CHOOSING A BUSINESS
What kind of business should I start? This question may puzzle you when you feel like starting one. So, do you know the answer? If not, then think upon it and discuss it with others as well as with yourself.
There are literally thousands, even millions of different types of businesses you can begin with. Look for some good magazines and books etc., and choose one according to your taste and capacity to invest. Do not feel that you have to come up with a totally new or unique business idea in order to succeed. Most new businesses are similar to the existing ones. The only thing you require is your individual talent and experience that you have. Your chance of business may depend on your interests, experience, abilities, your financial position, and the thinking that what else you would be doing to make more money. Check what are you going to sell? Is it a service or some product? This sort of discussion and thinking would enable you to decide what sort of business you should start.
YOUR HOBBIES AND INTERESTS
Your hobbies and interest may help you to decide what sort of business is good for you to start. One of your reasons why you want to start a business, may be to ecape boredom with your current job. But for this reason only you should not think of quitting your stable job, because there is no guarantee that you will like your own business when it will be more stressful with longer hours and paying you even lesser in the beginning.
Be sure that your own business will give you more contentment, more satisfaction and job than your current job. This thinking will help you in staying in the business.
Before finalising the type of business you will start, make a list of your hobbies and interests; even include your formal activities, such as reading, or so in the same. This list will help you to select the type of business you should finally start.
Check yourself which type of activity you enjoy the most. Make a list of your major responsibilities as your current job and then prepare a separate list of your responsibilities for your own business.
Of course, you will have to work very hard. Doing a job is an easy task than owning and running your own business. Once you are in a business you will have to be more responsibile, more determined, more cautious and always ready for tackling different situations.
In addition to your interests and experience, your personality and abilities also play a major role in determining what kind of business is best suitable for you. Make a list of your personal interests and abilities too and read them time again and try to feel what you can do very well.
MARKET'S PRESENT AND FUTURE NEEDS
Till now we have discussed about what you like to do, what kind of work experience you have had, and what type of products or services you could offer to your clients. Now we have to consider whether there is a good demand for the product or service you are going to offer to your clients. This is a very important question to be given full consideration. If there are only a handful of people who are accepting your services, then there is no business opportunity here. You can learn about it by looking at recent trends in the market. After some research you will be able to know about the prospects of your product or service.
The best way to learn about what is in more demand today, is to turn to the media. Newspapers, magazines, reports and T.V. programs, etc. reflect all of our interests and concerns. Study the things which are written or talked about most. This will make you know what are the best products or service, to be given.
If you know or come to know what you want to sell but do not know whether people will pay for it, concentrate on similar businesses in your area. Talk to the owners about how their business is going. Collect information from your neighbours and other possible sources. If you come to know about your possible customers, ask them what they would be willing to pay you for the similar products or service so given. Try to know what price is reasonable.
After several conversations you will have a good idea of what people want and what they will be willing to pay. You also look into your own close circle and the persons whom you know well and they also know your capacities, whether they would like to buy your services or products or not.
If you are currently doing something for your employer, then check whether your employer will like to buy your services if you start working as an independent contractor or free-lancer. Also check with other potential customers who are also willing to pay you for similar services.
If you get an answer in positive you can go ahead to increase your income. Similarly, you can talk to your former employers. They may be your potential customers if they know your worth. But do not rely on your old employers to be your first clients, else you will be seriously disappointed.
WILL YOUR BUSINESS SUCCEED?
Before you start a business, you should be very clear that it will be a successful venture, earning enough money that you need. For this you will have to do some basic financial analyses.
First of all check yourself how much you are able to invest to start a business. Of course, you do not have millions of dollars to start a business. Many people start small, spreading their money between living expenses and business start-up costs. They even start on a part-time basis. Later they do the needful.
It is you only who is to decide how much money you can invest to start your business. It may be Rs. five thousand or Rs. fifty thousand. Everyone's situation is different. Do not expect to start a big business with small sum.
If you have a small sum to invest, go for a small business only. Once your business clicks the market, you can expand it using the funds it has generated for you. Avoid loans, if you can.
If you do not have enough money to invest, then you should drop the idea of starting a business of your own. When you calculate how much money you need to start your own business, include the cost of your living expense during the initial phase. Do not assume that you will minimize your living expense. If you do not have a good meal for several days you will start hating your new business. And that is fatal for it.
To estimate the total start-up costs of your business, calculate how much money you need to start your business and how much money you need to pay yourself during that time in order to cover your basic living expense. Make sure you can cover your living expense for several months, say at least for 12 - months and smoothly run your business too. You can minimize the period of initial struggle to six months but not less than that.
Make sure that your business will become a profitable one within a period of six months. If you feel that it will not be in a comfortable position after six months, then , I think you should not start your business just now but postpone it for some more time, so that you can generate more funds by doing some job or such like.
