Former Secretary of State Colin Powell once said, “There are no secrets to success. It is the result of preparation, hard work and learning from failure.”
His thoughts were recently echoed by Manuel Martinez, president and CEO of the Los Angeles-based Success Training Institute, who said, “preparation, preparation, preparation” are the three keys to a successful business launch, during a recent segment of Money Talk on KCAA Radio.
While it seems prudent to launch a business during good economic times, “anytime is a good time to start a business, said Martinez, who offers education and advice to small business owners. He said that success has less to do with the economy and more to do with being prepared. He stressed that the prepared entrepreneur will have the greatest shot at success even over well-established but ill-prepared competitors.
“Without proper market research and a solid business plan, a business is more likely to fail,” according to The Ultimate Small Business Guide. “The more advanced preparation that is done, the better the chances for success.”
Being prepared means knowing as much as possible about a proposed venture. Entrepreneurs will significantly benefit from having firsthand experience with the type of enterprise being launched. Regardless of their business acumen, entrepreneurs who lack hands-on experience will be at a disadvantage over better prepared and informed competitors.
The following are five tips to help aspiring small business owners prepare for a new business launch:
1. Know the trade.
Don't assume that a decade working as a waitress or bartender provides the necessary insight and experience to successfully run a restaurant or bar of one's own. There's a lot more that goes on behind the scenes. Entrepreneurs need to know what it takes to run the entire operation.
Martinez encouraged entrepreneurs to “do something familiar," adding, "Don’t do what you don’t know.” Those seeking to launch a business should spend time doing the work at a comprehensive level.
Entrepreneurs with no experience in a specific industry should seek a position to learn the business, spending sufficient time to learn about it from top to bottom. Once the doors of a new company are opened, plenty of day-to-day issues will pile up, without the owner having to learn the business from scratch.
2. Understand exactly what a launch entails.
All small businesses require some form of licensing, such as a business permit, resale license or liquor license. Find out what necessary. Consult with a professional to learn the requirements. Reach out to organizations such as the SCORE and the Small Business Development Centers network of the Small Business Adminstration for free guidance.
FindLaw provides a list of commonly required licenses and permits, including state and local business licenses, registration for taxes, an occupational or resale license, a business name registration, and zoning, health, building and environmental permits. Business owners should carefully consider the licenses and permits required as well as the cost and time frames for approval.
3. Estimate startup costs.
According to the Small Business Administration, “Since every business is different, and has its own specific cash needs at different stages of development, there is no universal method for estimating your startup costs.”
Entrepreneurs must create a budget and conduct a cash-flow analysis that begins with startup expenses, such as costs for permits and licenses, and extends past the anticipated break-even date. A business owner should determine needs versus wants when weighing where to spend cash and also allow for additional funds in case the break-even points arrives later than expected.
Appropriate cash management makes the difference between open and closed doors in the startup phase.
4. Create a business plan and follow it.
Starting a business and keeping it running is like maintaining a garden: To keep it healthy and producing fruit, it needs continual tending. Create a business plan and follow it daily, to develop the business, staff and products. Keep a finger on the company's pulse and adapt.
“The importance of planning should never be overlooked," according to TD Bank's website. “Taking time to create an extensive business plan provides you with insight into your business.”
5. Manage risks.
“Make sure you are protected from anything that might take down your business that you worked so hard to build,” said Hunter Hoffmann, head of U.S. Communications at Hiscox Small Business Insurance of White Plains, N.Y., during a Money Talk radio interview.
“Entrepreneurs too often fail to properly insure their businesses," noted insurance broker Dave Terpening Torrance, Calif., during an interview. "They roll the dice hoping for the best.”
“Insurance professionals can be great sounding boards to business owners," he added. "An experienced insurance professional has seen and heard the horror stories and can advise new business owners on how to best create an affordable and effective risk management strategy.”