Starting or Buying a Small Business

Evaluating and Choosing a Business Opportunity
Checklist Tips, Guide, How to Start or Buy a Business
Read all of this BEFORE you go into business

Whether you buy or buy into a business or "business opportunity" you MUST know how a real business succeeds - you must know the basic principles of real business, not some pie-in-the-sky misleading claims of some opportunity promoter. Business is Serious Business-Don't be a gullible "babe in the woods". These are the major elements for small or new business success, besides the basic steps of a company legal structure and registrations and accounting basics. You can succeed in a business of your own. Business is just a set of formulas and instructions which you sort out to find what applies to your business. Are you tired of working for idiots or a cruel clueless corporation? Then read on:

If you are thinking of starting or buying a business, a franchise, a business opportunity or going into a corporate partnership, read this page and also check out the seller.

NOTE: Starting an internet web-based business is covered in a related website, WebSuccess.net which has several pages crucial to starting both an internet business or just a business website for your new business. Read it before you begin any website design or purchase. Avoid "affiliate" link type businesses which now downgrade your ranking by Google. Check out this Checklist for a business website startup.

1) Know The Business
Be sure you have strong interest, knowledge, ability and preferably some experience in your prospective field of the business. Enthusiasm overcomes most problems---except gross ignorance of business principles. Try to pick something you like or love AND know something about.

2) Choosing The Right Business
First and foremost is choosing the right business, one that is in demand in a growth field. Most good businesses present a clearly identifiable product or service and are not just "opportunities" or tout "cash streams". The centerpiece of the right business is the right unique high-demand product (or service) for a niche in the market where there is less competition.

3) Is The Business Exclusive/Unique/In Demand?
If the business opportunity doesn't first and foremost talk about exclusivity and uniqueness and demand for the product or service, be careful. The product or service itself should hit you with a "wow" response. It should be something that you and your neighbors or certain segments really want, need and demand. Don't ask your friends!! They lie to you or are influenced by you. Ask strangers and test your likely ads, appeals, ad copy and do actual product tests. Get real feedback. Nothing is more educational than listening to real stranger prospects as to their real opinions. Do this for at least fifty people or many prospective companies (unless you are in a narrow business to business niche).

4) Exclusivity
More important, they should only be able to get this WOW product or service from you and your exclusive territory. A real business has a virtual monopoly over a demand product in an area, like an exclusive dealer or a licensee. If you are considering buying a franchise, this is just one of many aspects of a franchise you should consider.



5) Allow Time To Break Even
If you have worked in a cushy job in corporate America, then be ready for a shock and hard work of at least 60 hours per week for a couple of years. Don't expect to be hiring experts and help to run most of the business. If you get lucky and the business booms, it will be a rare exception. Most small businesses require two to three years to get to break even, even without much hired help.

6) Importance Of Market Testing
Your opinion is no substitute for market testing. Be absolutely sure the product or service is tested on the public and audience likely to buy the product. This can be done by samples, focus groups, and market research tests, questionnaires and interviews. This is especially important if this is a new product in a crowded field, like food or energy savings.

7) Business Strategy Development
Soon after beginning the process of selecting the business and perfecting the products should come your "business strategy development". This critically important step can help you better define the product and verify the size and type of market, the target audience, the competition and how to position your company. Positioning, differentiation and focus are subjects you must study at length at the beginning of starting a business. Be sure to find some quality business strategy software to help evaluate your business plan. This is not the same as business plan software. Be sure the program is manageable and for small to moderate business, and expect to pay from $200 to $1200 for the program. Allow a solid week to learn to use it. Using a good strategy program based on established management consultant's principles is an education in itself upon the main factors in business success.

If you prefer, contact an expert consultant who has and can run this kind of program for you upon your main proposed strategies. Strategies operate around identifying niches and competition, and strengths and weakness of both your business and your product. The average research and set up to run such a program is about two days of your time for each product and strategy. If you answer the questionnaire for a strategy consultant, he can probably enter, tweak and run the program in about three to four hours and give you their opinion also, for about $300-$400 per run. This is money well spent. Expect to do this step at least three or four times until you finalize your strategy.

8) Studying Key Business Principles
The main keys to success in business are these big factors. Nothing is more important in business than a good product/business in high demand delivered by a good strategy with good management and enough money in a budget based on the strategy. You must have a virtual monopoly on what you are doing in some area to be very profitable. You hopefully have a unique product with competitive advantage and a unique selling proposition. These are terms you must study within the concepts of strategy and positioning.

