By
Doug Charney
If you've been hesitating to start a business due to the current state of the economy, you may want to reconsider. I believe the economy now only has one place to go—up. It’s only a question of when. With the right timing and the right planning, your business can be poised for success when the economy turns around.
In fact, growing a business during a slow economic period can have many advantages. While some of the giant corporations are suffering through layoffs and bankruptcies, smaller companies have some advantages. They are able to turn on a dime to adjust to any short-term market swings, while larger companies generally have a much harder time reacting to change. When the market finally does turn around, leaders of established companies are often still cowering under their desks while owners of new companies are ready to pounce on the opportunity to get more business.
However, be warned that timing alone is not enough. Having a successful business requires advance research and planning. Here are some tips that will help you start your business off on the right footing:
1. Do Your Homework
Here are some resources that will provide valuable assistance:
- Local colleges—Many offer courses in small business. Even the founders of Ben & Jerry’s Ice Cream took a $5 correspondence course in the art of making ice cream from Penn State University before they started their own ice cream company.
- Local chambers of commerce—They, along with economic development foundations, also offer courses in starting a new business.
- Successful businesses in other locales—Visit other cities and study companies that are working well in that market. Consider bringing that idea to your city.
2. Develop a Business Plan
No matter how confident you are that your business will be successful, you need to have a well-written business plan. If you need help writing one, check with local colleges or your chamber of commerce to find someone who can assist you. Consider hiring a professional to write your plan. The clarity and professionalism of your plan are crucial to your success in obtaining financing. You want everyone to know that you are a professional and that you take your new business seriously.
Professionalism can pay off handsomely. I know of one business owner who approached a local bank for a refinance loan. He had spent a great deal of time and effort preparing his business plan. Although he didn't technically qualify for the loan, the banker was so impressed with his business plan that he approved the loan.
3. Test-Drive Your Plan
Talk to potential clients—not just your friends and family. They are much more likely to be honest and give you advice on what could make your offer more appealing. Survey the area where you want to locate your business. Hire some college kids to do a survey. Arm them with questionnaires and have them make calls or visit target clients to get their input. This will help ensure that you are locating your business in an area where people need your product or services.
Start by selling your product or service on a small scale. For example, if you want to make and sell pies, try initially selling them at a local farmers market. You can experiment by adjusting the price, the size and the packaging to see what sells best. It’s easier to make corrections before you begin mass production.
4. Secure Financing for Your Business
Self-financing is one option to pay the start-up expenses of your business, but if you plan to fund the entire venture yourself, be careful. You don't want to spend all your savings up front only to discover you need more cash for unanticipated expenses. Be careful of using too much short-term debt, such as credit cards. These debts can come back to haunt you when times get tough in your market and if interest rates rise. Instead, consider using a home equity loan or margining against your stocks and bonds, as they often have lower interest rates and longer repayment terms.
Partners are another option to help with financing. If you do decide to take on a partner, choose carefully. Your relationship will likely come under a lot of stress as you grow your business. Make sure your partner is someone you really like, shares your vision for the company and is trustworthy. Even so, there should be a legal contract explaining the nature of the partnership.
Private investors or venture capitalists are another possibility for funding. And finally, another option is to get a Small Business Administration (SBA) loan from a local bank.
5. Plan the Day-to-Day Operations
Once you have secured funding, consider starting your business on a part-time basis. Once your new business grows and your income approaches that of your full-time job, you can make the transition to running your new business full-time with a fair degree of confidence.
Keep your overhead low to start. Don't spend large sums of money to have the best of everything, especially when it comes to your work environment. Keep it simple. You'll find that your clients will stop by more frequently if your office is clean, comfortable and accessible rather than if it’s overly ornate. Ample parking is also an important consideration.
Keep in mind that most of the business world keeps to a standard 9-to-5 schedule. If you are willing to expand your hours to include some evenings or weekends, you can get a leg up on your competition. If appropriate, you may be able to meet clients at their homes or places of business, offering a further convenience for them.
6. Market Your Business Effectively
Networking is one of the most effective ways to market your business. People do business with people they know. Join a Rotary Club, the Lions or the Chamber of Commerce. Introduce yourself to established members and become active in the organization. Ask key people to introduce you to potential clients—then return the favor.
Focus your marketing efforts on the businesses or individuals who are potential clients. Consider buying a mailing list that targets your audience. Screen them based on where they live, income, occupation, etc. Then market only to that group. Be persistent in your efforts to recruit them as your customers.
Finally, build your brand identity. Display your company’s logo on all your ads, mailers, vehicles, clothes, etc. You want your clients and prospects to think of your logo when they think of you. Create a flyer that describes your company’s services and products and how they can benefit potential customers. Include some graphics—spend enough money so that it looks professional.
The Journey Begins
You've done your research and planning and have taken the necessary steps to get your business off to a promising start. Now is the time to put your knowledge into action. With all you've learned, you're at least one step ahead of the competition. Now is the time to start living your dream of having your own business.
The following AMA seminars will help you succeed in your new business:
Author Bio: Doug Charney is vice president/investments of Wachovia Securities in Harrisburg, PA. Contact him at: (888)529-2973, or dcharney@wachoviasec.com, or visit his Website, www.charney.wbsec.com.
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