Starting Smart: 12 Things You Should Do
By Gwen Moran
Come up with great idea. Check. Choose a name and location. Check. Hang a shingle and open the doors. Check and check. Now what?
Starting off on the right start-up foot is key to ensuring the long-term vitality of your business, says Bern Lefson, a spokesperson for the Small Business Administration's Service Corps of Retired Executives, (SCORE), a free consulting organization staffed by volunteer veteran business owners. Beyond your passion, which is essential to success, most experts agree there also are some universal best practices - many often overlooked - that small businesses should heed. Here are the most important:
Get smart. Information is everywhere, so there is no excuse for being uninformed about your industry or about business in general, Lefson advises. Each state has SCORE chapters and Small Business Administration Small Business Development Centers (SBDCs), which offer a variety of resources and free or low-cost access to knowledgeable business advisors. It's old-school, but also drop by your local library and make friends with the reference librarian. Libraries often have on-site resources, directories and reference materials, or have access to business directories and databases that often require expensive subscriptions, he says. These can give you valuable data about market size, demographic and industry trends. Use your favorite search engine to look up your industry associations, as well as the web sites of other businesses doing what you want to do. That can give you insight into what your competition is doing.
Seek counsel. Read this carefully: You need a good accountant, a good attorney and a relationship with your banker. This trio will help you make wise decisions about everything from how to organize your business--LLC or Subchapter S corp., for example--to how to get the money you need and be sure you're abiding by the letter of the law. They may even be good business referral sources, says Nick Nanton, Esq. a partner in Dicks & Nanton, a law firm in Altamonte Springs, FL.
Protect yourself. Entrepreneurs face uncertainties every day. It's your job to make calculated decisions and minimize the consequences of risk in whatever way you can, says Nanton. First, that means protecting your idea through patents, trademarks and copyrights, where applicable. In addition, keep records of the development of your idea, which can provide valuable proof of your rights and prevent others from stealing your intellectual property. In addition, tap your trio of advisors to help you organize your business to minimize your personal liability, obtain proper insurance and determine what other risks you might be facing so you can mitigate them, he adds.
Make a plan. A business plan is a critical tool to help you map out our business on paper, identifying opportunities and obstacles so that you can deal with them appropriately, says Lefson. Most lenders and investors will want to see a solid business plan that reflects a thorough understanding of the market and the business' role within it. The plan will include explanations of what your business is, who your employees and key management personnel are, financial projections, and expected sales and marketing activities. It may also include a growth plan and other elements. And if that seems like too much to handle on your own, SCORE and most SBDCs offer counseling to help entrepreneurs craft their business plans.
Mine for gold: Billy, 38, and Alissa Maupin, 37, pore over their customer data at Green Tango Fresh Chopped Salads in Durham, North Carolina. As orders arrive in-person, or by phone, web site and text, employees capture information about customers and their preferences. Now, they have data on thousands of customers, allowing them to track ordering habits and trends, while giving them important info about inventory levels. Look for trends in your own data, says Turner. You may see seasonal upticks, product pairings, or other important clues about why and when your customers buy, which can influence sales and marketing efforts.
Get noticed. You could have the greatest offering in the world, but if people don't know about it, you're sunk, says small business expert Marcia Layton Turner, author of The Unofficial Guide to Starting a Small Business. Increasingly, that means developing an online presence. Turner says that all businesses, from the local dry cleaner to the fast-growth information marketing company, should have a web site. She also advises wise and business-based use of social media. "Set up a Facebook fan page, watch Twitter to see who is saying what about your company and leverage your LinkedIn connections to find new clients, employees or suppliers." Use the good information you've collected to invest in marketing activities that target your best prospects.
Sell like hell. Look at all of the channels you can use to sell your products and services, says Turner. They may include wholesaling to other businesses, selling through a web site, online shopping aggregator, auction site, or bricks-and-mortar store. Catalogs, manufacturers representatives and affiliate programs are other ways to make your sales reach broader, says Turner. And don't ignore your employees: Green Tango employees wear T-shirts, hats, aprons and buttons with different branding messages, using uniforms to draw attention new products or promotions. Employees are also trained in how to engage customers for greater sales. Horowitz looks for ways to grow his business and his clients' through partnerships. The launch of his latest book included a joint promotion with Green America, promoting the book to its 94,000 members in exchange for a 25 cent donation per book sold for one month.
Measure it. Small businesses need to do a better job of tracking the results they achieve from various investments, says Turner. This is especially true when the money is tight. Before you spend, she advises collecting information about your customers and what is driving them to your business. Look at the various activities in your business and see if there are ways to do them cheaper or more efficiently. In some cases, it may make sense to outsource certain aspects (e.g., payroll, training, or IT) that take away from your core business without adding value. When it comes to marketing, if you know which marketing tools are bringing in customers who spend money, you'll want to allocate more money for those efforts, she counsels. "By tracking, you can see that the press release you issued brought in 1,000 prospects and 90 sales, but the tweet you sent about a special offer brought in 200 prospects and 180 sales. They were both effective, but your efforts should focus on the best return on money and time," she says.
Watch the money: Playing fast and loose with your cash is a sure-fire way to bring your business down, says Lefson. Whether you're bootstrapping or you just got a fat capital infusion from an investor, be careful about where you spend. Small business consultant and co-author of "Guerilla Marketing Goes Green," Shel Horowitz routinely advises his clients to be frugal: "Do you really need that $2,000 desk? Do you really know which investments are paying off for you?" When you keep your expenses very low and watch your cash flow, he adds, "you increase the likelihood of success." Lefson advises effective tax planning is essential. And, when possible, securing a line of credit to tap during hard times is a good idea, too.
Hire right. You can't grow your company without good people, says Lefson. However, a common mistake entrepreneurs make is hiring people they like instead of people they need. Use written job descriptions to define the skill sets you need and make decisions based on what is best for the company--not necessarily who you'd like as a lunch buddy.
Grow and enjoy. Turner advises small businesses to look for efficiencies and develop systems and processes to ensure that the business can grow without too many pains. This, again, is where your business plan can be useful in helping you monitor where your business is vs. where you planned it would be. As your best practices start to pay off and your company begins to grow, it's essential that you monitor your money and projections to make sure they're on track and make adjustments, as necessary, says Lefson. "For a lot of small businesses, the road to success is a good business plan, a good marketing plan, and sufficient capital resources. Without those, the odds are stacked against them," he says.
Stay true to yourself. You can get all of the expert advice in the world, but you know your business better than anyone. You started it because you have a belief in it. When you care so much about something, says Lefson, you're usually in tune with making the best decisions for it, Lefson says. So, yes, take the good advice, but use your talent, knowledge, common sense and gut to move it forward.
Gwen Moran is the co-author of The Complete Idiot's Guide to Business Plans.