Starting a Business – Read First

Jerry had a business plan and some money set aside for startup capital. He assumed that’s all he needed, but six weeks later he was already out of business. What went wrong?

Starting a business is exciting and some entrepreneurs even describe getting an adrenaline rush as they approach opening day. But this impulsivity forward can lead to major mistakes, careless decisions, and ultimately put you on the path to failure. If you’ve got a lease on a storefront that opens May 1st, you should aim to open the business on May 1st. But if you are not prepared to handle the demands of your customers or conduct operations most efficiently, then you shouldn’t open just for the sake of opening.

What can go wrong the week before opening – April 24th

1. Choosing vendors out of convenience or because they can meet an arbitrary deadline
Example: You’ve spoken to two advertising agencies about your startup. Both have quoted the same price. Company A can put together a promotional campaign by May 1st, your opening day. Company B can put together a promotional Campaign by May 18th, but it will be much more effective and reach a larger audience. Company B’s campaign is far more likely to bring in customers for the same price.

Believe it or not, with all the stress and time against their side, many entrepreneurs would rather pick Company A just for the immediate relief. It coincides with their opening day and it would feel great to have one less thing to worry about. But Company B would generate more revenue for them and thus would probably be the smarter decision.

2. Looking at the process like a checklist

Let’s say you’ve created a series of basic steps that must be completed before May 1st. In the last week, you go back to check and make sure they’re all done or to find out what you have left.
Example:

1. Create business plan

2. Raise capital

3. Lease store space or office space

4. Choose vendors for inventory, supplies, and equipment

5. Advertise

If your list is as basic as this, you’ve already failed. Each step should have a series of substeps.



Example:

1. Create business plan

– Survey prospects to determine if there is demand for this product (Don’t ask your family. They don’t count)
– Obtain a 2nd opinion from a qualified business advisor on your business plan
– Locate 10 weaknesses or shortcomings of your business plan (if you can’t find 10, you’re giving yourself too much credit)
– Find proof that a similar business model has worked before and dissect their plan

2. Raise capital

– Determine how much equity you are willing to sacrifice
– Set realistic goals for when your business will be able to start making payments, how often you can make payments, and how much you can afford in each payment

3. Lease store space or office space

– Determine several locations that would be ideal to reach your target market, whether or not there is space available there
– Determine if there is a way to obtain space in that area (sublease, a landlord looking to replace a tenant etc.)
– Determine which locations are actually available to lease
– Determine if any of them are suitable for your business (if none, DON’T open!)
– Determine if the costs justify the level of success you can achieve in that location

4. Choose vendors for inventory, supplies, and equipment

– Seek out terms on inventory as opposed to COD (very difficult for a startup to attain but it would be a huge difference in cash flow)
– Choose reputable vendors (don’t pick the cheapest just because cash is tight in the beginning. Low quality goods may turn your customers away)
– Choose how you will pay for supplies and equipment (lease or purchase. Leasing may be less expensive now but far more costly in the long run)

5. Advertise

– Shop around and learn about all the different ways these firms intend to help you reach your target audience
– Choose the company that will produce the most bang for your buck
– Use common sense (A 3 AM TV commercial is probably not suitable for a toy store etc.)

If you didn’t go through this whole list, there’s a good chance you’ll fail. And just when you think you’re sure you’ve got a handle on everything, buy a few books by people who have been in your shoes. Find out what they did, what challenges they faced, and how they succeeded or failed. We’re not talking about a short article like ours, but rather a full story that shares every detail, thought, and emotional feeling that you can expect to go through. There’s nothing like being prepared and it may even inspire you to modify your business plan as it currently stands. Don’t end up like Jerry. Doing things right is much better than doing things quickly.

Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.