Small Business Entrepreneur Blog

Susan Schreter writes about start-up planning and small-business financing for the Seattle P-I and she came up with an interesting article on 6 essential things you have to have in mind before starting a business. I’m going to comment on each of them, but you should probably first read her article.

Ok, here there are my comments:

• “Plan to earn a living. Better business managers budget these costs rather than hope a few dollars will be left over at the end of the month to pay for food and rent.” I couldn’t say it better myself, and the living proof is…myself. While we started our company almost 3 years ago, and we bootstrapped along the way, I’ve never included the cost of living as a cost of the company. That’s probably one of the reasons why I’m still a part time entrepreneur – bills have to be paid somehow. Well, actually I did some guest-posting a while ago on www.bootstrapme.com and said that mixing personal finances with company finances is a big mistake. Bottom line is that, no matter what, your company has to provide a decent living for its founders and workers.
• “Know your industry. To help in business planning and pricing decisions, it’s helpful to understand what represents good financial performance within your industry.” Yep, your plans on paper might be too good to be true. And as all things in life, everything that is too good to be true is not true. If you expect to have some profit, check against the numbers in the industry to see if they are realistic. A reality check from time to time never hurts.
• “Think beyond the product. Successful small-business owners are not “in love with their product,” rather they are in love with the pursuit of customers, cash flow and profits.” You usually start with a product/service idea. Then, as soon as you realize you have bills to pay, profit to make and investments you will understand that it doesn’t really matter what service/product you do. Your goal in life is making profit some way or another.
• “Know your target customer.Entrepreneurs who actively test products and services with prospective customers before a full-scale business launch minimize the costs associated with mistaken assumptions.” Good idea. The thing is that most people are to afraid to start anything because they don’t have that unique, great idea. I would say that you should start somehow, even if you’re not going to be the best. You might never be the best, but this doesn’t really matter, because your goal is not the perfect product/service but making profit.
• “Competitors will copy.Practical small-business managers assume that one day competitors will imitate their most successful strategies. To protect their company’s revenues, they take proactive steps to lock down customers and distribution channels through contracts, incentive pricing, brand awareness and other tactics that make it difficult for customers to switch loyalty.” I wouldn’t worry about this in the start-up times. In fact, being copied is sometime a good sign, that you are doing something right!
• “Build salable assets. I encourage startup business owners to think several years down the road to the moment they negotiate the sale of their business.” I would say this differently. While you start-up (and even better, always) you have to spend wisely. I know that once you will see some money in the bank you will have the desire to burn some cash as a payoff for your sleepless nights as an entrepreneur, but that’s the surest path to failure.

Here is SUSAN SCHRETER’s original article.