn a lot from someone who has already been doing something similar things to what you plan on doing. Having many competitors in a certain market might also signal that, while there might currently be a profitable opportunity, over time profits will decline due to over-supply. If you are trying to service an unmet demand, you should also try and understand why there is no one currently servicing that market. Is it too hard to do? Has someone already tried and been unsuccessful?
Ensure you understand your set-up costs (explained in the “Financial Model” below) and whether or not you can self-finance them. Try and understand sources of finance available to you – friends, family, bank, start-up loans – and when at different stages of your business you might need additional finance.
How long do you plan on running the business for? Will you be working by yourself or with a partner? Will you be working with a friend? Especially important when working with friends is to have a partnership agreement and ensure you understand what happens if one of you wants to end the partnership. What is your ultimate goal? Would you like to sell the business to someone else? I had a friend who ran a franchise and when it come to selling it was very hard for her to do since the originally franchise agreement she had signed made it impossible for her to find a qualified buyer. Ensure that you understand not just the legalities but also the operational consequences of starting your own business.
Understand the variables that will drive your business model. All financial models have a revenue side and a cost side. The revenue side would be driven by price/fee of product/service and volume (number of transactions). The cost side would be driven by the day-to-day costs of operating your business such as rent, wages (if you have staff) and other overheads. In addition, while starting out, you will incur set-up (inventory you might need to buy, production costs, rental deposits, website hosting etc.) costs. Try and do a break-even analysis, which would show at which point in your business you will have recouped your set-up costs. A realistic monthly forecast of revenues and costs against which you can track your performance is recommended. There are businesses that turn profitable soon after set-up and others that take longer. Do not be disheartened since every business has a different profile. Your business might need capital injections at different stages of growth and it is prudent to try and figure this out as part of your financial model.
How do you plan on selling your product/service? If you are selling a product, are you planning on doing it directly online, via aggregators or via retailers? When approaching other companies to market your products, you must have a presentation that details your company, business vision, competition (and your differentiator) and pricing (wholesale/retail). If you are a service provider like me, you have to essentially promote yourself. In either case, you should have a web page and also chalk out a social media strategy (there is so much out there; please be careful not to be sucked in so that social media becomes your day job rather than your business!). Have a detailed profile written in the first person on Linkedin and add your Linkedin address to your business cards. I also have a blog with which I try and engage with my “audience”. Write up a tag line. It should be something that describes your business in one or two simple sentences. This will help you at times and moments when you are out at a networking event and have to talk about what you do. Understand the use of PR and advertising for your business. Try and find as many PR sources if you can. Many magazines and newspapers offer low ad rates for start-ups and many local newspapers also offer free space. Before using paid advertising, ensure you have fully exhausted all the free services available to you.
Being in business is about being passionate about what you do, but most importantly being ok with taking “No” for an answer. It’s tough to accept, but it is better to ask and not get than not to ask at all. How many times a day do my children ask me for something, get “No” for an answer and still come back and ask for the same thing and often other things that I am even more unlikely to give them? Never give up and the rest will follow.
*Deepali Nangia works as a freelance business consultant helping entrepreneurs shape their ideas into businesses and their businesses into bigger ones! Deepali also provides career guidance and counselling services. She is a mother of two, loves the arts and is a strong supporter of women in business. She can be found on www.empowerbizsupport.com or email@example.com.