Even if it is not your money but of an investor's that funds to your business, you are giving all your time; and time is also worth money.
Professional investors require a formal plan before they give their consent to invest. Even when you have your own cash to invest you have to be as serious about evaluating the opportunity as an investor would be. Investors frequently look at situation in terms of opportunity cost. If they see the other investment options are better ones they will not give you the money. In the same manner, you will have to observe your own situation and decide wisely. The bad thing with having a business is that it should not fail in a slow process, as in that case you slowly lose your reserve funds and energy. Also in that case you do not feel like closing it. When this happens, you find yourself digging into your personal savings each month to keep the company afloat. But , if this goes on it may turn both your company and you go bankrupt.
To avoid such happening you will have to set some guidelines for when you will evaluate your company's performance. There guidelines should include desired, or even required levels of personal income and time investment required to keep the show go on. If you have exceeded these goals, then you and your company are successful. If it is not so then you can make some business management adjustment. At that moment you have two choices, either recommit to the venture or call it a bad one and move on by closing or restructuring the business to achieve your goals.
Your family should know their sacrifices on their part that the same are only for a set period of time, after which things will be re-evaluated. If your business is doing well, everything is fine, else your family will feel very much comfortable if they hear that you are shutting it down after a certain period of time and do something else.
The most odd question is how long you keep investing in the company before you expect a profit. You can only expect to lose some money for at least 18 - 24 months or so. After that you should expect a decent return. If it is not so, then what is the use of your present venture.
To make it sure that you will be a comfortable position after a set period of time, you will have to do a break even analysis, i.e. a calculation of how much money you need to make to cover your basic costs of doing business. If your income is more than that, the business is profitable for you.
A break-even analysis has the following pieces of information:
The average price of what you sell. Just estimate how much your typical sale will be.
The average cost of what your sell, or how much it costs to produce your typical sale.
Your total fixed costs per annum, which would be your total expense for the year that you have to pay, no matter how much you sold. This includes things like rent, salaries, and utilities, etc.
Your break-even price can be calculated as following :
Fixed costs /1 - average cost of products / average price of products
In any case, you have to have enough sales in a year just for your business to break even.
For example, if you have annual fixed costs of Rs. 3,00,000 and sell a product that is priced at an average of Rs. 1000 and costs you Rs 200, your break even in rupees is Rs. 3,75,000.
Rs. 3,00,000 (1 - 200/1000) = 3,75,000
It means that you have to have sales of Rs. 3,75, 000 per year just for your business to break even. To calculate the numbers of products (units) you have to sell, you simply divide Rs. 3,75,000 by the price of the product i.e. Rs. 1000.
3,75,000/1000 = 375 units.
Once you figure out the break even in Rupees and units, think about whether these figures look high, low, or quite reasonable.
If you are not selling a product, there are other way of estimating your break-even point. If you are giving some sort of consutancy or service you can determine your hourly rate and divide your fixed costs by your hourly rate. That will tell you the minimum number of hours you need to bill each month to break even.
If you have problem in choosing an hourly rate, ask your competitiors what their rate is. This will guide you what the local clients are willing to pay. If you cannot figure out the average price, just take the prices of all or most of your products and calculate an average. If your break even appears well within reason in terms of sale your business is a profitable one. If it is not so, think ways to reduce your fixed costs such as by setting up a home-based business or not having any employees right away. You will have to take such decisions so that your business could run smoothly.
IMPORTANT POINTS TO REMEMBER
Starting a business is exciting, exhausting and expensive.
You always have options. Make sure that starting a business is your best option before you start. If your answer is in positive, go for it.
The best business for you combines your interests, abilities, and experience with a market need.
If no one is interested in buying the products or service you want to sell, you have no business.
Financial books such as break even analysis can help you to know where you stand and whether your business has some potential or not.
EFFECTIVE MARKETING MATTERS THE MOST
Marketing consists of strategies to identify your customers, their requirements, determine who to charge them, tell them that you have the particular thing they need, and them sell it to them. In other words, marketing involves selecting the right products, pricing strategy, promotional programs, and distribution outlets for your particular market.
Specific marketing includes market research, product/service development, analysis of pricing levels, creating of marketing materials and sales aids, advertising, sales support, and public relations.
Sales is part of marketing and this activity includes all the steps you take to get the customer to buy your products or service,viz. contacting customers, making presentations, and getting the orders, among other things.
For a proper and efficient marketing you have to select the particular category of buyers, say your target buyers, their class and age groups. We have certain characteristics that bind us as a group. To these characteristics we call demographics that includes such things, such as age, income level, educational level, and marital status.
Breaking down your target customers by demographic characteristics is called market segmentation. Market segmentation helps the marketing persons to group similar customers together and develop products that they will be interested in.