NOTE: Compare these steps to what most people want to do: They fall for hype and want to buy into some scheme for selling and marketing business opportunities or some non-exclusive rights to sell a me-too product. Do you really think that all the world needs is one more brand of nutrition supplements or cooking pans that your neighbor also sells? Get real. Too often, the only ones who win out on those programs are the first five or ten people in the company.

9) Execution Of Strategies
Next comes good management to execute the strategies. This is primarily management of development, operations and marketing strategies in the first year. This is where the strategy is implemented and executed. By the time actual start up has begun, the sub-strategies must be mostly complete, as to an operations strategy and a marketing strategy, for example. Obviously a financial strategy is important also.

10) Congruency Of Sub-strategies
Ideally the product development strategy is near complete as to execution. What is critical about these sub-strategies is that they are part of and congruent with the overall business strategy. They are held together and enforced by a budget, which can be modified each six months to a year, preferably yearly with an allowed 10% or so adjustment built into such budget as to re-allocations for what is learned during the year. (that is 10% in each subcategory, not cutting or shifting too much into or out of one category, unless a product is an obvious loser or big winner, which would make an exception).



11) Advertising And Growth Planning
In the early years, the marketing budget is very high compared to its later percentage. In the first year, for an average product or service, this part of the budget can run from 20% to 60% of the entire budget. Advertising and promotion should be the bulk of that. But be cautious and aware that if the product/service takes off, then too rapid growth can destroy the company. Too rapid unplanned growth can be almost as dangerous as few sales, especially if you have to finance the growth and offer terms on accounts receivable. Tight credit terms and customer credit management can not be over-emphasized. A lot of companies and consumers don't pay their bills, or wait months. Too many of these and you will go out of business. This is one of the few areas where a food business shines, if it is mostly cash and credit card sales

12) The Internet Strategy As Part Of Marketing Strategy
Even if you are a brick and mortar store or office, plan now for your internet marketing strategy as part of your overall business strategy. Long before you begin designing your web site, you should have developed an overall business strategy and studied all your competition and their ad copy, including on the internet, to build your marketing strategy. Your overall marketing plan should have taken into account your internet marketing plan based on competition and cost factors of your web presence. Be very wary of trying to compete nationally or internationally if your product is not very unique. Be aware some products don't sell well on the internet, such as medium to high priced jewelry or conventional shoes or clothing or items that sell by touch and smell (candles) from an unknown brand and seller. The other marketing factor is always competition. How exclusive or unique is your product? How expensive is it to ship ? Will you have established channels of distribution ? Is there adequate margin for a distributor or dealer? Many items can not be effectively sold without dealers if the package does not total at least $30 to $40 if they are not small and light.

13) Study Factors And Risks Before Beginning Your Website
Internet marketing is an important component of most businesses now days. Do not plan to use a site builder or web site generator for a real business. That will likely cost you more headache in the long run, although it can be used temporarily in conjunction with a professional business web designer to build you a web site which is adaptable, transportable, maintainable with standards compliance and multi-browser compatibility. Be certain to read up on internet business success factors and consult with a good web designer before you ever start your web site and even before you create a logo, or your first ads, so you don't have to do that over because your colors and work files don't match web requirements.

Careful design pays off long term. Many factors will affect your internet marketing and promotion design, especially your budget and labor time available. And sooner or later you will want to own and move and add functionality to that web site if you are a real business. Plan for all that in advance because once the business is running, you can't take out a lot of time to overhaul, move and manage a major web site move and upgrade project. At that point in time you are supposed to be doing useful things like testing ad copy and SEO key words and adding searchable articles and case histories to your site and managing internet advertising campaigns, and planning a nice minor upgrade for a slightly more interesting and fresher look each two years or so.

14) Why The Marketing Plan Is Important
Because a good marketing plan can save your business about 5%-20% per year in wasted costs while increasing sales by double, it is the centerpiece of every business strategy. Some of that marketing plan revolves around content writing for your advertising and web presence. Writing ad copy and content is a specialized skill. It is like a translator who can keep the essence of the main thoughts while re-wording slightly to incorporate more common search terms and phrases. For example, at the beginning of this paragraph, we could have used "well-planned marketing", but "a good marketing plan" has far more search requests. You write for humans, but don't forget search engines. Some focus on the internet is important to keep you abreast of market developments. But the key consideration is whether you plan to use organic or paid promotion, which depends on your marketing budget. This area of internet marketing and web success is an entire subject requiring your study for at least half a day. It is the small business equivalent of "don't leave home without it". Or, you can take chances and be an amateur. Business is a science, with formulas. Follow the recipe and get a good result or at least avoid a big disaster.

