The complete guide to starting a business and making money in the process.
1. Location is critical when starting a business
There’s nothing that upsets me more when walking up the high street in my neighbourhood than seeing businesses that have gone to the wall.
The thought of that hard-saved, borrowed or even windfall money being lost because someone didn’t do their research thoroughly before opening, saddens me greatly.
There are basic questions which every journalist seeks to answer when writing an article – it gives the fullest picture of events. These questions are where, when, what, why, who and how. For anyone ready to open their own business, the questions should be the same.
Where – this is probably the most important question to answer. Are you opening in the right location? Have you researched? Have you loitered around the location at all times of day – opening hours and outside? Do the locals come during business hours? Or is there a thriving after-hours shopping culture? Do you have competition too close – and competition which is ingrained into the local area?
I’ve seen many Indian restaurants open near a particularly successful one in my neighbourhood. They think they will simply get the overflow from the popular one. They haven’t and they have gone broke. Their research has been scant at best.
Other shops have gone broke because they think they can make more margin than is possible in a very price-savvy neighbourhood.
Shops which assume they can run during regular business hours have missed the best business opportunities and they also have gone to the wall.
The best shops have opened knowing their location, their clientele, the best hours.
Not every location will give the same opportunities to your business. Even if you are tried and tested in other locations, you need to make sure a new location will offer the same opportunities.
Are you going to be the third trendy baby shop in the 250m long shopping strip?
Are you opening a florist too close to a market?
Even 100m can make a lot of difference if you are not located near any other businesses that people walk past.
If you sell something that is heavy and will need people to be able to park, make sure you are located appropriately.
2. When is the right time to start a business?
There are two different ways of approaching the “when” question about opening your own business.
Is now the right time to open – meaning, is this the right time of year, the right economic climate, the right time in terms of changing ways of business?
And also, what hours are you going to keep. This is a very important aspect in the running of your business. If you don’t get it right – such a simple decision could end up costing you the business.
But firstly – look around you. Is now a good time to be starting a business? Retailers across the country are in trouble. They are finding the strength of the Australian dollar is inhibiting profits for imports and that consumer trends are to go online and buy imported goods directly.
There is also a trend for people to spend less and save more which could impact a business that relies on discretionary spending.
Of course, it’s important to look at the particular business and the trends affecting that business. A photo developing shop is probably not going to be an ongoing concern unless it is willing to adapt as the market changes and more is being able to be done online.
If you’re borrowing money – perhaps the economic climate is more important as your costs will include any interest rate rises and this will affect your bottom line and profits.
If you’re opening an ice-cream shop or gelataria perhaps winter isn’t the best time for this. Nor is it the right time to open a coat shop in summer.
Opening hours are another major concern for your business. If your location isn’t an early rising one – there’s probably no point opening at 9am. Maybe 10am or 11am would be more suitable and a later finishing time.
If you are a hairdressing or beauty business, late closing hours are becoming increasingly expected.
You should also try and fit in with other businesses in your area. If you are a shop which services commuters getting off the train you should try and make the most of the busiest travel times.
Similarly if your area has an influx of visitors on a Sunday you should keep open longer hours then.
If the hours you will need to open are very long – maybe you will need to hire more staff. Again you will need to take this into account in your expenses.
Again, it’s of vital importance to do your research before opening any business. Survey other local businesses. Hang out for a couple of weeks – at different times, and on different days. You shouldn’t consider opening unless you have a real feel for the area and how your business will fit into it.
3. Be very clear with what your business aims to provide people
What are you going to provide – what are the goods or service your business is about?
This is the most important decision of all in your business.
Do you know about the product or service you are providing? Do you know more than your potential customers? Or your competition?
If you don’t – this is perhaps not the business for you. Don’t think about opening a bookshop or video shop if you don’t know about books and literature or movies and television.
How will you know what sells and the nuances of different products if you have no personal knowledge of your product?
It seems basic, but I’ve often walked into a shop and felt that they weren’t selling the best items they could for the market they were aiming at. I have felt, I know there are cheaper/better versions of these products just up the street.
It’s important to know what your competitors are selling and if you choose to sell the same or similar – what will your point of difference be. If it’s just price – is that sustainable?
If it’s a service – again, think of the competition, your point of differentiation and the location. Make sure that you have an advantage in one area at least.
When looking at what to provide – what does your area need – is it homewares, clothing, accessories, children’s clothes, sporting goods, a pet store. Why do you think the area needs it?
Have you heard people talking about it? Have you needed it yourself? Do you see a real gap in the market? Are you sure that it is right. There might not be a nursery in your row of shops but there may be a plant shop that is bigger, and cheaper than you could hope to be just a short drive away.
If you know a lot about vinyl records and think that you could see a market in the area and that you have worked out the profits that you need to make to sustain yourself then perhaps you have found the right product.
If you have seen four beauty shops in the area close but think you could do a better job – make sure you really do the research. There may be a very good reason why all the previous shops have closed that hasn’t to do with the quality of the service at all.
4. Ask yourself: Why will my business work? What makes it special?
Why do you think your business will work? If you can’t tell your mum or best friend in simple words what the concept is for your business you will find it hard to succeed.
The idea – I want to sell maternity clothes – isn’t enough. You need to have a statement which talks about your business. I want to sell maternity clothes because there are none around that I would want to wear at prices I would want to pay is something closer to a business idea.
However, it is still lacking.
You need to provide an idea, and a value to the buyer, and to yourself.
I want to fill the gap in the market for affordable and trendy maternity wear. I know how I can make/source maternity clothes for a lot less money than the shops are currently charging for them. And I know that by targeting mothers’ and specialist websites I could create a market that would give me a sustainable business.
It’s important that in the big idea of the business that you find some way of telling the market. It’s no good to have the best business without anyone knowing about it. Think about advertising – whether it be large signs outside the business, local newspaper ads, website ads, mentions in magazines, newspapers.
Make the idea something compelling. Why should the consumer shop in your business? What’s in it for them? Are you providing something they can’t get elsewhere? Are you providing better quality than they currently enjoy? Are your goods/services cheaper? Do you offer a brand of cool other businesses don’t? Will they feel better doing business with you?
Even if it is a perceived value only, as long as you can sustain that perception – you will win the business.
5. Who will work in your business? Wages are critical to factor in
Who will be working in the business is an important consideration that many people don’t think about before things start to get busy.
If you can run the business well and good but if you need help you have to figure out the estimated cost of employing others into your business. How will you structure the pay? How will you make sure that you have help when you most need it?
Can family members help until you have started to make money from your enterprise? If you need childcare, can family members help so that your outgoings are minimised at least until you are earning an income?
It’s important that you have people who are aligned with your business. Make sure that anyone you employ or who is working with you sees the same value in your product/service as you do. You don’t want someone who doesn’t like children working for you if you are making children’s clothes, or you don’t want to have someone who is stuffy and formal if you are producing an alternative health spa.
If you are using family in the business – make sure that the lines are clear of what is work? What is payment? A and what will happen in the event the business takes off into stratospheric success. Don’t risk family or friendships by being unclear about the business.
You might think you know how it’s going to work but if you are working with others they have a right to be considered a part of the business also – especially if they are not working for market rates.
And also, if it’s family and a family event comes up – who is going to be free to go? Who will be expected to help whom when?
If you are running the business with a partner – spouse or friend, make sure you are clear on purpose and the way the business will be run. Does one of you want to build the business while the other wants to reap the profits? If you are not united your business will not survive.