From the April 2002 issue of Startups

(YoungBiz.com) - So you've been thinking about starting your own business. And you've been mulling over a few different ideas. Where do you go from here? To get you started down the right path, we've got four quick steps that two successful teens took:

Step 1: Choose the business that's right for you. How do you know which business to choose? For starters, it has to be something you enjoy doing--because you're going to spend a lot of time at it. There also has to be a market for your goods or services.

John Stirratt, a young entrepreneur in Shorewood, Wisconsin, had a head start when he decided to start a business three years ago. His parents, owners of JARR Sales and Trading, sell souvenirs outside of local sports stadiums. Because he had spent a good deal of time helping his parents, Stirratt, then 16, knew he enjoyed this type of business. And since he had a good feel for the customers, he thought he could find a product he could sell to them for a better price than other vendors.

Similarly, for 16-year-old Mallory Gollick in Denver, brewing a good cup of coffee has always been a family affair. While vacationing in Costa Rica five years ago, Gollick's family visited a coffee plantation and watched coffee beans being roasted. She loved the aroma and flavor of the coffee--and she believed other families in her hometown would, too. That was the beginning of her gourmet coffee business, Mallory Gollick's Jungle Beans.

Step 2: Do the planning and research. After some research, Stirratt decided he would sell peanuts. "After looking at what was selling inside the stadium, I knew I could sell something small and sell it at a better price," he says. "Peanuts are an inexpensive item but can still make money."

Before Stirratt invested in his first bag of peanuts, however, there was more research to be done. His next order of business was to consider the going rate--what the other vendors were charging for peanuts. He found that a bag of peanuts sold for $3 inside the stadium and quickly decided he could do better. "I knew I could undersell them," he says.

Next, Stirratt needed to find the right peanut supplier. While there was one in Milwaukee close to his hometown, another vendor in Chicago offered a better price. "[But] If I had to drive to Chicago, I lost money for gas and time," he says. Stirratt decided that buying his peanuts closer to home made the most sense.

Buying his peanuts wholesale, Stirratt's calculations showed that he could sell each bag for $2 and make $1.23 profit. He further estimated that he could generate a profit of $2,125 for the 12 home games that season. Based on this, John was confident a peanut business could be profitable.

Step 3: Start finding customers. You can have the greatest product in the world, but if no one knows about it, your business won't succeed. That's where marketing--the steps you take to find customers--comes in.

Gollick's marketing plan for Jungle Beans was two-fold. She knew that word-of-mouth would give her business a jump-start, but she also distributed fliers to advertise her new venture.

Stirratt faced a different challenge. He knew exactly who his customers were--the thousands of sports fans who streamed into the stadium each weekend. What he needed was a way to get them to stop and check out his product.

Based on his previous experience with the family business, Stirratt knew that location and timing were everything. So his marketing strategy was to place his tables in the areas that draw the largest numbers of people. Then, about 20 minutes before the game started, when fan traffic was heaviest, he moved his peanuts closer to the gate to capture the last-minute game-goers at just the right moment.

Step 4: Check progress and keep improving. Try as you may to make the right decisions upfront, running a business involves trial and error. The biggest problem Gollick faced was not knowing how to order the right amount of coffee. Sometimes she would run out of coffee and lose money because she couldn't fill orders. She soon learned to keep at least 40 kilos (about 88 pounds) of coffee on-hand at all times.

Then, an unanticipated problem came up. Not only did Gollick have to pay import fees to receive coffee shipments from Costa Rica, but frequently, the packages were damaged upon arrival and she had to absorb the loss. Gollick started checking out the coffee prices near her hometown and found that local vendors, who bought imported coffee in bulk, could actually offer her a better price. By buying her coffee locally, she could turn a better profit. Plus, she'd no longer have to deal with damaged goods.

Gollick says it takes some time to "work out the bugs" in a new business venture. Her advice for other 'treps? "Give your business at least a year to become profitable."

After one football season, Stirratt was very satisfied with his profit margin, but he wanted to find a way to expand his company, known as JARR, Jr. So he added the summer baseball season to his roster of sales opportunities. And, down the road, Stirratt hopes to take over his family's hot dog cart business. "My father is an entrepreneur and has always been one," he says. "He is my role model."

Now What?
No matter what business you are considering, there will be plenty of decisions to make from the get-go. As you can see, creating a solid foundation from which to launch a business takes a lot of thought, planning and research, as well as willingness to learn by trial and error. Observing other entrepreneurs is one way to discover the steps that will take you in the right direction.

NEXT STEP
  • Go to YoungBiz.com and read what John Stirratt has to say about facing competition in business.
  • Get an introduction to writing a business plan here.
  • Get yourself a copy of How to Be a Teenage Millionaire by Art Beroff and T.R. Adams.
  • Go to YoungBiz.com to order a copy of Danielle Vallee's Whiz Teens in Business, a simple and complete guide for teenagers who are starting and managing small businesses.