15) Branding, Positioning and Pricing
The web site design as explained at Web-Success.net is a reflection of all the business strategies taking into account all the competition, the company's strengths and weaknesses, threats and opportunities (SWOT). Additionally it must accommodate principles of "branding", image, positioning and as a part of that--- pricing. Many people infer or believe that a higher price must reflect higher quality and vice versa. At some low prices, people think there is something wrong. The point here is margins. Good margins are a high priority for business. For some services, it is better to get half the business and charge twice as much. At least that way you have less overhead and work half the time for the same money. Plus your clients pay attention because they believe you must be better. (In our case, we are better but we charge medium competitive rates for internet business services). Pricing may reflect your desire to build market share. Temporary discounts or sales or promotions can help achieve good margins without cheapening your image much. This is a good way also to evaluate a business opportunity. Do they come at you first with product quality and uniqueness and evidence of demand from strangers (not sales agents) with reasonable pricing, or do they talk "income stream" and "high potential"? Guess which might be a real business? (duh!)

16) Budgeting Forces Balanced Strategies
Which brings us back to "money" and budgets. The beauty of excellent strategies is they force realistic budgets which enforce the strategies. Most big companies give strategies lip service and spend too much time on weekly reports, meetings and bad email. If your product is technology based, then you have way more factors to deal with, including obsolescence and technical performance issues. You may not have as much time to develop a great set of strategies. But the keys to your success lie in those strategies and market and competition research and expert help in positioning your image and product to fill a unique niche. If your strategy does not match your resources, you have failed and likely will not succeed like you could have.

17) Iterative Process Of Improvement
As we explain on our WebSuccess.com website, this is an iterative process. Especially is that so in regard the web site design and development. This can be a fun yet very trying task, but nothing is as satisfying as building a real business of your own. You have to start with your budget limits, a conservative estimate of funds from sales, a survey of competition, and a thorough market analysis of demand for your product /service. You cycle through all the steps once, then you go back and refine them several times.

Each part of the study and planning improves the other parts and makes them match the market and the budget. When the strategies are complete, they are "congruent", they balance and fit and dovetail perfectly with each other and the market. Operations and production fit the budget available for that, like the advertising and sales costs. If the budget is limited, you don't take on the big established competitor head on; you find a niche nearby it and go in around the edges. The idea is to succeed in yearly steps while keeping your three to four-year-out strategy in mind.



18) Selecting A Good Business
Consult a book of "accounting ratios" or financial ratios in a major library with a business section. Study it and find a business similar to yours. Your final budget should look like those ratios with a higher proportion allocated for advertising and promotion. If you are a sociable and salesy person who has ability and can create, study the PBS shows on small business and guerilla marketing. You might save a lot on marketing costs. The key is how great your product is. Really good ones begin to get the best advertising money can't buy: referrals and word of mouth. If you have a product like that, invest in it and eventually seek good funding. Big companies often survive in spite of themselves just due to the prevalence of their brand visibility and people seeing each other using the product. Do these things right and likely you may hit that threshold where everything gets so much easier. There is something to be said for "keeping your day job" until you have the basic tests, strategies and early sales underway. Gritting your teeth for one more year could make the difference.

19) Cost and Income projections
For every estimate of sales, cut your projections to a very conservative level and increase your costs by a good 10% to 20% over what you think it will cost. Run your projections with a business plan builder or spread sheet. Experiment with varying the marketing budget, such as with PPC, pay per click advertising and/or directories. Don't assume you know what you are doing with PPC advertising. Read up on it at WebSuccess.com The strategies for organic ranking versus paid promotion are very different, with different budgets. You must decide this before you work with your web designer to build a great website. Be aware, some of the best selling websites are not innovatively laid out, strikingly beautiful or wild animations. They are simple, communicative, quick loading, fairly standardized in layout and easy to navigate with a few interesting visuals. The main issue for start-ups and early stage companies on the internet is "credibility". Time, effort and certain WebSuccess techniques solve this.

