All entrepreneurs have had that “Eureka!” moment when they’ve been hit by a great business idea. But having a good concept is not always enough to set up a successful business. Careful planning, research, and testing have to be done before an idea can even be considered remotely profitable.
Here are some essentials when setting up your own business.
(in photo: Liza Morales-Crespo, UAP, LEED AP, AIA, co-founder of Tali Handmade, member of Entrepreneurs’ Organization)
1. Determine product/service viability
“You will always think people will buy your product or service, because it’s your idea. But understanding your customers well, and studying them will help you understand if they will buy or how you will get them to buy,” explains Anna Patricia Fernandez, an experienced professional in digital marketing, retail, and brand functions in financial services, quick-service restaurants, and startups.
Market research methodologies allow you to get a feel of what your prospective market currently patronizes, as well as what they’re looking for and would be willing to purchase. You can conduct surveys, focus group discussions, and/or do interviews. Simply observing the market which you would like to penetrate and doing experiments and field trials can give you an inkling if you’ve got a good product or service on your hands. Tools are available online to help do these in a cost-efficient manner.
“Understanding your products’ features allows you to present their benefits accurately and persuasively,” notes design thinking consultant, startup mentor, and GoNegosyo coach Rock Cleo. “Be enthusiastic and passionate about your product or services and eager to share the benefits. Customers are more likely to trust business owners who show confidence in themselves and what they are selling.”
Aside from doing research, entrepreneurs need to develop their value proposition. “This is what sets your business apart from other businesses,” explains Liza Morales-Crespo, an architect with a focus on sustainable design, and co-founder of Tali Handmade, a social enterprise which employs skilled women in impoverished rural communities to craft artisanal handbags and home accessories. “They need to ask themselves, ‘What is it I’m offering and how is it different?’”
2. Test your business model
Sometimes, an idea may seem good on paper, but you’ll later find out that it’s not really that good after all. That’s why, apart from market research, Liza recommends testing your business model.
“Before you plunge into something, try to get feedback on your product,” she says. “Try testing it first with a smaller audience. By doing this, you’ll be able to figure out common issues or problems that you’ll encounter because of the business.”
3. Figure out your revenue model
Simply put, the revenue model shows how and where the business will generate income and how to manage this income stream.
For example, the transactional revenue model best fits brick-and-mortar businesses that sell products. You need to define what value your product brings to the table and how much it costs to create and market.
On the other hand, if you’re setting up a travel blog, your revenue model can be ad-based or affiliate. This means your blog will earn through ad placements or sales commissions from promoted links in your site, respectively.
4. Do some financial forecasting
One of the starting-a-business tips that newbie entreps often overlook is to conduct a financial forecast. Financial forecasting is necessary because it helps you adapt to cash flow challenges effectively. More importantly, it helps you achieve your business goals.
Financial forecasts usually include startup costs, sales, expenses (usually operational or overhead), and cash flow. For new businesses, doing weekly or monthly financial forecasting is recommended. More established SMEs can go with quarterly financial forecasts.
5. Draft a business plan
Putting together all the information you have, you’re now ready to create your business plan.
A written business plan includes:
A business plan comes in handy especially when you need to present your company to potential investors.
6. Determine the legal structure
Now that you have a firm idea of what your company is about, you can start thinking about your business name, as well as what legal structure it’ll have. Will it be a sole proprietorship, partnership, or a corporation? Each setup has different business registration requirements as well as scope of liability, specifically in the event that the company has to declare itself bankrupt and owners need to protect their assets. Make sure to take note of their individual advantages and disadvantages so you can choose wisely.
7. Invest in people
Whether it’s an additional hand or an entire team you’ll be needing, it’s important to hire the right people specifically for your business.
“Critical to any business is your staff,” Liza explains. “People don’t realize how important employees are. Make sure that everyone you hire is aligned with your business’s mission, vision, your business model, and has the aptitude, enthusiasm, and energy.”
Liza shares how she hires for attitude, not skills. This is because even people with zero skills can be trained, but those who may have the skills but not the right values or work ethic may only bring conflict to your business.
For small businesses that only require minimal staff, Liza recommends hiring someone who can multitask. “Look for someone who’s not picky,” she advises. “For example, he can be your messenger, but at the same time, he can also perform other tasks.”
Liza also notes that you should make sure to comply with all of the Department of Labor and Employment’s (DOLE) requirements when you hire employees.
8. Apply for a business license
To fully legitimize your business, the last step is to have it registered so that you have the legal paperwork to get it finally up and running. You can do this on your own or entrust the work to an accountant. Depending on where your business will be located, different municipalities will have varying requirements and tax computations.
9. Do a business process review
It doesn’t really end with getting the business is launched, adds Liza. She recommends reviewing your inventory system, operations, and doing further checks and balances.
“After this business is running already, it grows so much within a few months,” she says. “What you started from the very beginning may not be applicable already. At some point you have to do a post-analysis. Recalibrate.”
Starting your own business takes a lot of guts and grit. But by taking the time to research, plan, and strategize for your idea, you can translate it into a profitable business.
Learn more about setting up your business when you sign up to Globe myBusiness Academy.
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