From my interactions with a lot of the people I have met and discussed entrepreneurship with in the past few months, mostly employees of blue chip companies, I have realized that almost 9 of every 10 of them believed that they needed to start their own businesses immediately.
However, going deeper into the conversations, I also realized that 7 out of the 9 didn’t know what to do or how to do it. I frequently get questions such as: “can you give me an idea of a business I can go into and how to start it?” “which business do you think is very profitable and can be started with little capital?” but unfortunately, often time, my responses don’t go down well with the inquirers.
As an entrepreneur and a small business consultant, I have been able to identify the following basic tips required for you to start your own business. These tips are borne out of personal experiences as a business owner, operating in a challenging operating environment.
1. Know yourself, what motivate you? It is a fallacy to assume that everyone will start a business. Not at all. If everyone starts a business, where will the workforce come from? The fact remains that some people will become business owners while a lot of others will remain as employees.
You need to understand yourself perfectly well. If you are a true career person with penchant for more academic qualifications, regular promotions at work, following work rules, preference for job security etc., you may just not be cut out for business; you can still be successful as an employee.
However if you are the type that is ever ready to challenge the status quo, innovate or create new ideas that solve existing problems, ready to take up new challenges etc. then you may thrive in business.
2. Choose the right business for you. The key to business success is finding a need that you can fill and which a consumer will be ready to pay for. While it is generally advised that you should choose a business that meets your passion, it must also be well emphasized that doing a business that meets your passion may not necessarily bring food on your table. Only businesses that consistently meet people’s needs will bring sustainable returns to a businessman.
The beauty of the operating environment in Nigeria is that we have lots of problems that aspiring entrepreneurs can proffer solutions to. Our huge population and poor infrastructural development are some of the begging reasons why a smart person should consider doing business in Nigeria. It is no surprise that we became the largest economy in Nigeria after the rebasing exercise.
In one of my posts on the social media, I stated “when you look at the situation in Nigeria what do you see? Problems or Opportunities? Smart people see the opportunities in the problems”.
3. Be sure there really is a market for what you want to sell. One of the biggest mistakes startups make is to assume a lot of people will want to buy a particular product or service, because the business owner likes the ideas or knows one or two people who want the product or service. To minimize your risk for loss, never assume there is a market. Research the idea. Talk to real potential prospects (who aren’t family and friends) to find out if what you want to sell is something they’d be interested in buying, and if so, what they will be willing to pay for the product or service.
4. Plan your transition. Having a business idea is one thing, planning its implementation is a greater task. An individual will need to make countless key decisions along his journey to entrepreneurship, and all these decisions must be supported by careful planning.
The person planning to start his business must plan for some of the following concerns:
– How do I run the business? Do I need to resign from my current employment to squarely manage the business or not?
– Is it possible to combine running a business with my daily work schedule without either suffering?
– How workable is it to get someone to run the new business for me?
– What is my current savings? If I decide to resign, can my current savings sustain my life style for the following 1 or 2 years?
– If the answer to the above is NO, how do I cut my expenses in such a way that I will still survive with my savings particularly during the early stages of my business life cycle?
– How many dependants do I presently have? If I decide to resign to face my business, how many of them am I indispensable to?
These and many other concerns need to be well planned for. From my experience, many entrepreneurs start planning for some of these concerns after they have started their businesses, a situation that puts them under pressures from work and family. They often end up going back to paid employments.
5. Business Plan: A business plan is an essential pre requisite for every business. It should be noted that doing a business plan is not a guaranty for success in business, but it helps coordinate the ideas of the entrepreneur. There is nothing as revealing as having your idea properly documented. It helps you understand the workability of your idea as well as makes selling your ideas to potential investors much easier. A business plan is not a story that reflects optimism. It is a report that must reflect reality.
Your business plan should capture the following:
– What type of business formation is suitable for your business idea? Sole Proprietorship, Partnership or Company.
– Overview of the planned company: e.g shareholding structure, functional departments, staffing requirements, core values, Mission and vision statements and other organizational details.
– Industry Analysis: What presently obtains in the industry you are planning to play in? who are the key players? Who are the stakeholders along the value chain? How profitable is this industry? What are the key success factors? Porter’s 5 Forces of Industry Analysis will be very helpful here.
