If you are planning to open a new business you will need to think of many different things. Here are a few really key questions that you may not have thought about. If you cannot answer any one of these satisfactorily you may be taking unnecessary risks.
With the horrifying failure rate of new start-up businesses you would want to reduce risk as much as possible, so if any of these questions cannot be answered or leave you feeling uneasy, then my advice would be to attend to this urgently, even if it means delaying your launch.
- What loyalty from customers can you bring or build? Do you have special relationship with customers who will follow you to your new business? Do you have special skills or knowledge that will draw customers and make them want to stay? And by ‘special’ I mean rare, unusual or significantly different to those of competitors. Do you have an engaging manner and a real desire to make customers happy? Someone who is seen as likeable and eager to please? Do you offer a unique service or a level of convenience that will be irresistible to customers?
- What will make people buy from you for the first time? To answer this question you need to be able to answer a whole lot of other questions. Like: How will they know that you are open for business? (And if you said ‘I will have an attractive web site and that will inform them’ then prepare yourself to be lonely and poor at the start up time). Why will they change from whoever they buy from now? Curiosity? Convenience? Price? Incentives? Better technology? Do they hate their current supplier? Do you have something radically different or significantly advanced over current offerings? How will they get to know you offer this advantage? How will they know how to find you?
- Will it fly? How sure are you that your business concept and model is viable? Has it, or similar concepts been done before? With what result? Think about the hundreds of fashion boutiques that have opened and failed in shopping malls near you. How many small IT suppliers, courier companies, builders close their doors every month. And yet every month another boutique, IT company and builder opens. If you are following this trend why do you think you will be immune? On the other hand if your business is radically different from others have you got really convincing research to indicate that it has a strong possibility of success?
- What will competitor’s reaction be? Will they leave you alone to grow to threaten them? Aggressively attack you while you are new and weak, with price and marketing promotions competition that you cannot match? Bad mouth you among customers? Try to interrupt supplies to you or monopolise raw materials? Better to think about how you could respond to these and other threats before you have to respond in a panic.
- What have you not thought of? (Aside from some of these questions!). Conduct a sensibility test with a non-involved friend or associate. Try to think about everything you should have prepared. Is the insurance in place? What about theft by staff or customers? Are all the licenses and permits in place? Do you have a VAT number? Will you have electricity, telephones, postal services, internet connectivity, parking, a working alarm system, a method of invoicing and controlling cash, pens and light bulbs when you open?
- How ‘me too’ is your business? If it is very alike other accessible existing businesses have you considered the consequences? Some while ago there were four electrical and lighting suppliers within a kilometre of my home. Now there is one. There were never enough customers to support all four, and newcomers had to attract customers away from established suppliers, by destructive price and advertising wars. There were always going to be casualties and it this case it was all the newcomers. Consider what alternatives your customers will have when you open your doors, and how you will make sure they buy from you. Don’t become a casualty of ‘me too’ competition.
- Are you ruthless enough? If you have never run a business before are you prepared to take the really tough decisions? Retrenching people who desperately need their jobs? Disciplining otherwise loyal and key staff? Collecting money from customers who need it badly? Deliberately diminishing a competitors business? Knowing when to retreat even if you are right? Entrepreneurship is a tough school, be mentally prepared.
- How much of your business strategy and plan is based on wish rather than reason? Common wish problems include statements like “We will give better service so everyone will flock to us” or “My products are so much higher quality than anything available, so I won’t really have competition”. No they won’t, and yes you will! The sales forecast and length of time you can hold out in worst case scenarios will often have more wish than reason associated with them. Step back and put more hard fact into your thinking. All entrepreneurs get misty eyed and imagine just how successful they will be. This is good, but if it turns into wishing success rather than applying logic and hard work than dreams may not come true.
Many questions will be running through the mind of an entrepreneur planning to start his or her own business. A difficulty is separating the key priority questions, those that can hurt the new enterprise, from the multitude of trivia.
Source: Ed Hatton’s blog Marketing Strategy. Ed Hatton has mentored and advised entrepreneurs for many years from his consulting company The Marketing Director. He is known for his successful work with start up companies and in helping SMEs to grow and develop, and has been a Business partners Mentor for many years. He is a speaker and writer, the person behind the advice column The Start Up Coach in Entrepreneur magazine, and co-author of a textbook on entrepreneurship.
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