You're smart, hard-working, and driven to succeed. Your friends describe you as innovative, entrepreneurial, and business-savvy. You have thought out an angle for a business that is going to revolutionize the industry. Now it's decision time. Are you willing to take a financial risk on the strength of your idea? Or do you prefer the low-risk stability of your present employment? Is your venture well conceived and built to thrive, or fatally flawed and destined to fail? These are vital soul searching questions you must answer before joining the ranks of entrepreneur.
Starting your own business can be an exciting venture that allows you to use your personal knowledge and talent to prosper financially and emotionally. Ideally, your business venture involves an area in which you possess a high degree of expertise and passion. You need to be realistically aware of your talents and liabilities, and must have the energy to overcome many frustrating obstacles. The concept of the "American Dream" - being your own boss, following your heart, and charting your own destiny can be filled with rewards and accomplishment. However, your vision is not something guaranteed to succeed. Many creative endeavors come unraveled based on insufficient analysis, overly optimistic projections, or the inability to deliver a unique or tangible value. In order to avoid failure, starting your business must begin with the successful navigation of strategic and financial planning.
In order to transform your idea into a legitimate reality, preparation is of the utmost importance. Successful small businesses are not born from fleeting visions, but rather are built from a foundation of careful thought and deliberate analysis. Strategic planning is often thought of as a written document (most often referred to as a business plan), but the concept is much larger. The process should begin with identifying your organizational mission and vision, assessing the demographics and motivations of your target audience, and developing a mechanism for achieving short-term and long-term objectives.
Strategic planning includes several critical elements: a detailed examination of your proposed product or service; the organizational structure that will accomplish the delivery of your business; market trends as they apply to your business, competition, and the industry at large; and a communications plan for marketing your business to prospective consumers and merchants who will provide necessary capital and collaboration. The strategic plan should be written to address in detail each of the elements above, however, it should not include highly sensitive, overly technical, or proprietary information. Additionally, it should realistically project financial matters such as income, cash flow, and operational and capital expenditures. While you may hold expert knowledge of your chosen industry, it is often difficult to master all aspects of business development that include legal matters, marketing, and accounting. Because strategic planning will offer an operating structure for your business, it is best to consult with expert advisors or assemble a qualified team if you are not highly credentialed in each area.
Strategic planning will not only provide you with a framework for developing your business idea, but also a vehicle for the second prerequisite to starting your business: financing. In essence, a solid strategic plan is interdependent with the likelihood of raising capital for your business. Whether applying for loans or securing investors, the ability to articulate your mission, method of delivery, and financial projections will determine your success in the notoriously difficult arena of fundraising.
Your strategic plan will determine the legal form your business should take. Typically, small businesses exist as sole proprietorships, Limited Liability Companies, C corporations, S corporations, general partnerships, and limited partnerships. Each entity possesses general advantages and disadvantages, but the specific legal form is contingent upon your individual and business objectives. Of course, your strategic plan will also determine how much capital is required to begin your business and achieve the desired outcomes. Many individuals who initiate small businesses receive their start up capital in form of SBA loans. Qualifying for these loans is a function of personal credit and income tax history, demonstration of the ability to repay the loan, collateral and business debt ratio, strength of the business plan, and the investment required to start a business (typically ranging from 10-30% capital injection). Again, preparation is the key to success.
With dedication and appropriate attention to detail, you can establish the building blocks for a thriving enterprise. No matter what your business, be sure to discuss it with family and professionals to determine if it is the right opportunity for you.