Target marketing is a marketing approach that involves focusing your marketing efforts on those group of potential customers most likely to buy your products.
Identifying your customer is an important part of the marketing process. If you do not know who is your potential buyer of your products you will not be able sell the same. In order to develop a target marketing approach, you are to know something about what you need selling and who needs it most.
Target marketing saves your time and money.
Price is a very interesting phenomenon in our society. Before you fix some price for your product you have to see so many things in regard to your products costs, your competitor's pricing, and how customers decide what and when to buy. Here are some basic rules that may help you to determine the best price for your products:
Do not ever price the products below your cost.
Price lower than the established competition until you get a foothold in the market.
When you price offerings at a level set by what everyone else is charging, rather than by costs, you can make more money.
Quantity discounts are an effective method to encourage your customers.
In conclusion, your best price will mean more sales for you, because you will have figured out what your customers believe is a fair price for your goods. In return they will buy more.
Before determining a pricing strategy you have to see what your competitors are offering to the customers in terms of their basic product price and the price of any add-on services; how much it costs you to supply the product desired by the customer; what additional feature you offer to your customers that your competitors do not; and whether these features are worth more money.
PRODUCT/SERVICE LIFE CYCLE
Every product or service goes through a life cycle from its introduction to the time it is discontinued or taken off the market. The life cycle usually refers to products. Some products go through an entire life cycle in a very short time (such as a single Deepawali or any other festival buying reason). Only durable goods have an extended life cycle. You can very well see that the perceived volume of your offering will change over the life cycle.
In the early days when your production is just launched, only a small segment will take chance by making a purchase.
In the growth stage when your product is in good demand you can even charge a premium price since you have something everyone wants. But by the time you enter the maturity stage you will have many competitors with similar products who will force you to compete on price and service. Thus for choosing the price level that will generate the most sales you should use three different strategies: cost, market, and perceived volume pricing.
MARKETING MESSAGE AND POSITIONING
Positioning is everything in business. It is not the geographic location of your company, necessarily but the way your company is perceived by your potential customers. Think of the marketing related messages that you hear daily. How do they influence you? Do you care for all of them or only a few? In fact a good marketing related message is that by which a product is presented in such way that communicates a beneficial message of interest to you.
In my opinion the message should be simple, easy to remember and understand. In order to position your product in your customer's mind you will have to understand their thinking and life-style. Also, you must be aware of what your competitor's marketing approach is. Make sure that your company is looking different from the others and is able to make customers more comfortable with its product.
Change may be a natural thing but it generally creates confusion when dealing with marketing message and positioning. If takes long time to create a solid market positioning in a customer's mind, hence handle it with all care. Once you decide on a positioning stay with it. Make sure your marketing message accurately conveys the customer benefits associated with the positioning.
GETTING THE PUBLIC ATTENTION
If you are able to get your story (story of your business) published in renowned dailies, it is very good for you. This way you and your company can get a good advertising, that too free of cost. This free advertising is called publicity. But it is not that easy. You will have to work hard for it. If you have some links in some ewspapers, especially with the editors, your work becomes more asier. Newspapers are always hungry for stories, so you can make it.
If you have no time, also enough funds you can get your story published through some private agencies that specialize in making the desired media contacts for you. The press release (of your story) should contain your company contact person's name, address, phone and fax, etc.
Besides publicity there are many other ways that can get your name and offering into the public eye. Some of them are as under:
Sponsor a sports team and make that every uniform will have your company name on it.
Speak at chamber of commerce, and check community oriented organizations.
Participate in the cooperative events such as donating food and clothes for the poor, race for peace etc. You can further sponsor a race.
You can display your offering in trade fairs but at a cost that is substantial.
Advertising is good for making your company and product popular among a wide variety of people in a timely manner. Advertising is useful for creating a pull marketing strategy, which means that the customers pull your product through the distribution channel by repeatedly asking for it.
On the other hand the push marketing strategy requires you to convince distributors. In plain words, a push strategy is driven by distributors.
Remember the following points when you consider advertising
Many companies provide money to distributors for cooperative advertising. If you mention their products in your advertisements, they will pay for a portion. Better, include number of suppliers; maybe that entire advertisement cost is paid by the suppliers only.
You can place your advertisement in the local yellow pages, in order to reach the general public.
Repeat your advertisement at lest 5 to 10 times in a newspaper or on TV or radio, or do not waste your money.
Hire the services of the advertisement firms to have a nicely and professionally designed advertisement for you.
Keep in touch with each publication, radio and TV station where you want to give your advertisement, and ask them to send you a media-kit. The kit includes demographic information about people read each publication, listen to specific radio program and watch individual TV shows.
Typical information about your possible customers, received this or that way includes their age, sex, education, and marital status. And once you are equipped with such information you can make a proper strategy how to attract those customers.