– Market Entry Strategy: How do you want to play? How do want to gain market share? This is one of the most important parts of your business plan.
– Financial Analysis: This will include a forecasted financial statement for the first few years of your operation, Investment appraisal to identify expected breakeven points, Pay Back Periods (PBP), and Internal rate of Return (IRR).
– Set up cost: How much do you really need to start the business? Many people make horrible mistakes here. The fact is that an individual must be very thrifty with his spending during business formation. Spending should be made ONLY on exigent items. Overspending on things like office space, furniture, cars etc. during start up could be regrettable.
Individuals planning to start their businesses should endeavour to do their business plans themselves. Even where they need the help of a professional e.g in financial analysis, they must ensure they understand the meanings and implications of the figures. Doing the business plan yourself makes you understand the nitty-gritty of the business.
If you’re not seeking investors or putting a huge sum of money into your business, you may not need an elaborate business plan, but you still do need a plan, at least something that specifies your goal, your destination and then lays out a skeletal roadmap for how you’ll get to where you want to go.
Your business plan may change as you progress and learn more about your customers and competition, but it will still help you stay focused and headed in the right directions.
6. Seek Advice. Seek Information: It may be necessary you get a mentor in the same business field you are planning to go into. The fact is that someone has done it before and survived, so you should be able to leverage on his wealth of experience to jump start your business. You need not make the mistakes he made while starting.
You should also be eager to learn more about the field you want to go into: market dynamics, industry regulators, government policies relating to industry etc. Attend industry conferences. Take training courses when they are available. Buy courses offered by experts. Browse the internet for information. Follow entrepreneurs in similar business on social media. You’ll save a tremendous amount of trial and error by learning from people who have been there before.
7. Don’t procrastinate. Take actions: While it is important to plan very well before starting your business, it is also important to note that all plans must have a definite timeline. Very many people spend years planning and eventually they never take actions. Only a sizeable percentage of people with business plans take the next step to actualize their plans.
Some people advise aspiring entrepreneurs not to move ahead with their businesses until they have investigated every last detail of the business they want to start, and are absolutely sure it’s all going to work and be profitable. The problem with that approach is that it leads to procrastination. No one ever really has all the pieces in place, even after starting their businesses.
8. Start small. Grow with time: I may not know the intricacies of all businesses, but what I know is that entrepreneurs should try to start their businesses small and grow organically. Starting a business small gives you the opportunity to manage your business risk more effectively.
I have heard many unfortunate stories of how entrepreneurs started their businesses with so much capital and end up folding up few years after they commenced. The human factor of wanting to be the biggest and richest must be disposed of by entrepreneurs, particularly at start up.
Entrepreneurs should only start growing their businesses after surviving the storming stages of their business life cycle. If you survive the storming stage, then you must have been an expert in that business and decision making will be more strategic and effective. Any investment at this stage will likely yield the expected returns.
Some of the basic advices on starting small include:
– Don’t spend unnecessarily on an office. Ask yourself, do I need an office to run this business immediately? If Yes, do I need to rent a separate apartment for my business or can I simply start by using my residential apartment or by sharing an office with someone else? A lot of money can be saved if you get this decision right.
– How many staff members do you really need? A good principle here is “don’t hire a staff to do what you can do by yourself”. Hiring a new staff must be borne out of dire necessity and the business must be able to pay the salary of the additional staff. If not, don’t hire.
– Do you necessarily need to buy an operating asset immediately? The principle is “what you can hire, you don’t rush to buy”
– Minimise your loan exposure. Huge interest cost may be a burden to a small start up business. If you need to borrow, consult family or friends for interest free loans, if possible.
– Don’t pursue the big project immediately. If you fail on the big project due to inexperience, you have created a bad image for your company in the industry. You fail in business, when you fail your client.
– Don’t start a new line of business until you stabilize on the first business line. If you have two businesses running currently and both having teething challenges, it will be counter-productive as both will eventually run sub-optimally
– Minimise spending on “luxuries”. At start up, all luxurious spending should be turned down except where it is unavoidable.
Sola Adeyiga is the faculty director of Soar & Heritage, an entrepreneurship development organization. He is an entrepreneur as well as a business consultant. He speaks, trains and writes on entrepreneurship.
You can connect via: Twitter: @soladeyiga, email: sola.adeyiga@soarandheritage.org
