Everyone, I mean, literally everyone, wants to have some kind of business to their name; from those with very excellent business ideas but without the capital, to the ones awash with both solid and liquid capital, but devoid of basic business idea; and the perpetual “dreamers” who perceive themselves as the next Bill Gates and Tim Cooks of this world, but lack both the ideas and the capital to engage in any form of entrepreneurial venture. Business ideas could range from a home-based bakery, lawn-mowing, delivery service, housecleaning, and dry-cleaning business to a fast-food franchise chain, and a conglomerate.
However, many obstacles lie in the way of prospective entrepreneurs; chief of which is the lack of entrepreneurial spirit itself – the drive and determination to succeed against all odds. For those who have the spirit and determination, enumerated below are some steps and requirements to a successful entrepreneurial venture.
Market and Need
First on the list is to identify the market: rural, suburb, or urban area; then, the demographic segment within the market that you want to serve: men or women of certain age, race, education level, and income bracket; bachelors, spinsters, couples with family, gays/lesbians, or transgender.
When you narrow down the market and the desired demographic, the next step is to ascertain the need within the market that you want to satisfy. Is it a good or a service? Is the need already being met by some other provider? If so, how can you improve on, or add to, what already exists? Finally, at what cost?
Product or Service?
In your chosen market, there may exist a need that is not being met by a provider; in which case, you will have to start from scratch to build a business which will provide that product or service. If the need is a service, what is the best way to provide it? Online, direct/in-person, or through a third party? If it is a product, do you manufacture from scratch, assemble completely knocked down parts (CKD) and deliver, or repackage bulk purchases for retail sales? If you are manufacturing from scratch, what will be your initial quantity? What size of storage space would you need? What initial manufacturing equipment would you need? All of these would contribute to determine the size of initial capital investment you will need. Some of these same questions apply if you are assembling CKDs, or repackaging bulk purchases.
The next decision to make will be logistics; direct delivery by mail or with your own company vehicles and drivers? Contracting out the delivery to a third party commercial delivery company, or independent hot-shot delivery firms? Customer pick-up from an outlet?
Name and Registration
What comes first depends on the entrepreneur, the type of business (sole proprietor, partnership, or joint venture), and the product/service to be offered. Some people pick names for their companies before even engaging in any market research, while others do so after the research. Whichever is the case, everyone goes through the process of registering a name for the company in their proposed city, county, state, or nation of service. Process of registration depends on the bureaucracy of the country and culture involved; in developed nations of the Americas and Europe, it takes from one day to a week (in-person), and probably more if done by mail. In African and most Asian and Central American countries, it can run into months, if not up to one year, to register a business.
Staff and Compensation
This, also, depends on the type of business and the prospect of expansion. A sole proprietor will not need as much staff as a partnership, corporation, of joint venture; neither will a service provider need as much staff as a manufacturer of products. The staff strength could range from mom and pop to technicians, office assistants, drivers, line production staff, loaders, etc. Depending on the product or service offering, they could range from lobbyists, information technologists, to unskilled laborers. Also, the level of education could range from high school graduates to postgraduates and experienced professional certificate holders. The age range is equally a factor; from teens and young adults to middle-age. A decision on the initial strength and quality of staff, helps with determining the initial compensation package offered.
For some prospective entrepreneurs, the next step will be to work out an initial advertising/marketing format and budget; social media or traditional – TV, radio, newspapers? Distribution of flyers and business cards, or word of mouth? All these different forms of advertising have their different costs and reach; so, an advertising budget should factor in your initial target reach, internet and media accessibility, and the literacy level of your target market. Where your target market is the general public, all the above forms of advertising should be used; in the case of a narrowly-defined target market, a specialized format may be necessary. There is nothing wrong with a combination of the two.