20) Management Priorities
Once the above are accomplished, management is relatively easy. Product quality, customer service and good advertising... rule. Management is just about prioritizing and handling exceptions. We don't spend a lot of time on accounting management reports. If the company is profitable, the emphasis is on common sense cost improvement with increased sales and avoiding crisis. (sounds a little like a family's same approach to wealth building). Don't dramatically change what works, especially in ad copy, without testing.

21) Proper Hiring
A few last pointers on hiring help, contractors, services and consultants. Avoid the temptation to hire employees as long as possible. The problems and legal issues are more than most small companies can handle. Keep people out of your accounting, methods and secrets unless highly trusted. Don't talk about your business secrets. Get a legal primer of what not to do in business (or anywhere else) in the area of stating absolutes and making promises, or failing to make important disclosures which could greatly harm someone. Get up some disclaimers and limitations on warranties. Protect your assets, trademarks and web site copyrights. Brands are very important and trademarks can be valuable.

As for experts, contractors and consultants, shop carefully. Get to know them by their knowledge and reputation. Technical types work best in technical quiet environments. Sales and social types--- the opposite. Don't let sales irritate engineering and production types.

Have experts work on pay as you go basis with results as the measure. Consider a moderate equity position for someone very talented (and very cooperative and easy to work with). Remember, if you have difficulty coming to terms before a contract is signed, it will like not be a good relationship. When you hire a lawyer, shop hard and fully research, outline and prepare what you want them to review and give opinions upon, to save you money. Be loyal to people who really help you and who tell you sometimes what you don't like to hear.

22) Simple Accounting
On accounting, Quickbooks will usually do. Don't make a complex chart of accounts, but ask an accountant how best to keep it simple and in line with Tax reporting categories for the first two or three years. A good accountant can help you close out your year and make adjusting and correcting entries for a few hundred dollars. We suggest trying good quarterly reporting and business reviews each six months.

23) Choosing Computers For Your Business
Pick a computer expert carefully, one who can talk you through email, network and filing problems. Get someone experienced to help you set up good filing and naming methods, and to help you decide how and when to back things up. (At least weekly). We recommend simple locally built computers with full compatibility, not proprietary like Dell and HP. You might spend 50% more, but you will have computers your tech can upgrade and fix more easily. Our experience is they will be more reliable than Dell was.

Don't be the first to use a new operating system. Give them a year or so to debug it. Google's new "Chrome"tn might be the exception, but give it six months to shakedown. File compatibility and hardware support are always a big issues to study.

24) Avoiding Partners
On partners, be careful. We have a web site discussing this and corporate ventures. Consider having two entities, such as your own operating entity with the financial partners entity as an investor or loan provider. The fewer the partners, usually the better. Friends who have gotten over hard situations could be better. Know the partner well. Partners can obligate you, with joint liability by their acts and omissions and errors. Such terms must be laid out very carefully by a lawyer (read "expensive"). These subjects go beyond the scope of this how-to article, and you should also seek competent legal advice.

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Summary
The nice thing about starting a new business is you can do it right, and you can do what feels best to you without asking permission. You can respond quickly and even change direction on a dime when your strategy is not working. You can put ideas into action in one day. Corporations fail in these areas miserably. They are like pondering plant eating dinosaurs to the quick Raptor-like small company. So do your homework, work hard, promote well and you can succeed where many fail.

Just like with searching for a job, do a better job than your competitors. Following the above can essentially let you create or buy your own job. There are many advantages and disadvantages to owning a business. A very small but profitable business can be way better than a job. You don't have to take orders from idiot rude bosses, nor take flack from A-hole co-workers. But you do have to deal with customers who can be irate and similar to those bosses and co-workers. However, YOU can FIRE them !! (Especially if your business is in demand). Upgrade and improve your customers constantly by improving your screening. Be sure you and your unique skills are actually better, and appreciated highly by your customers. Don't waste time on those who try to take advantage of you or try to get free work from you, nor those who don't want to pay. Keep the slogan "First pay, first served" if you do service. Don't issue credit if you can help it.

Another big advantage is doing things the way you want to. There is a good chance that with your own business you can instill your values into your product and people. You might end up doing what you love. If it does not start out right, you can change it, adapt it, or sell it and start another.

Biz-Success and Helpful Pages™ consumer and citizen better living tips are sponsored by Buyers Group and Business Standards Institute. Good luck!

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