While some forms of social media advertisements, like tweets, Facebook, WhatsApp fora, etc, may be free, they are somewhat specialized; you are targeting a particular audience; your friends on Facebook (and their friends, et cetera), followers on twitter, and the collection of contacts you built up on a WhatsApp forum, anything beyond that, and to reach a wider audience, will cost some money. The hope is that your social media contacts will help spread the news of your business. You made opt to join groups or platforms on Facebook Marketplace, or the like, in other social media outlets; while some have guidelines and small fees, others offer free entry and exit.
Again, the service you offer will dictate, to a large extent, the form of advertising you elect to invest in; specialized goods and services require targeted advertising, while general goods and services will require all the forms of adverting strategy listed above.
Establishing a feedback mechanism at the start of your business is key to improving your product or service offerings. An efficient and easy return/refund/exchange process, is necessary to build trust in your customers or clients. A repair service, where necessary, should be fast and of good quality work. Another effective feedback channel is a follow-up with customers either by phone, information box, or ratings on social media. The response you get will help you understand the feelings of your customers towards your services, allow you to make the necessary changes to stay in tune with changing needs and market shifts, and help you build a list of loyal customer base.
It is very important to pay close attention to the negative feedbacks, because those are of a greater value than the positive ones. In the event of a possible expansion of your market base, negative, or critical feedbacks, allows you to offer divergent goods and services to segments of a market.
What to hold, when to hold, and how much to hold. First, you must determine, based on the life span of the good you offer, if you should hold inventory and how much. Perishable goods with short lifespan? A just-in-time inventory process may be the best option. If you are in the business of manufacturing or distributing durable non-perishable goods with extended shelf life, a three to six months’ worth of inventory may be ideal. Of course, as a startup company, three months will be just right. This is an important factor in determining your overall startup cost. As the year progresses, and you are able to predict your quarterly business volume, you can gradually increase your inventory holding and budget.
There is no need for inventory if you are offering consulting and other advisory services. However, some hospitality businesses, like housekeeping, does require the holding of some inventory of cleaning products. So, how much, and if you hold inventory at all, depends on the line of business you want to get into.
As a beginner, strategic pricing is very important; the idea is to attract and retain customers. Regardless of what good or service you are offering, it is to your initial benefit to start low; though, at a cost. However, in the long run, due to high sales volume, you will be able to recoup those initial losses. There are different pricing scales for different goods and services in every market segment, and to wet one’s entrepreneurial feet in any market, one needs to either, initially, offer a promotional price, which is usually at a heavy discounted rate; or, offer coupons to be redeemed upon purchase of a second item, or a reach certain amount of total purchase.
Once you have established your presence in your chosen industry, you can begin to offer specialized pricing in your market. Where multiple goods and services are offered in diverse market demographics, you can offer pricing to suit specific markets or demographics.
Where you intend to offer the same type of good in diverse markets, you may choose to apply a uniform price in all the markets. So, there may be no need for specialization. This strategy comes with drawbacks, though. One, high-end markets may not accommodate low-rate goods and services; so, the prospect for growth will be very minimal. Second thing to keep in mind is that incidents of “dumping”, from foreign or outside competition, is greater in low-end markets than high-end ones. With it comes the risk of being pushed out of the market even before you can break even.
It is very important to consider all the above scenario before deciding on a pricing plan for your goods and services. Also, always be mindful that market forces, both internal and external, will always dictate prices in a market, non-monopolistic, economy, and be prepared to adjust to suit turbulence of the times.
You would not know how much you need as startup cost until you have figured out all of the above. When you have decided on those, the next step is to start sourcing for capital. The three main capital markets for entrepreneurs are savings, loans, and partnerships. We will look at these three in details;
When you have lined up all these requirements in the necessary row, and worked towards meeting all of them, your pathway to business success is assured. One thing cannot be ignored or de-emphasized here; you may have all the best plans in the world, graduate from the best business schools in the US and Europe, or have access to all the material and financial capital imaginable, and still end up a failure. It requires entrepreneurial skills to establish and run a business successfully. You do not have to be a Harvard or Yale graduate to have that, though they may enhance your natural knowledge and skills; you have to be a graduate of the school of common sense, first.