What Do You Need to Start a Business

What do you need to start a business? There are lots of things you need but why not first learn from the mistakes of others. Wouldn’t it be great if your foresight was as good as your hindsight? Well unfortunately it’s not as good, but as you know it can be easy to look back on your mistakes and see exactly where you went wrong and most of the time even know why you went wrong. And you can also have the advantage of looking at the mistakes others have made as well. So much can be learned from your past and others past. The important thing for you as a business owner or a potential business owner is to do everything you can to avoid mistakes. So what do you need to start a business? First learn about all those things that will for sure keep you from being successful. So, let me share with you just a few to avoid:

1. If you want to be successful, then you should plan. You have probably heard the old saying if you don’t plan then plan to fail. This is so true. I’ve experienced this myself as well as watching others do it too. It’s so easy to try starting a business without a plan, but your chances of failure are a lot greater. Most likely without a plan you wind up waivering all over the place. It’s easy to know where you want to go but it’s not so easy to know how you’re going to get there. But if you have a good plan and follow it, then your chances will be much better of enjoying success. Think of it this way.. If you don’t have a plan, then you’re guessing.

Unfortunately, there are a lot of business owners who don’t have plans and even worse they start their business without a plan. Most of us would not start on a long trip without a plan, but will start a business without a plan. Isn’t that pretty interesting? You see a business plan will actually help you know your business better, know your industry better, your competitors, your suppliers, your market, and your finances better. When you know the business side of your business well, you’re probably going to operate your business well. That comes from planning.

2. Know yourself. Can you handle a business? What will be the effect on your family? Can you manage people? Are you a good manager of things? How much do you know about the business side of a business? Do you know how to develop a plan that will take you out 15 years? Can you handle failures? Can you work with people? Do you have patience? Are you willing to change or are you set in your ways? Will you seek advice when you need to? So study yourself very well.

3. Be strong in discipline. Stick with a plan. Know exactly where you want to go and stay on course. Don’t get distracted. Again, you see, if you don’t have a plan you’ve already lost your discipline. There are so many things that will distract you but if you’re disciplined enough, you won’t be pulled away from your goal. Now if you can’t follow schedules, you may not be as disciplined as you think you are. It’s really that simple.

4. Know your market well. There are so many ways now days to market your products or services. It’s very wise to choose one that fits your business best. Do your research. Know which marketing methods is best for you. When you do it right, you can actually know what size your market needs to be and know if your market is actually big enough to cover your business plan. But you see, without planning you won’t know what size your market needs to be and whether you will have enough customers to give you what you need to have a successful business especially in the future.

5. Watch your spending. Far too many business owners gage their business by the cash they have onhand and not by their profit and profit margin. Just because you happen to have a lot of cash does not mean you are making money. I see business owners watch their bank account balance only and from this they will determine if their business is doing well or not. This can be disastrous.

Startup cost is another area that can sink you before you know it if you’re not watching closely. You need to know when your revenue will begin. Doing a startup costing plan is just about the only way to have an idea about a startup business. This is simply listing all your onetime cost and ongoing cost and when you expect revenue to start coming in and how much that revenue will be.

6. Delegate. If you have more people working than just yourself, then delegate a lot. Teach your people to be responsible and to make as many decisions as they can on their own. If all decisions have to come through you, you will find yourself having to spend all your time in your business and none on the business side of your business. This can be very risky.

So these are just a few of the pitfalls than can create a lot of problems for you so avoid them if you possibly can. You will be better off if you can.

A Sample Business Plan for a Small Business May Not Be the Best Way

You can find a sample business plan for a small business in all kinds of formats. There is a sample business plan for a small business where you basically fill in the blanks or you can have access to a sample business plan for a small business where you can pattern yours from it or you can develop a business plan that is centered on what you want for your dreams and your life.

I don’t know of better way than to let your business give you what you want for your lifestyle. Whether it’s a sample business plan for a small business or one where your business gives you a plan, it should tell you what is needed to take you where you want to go and when and how you can get there and it should be in clear simple terms, supported with all the specifics.

So using a sample business plan for a small business is just one of many ways to make a business plan but frankly I think designing one that will have your business give you exactly what you want is by far the best way.

So, why not start out with what you would like to have in life for you and your family? Then develop a business plan that could show you exactly what your business would need to do to give you that life style. If you think about it, there is no other way where you have more control over what you want in life than letting your own business do it for you. If you work for someone else, you’re sure not going to have as much control over your future.

So how would you go about making a plan like this? Well if you know a fair amount about business, you can. It will take some special calculations and some work but if you know how to put together a Profit & Loss Statement, you can probably do it.

You would first do a P&L for the present year for your existing business and the first year and as many years after as you would like to have your plan cover. Your existing business financials will be the foundation for building yourself a business plan for as many years out as you want. This data will tell you a number of things but first if you want to build your plan around what you want in life, you would need to decide some things about your life:

1. You would need to decide how much income you would like to have for yourself for each of the years you plan for.
2. You would need to determine what kind of profit margin you would want from your business for each of the years.
3. And by combining these 2 things into a P&L format you can develop a financial business plan that can extend as for into the future as you would like.
4. The first thing it will show you is how much sales you would need each year to give you the income and profit you would like. Once you see the sales needed, if you know your business well enough, you should be able to estimate those additional expenses needed to overcome capacity constraints that will occur as your business grows.

With this information you can actually predict not only what your sales will be, but you can see how much your fixed and variable expenses will be, what your labor cost will be, your material cost, and your profit.

1. So let’s first look at what exactly are fixed expenses? They are exactly what they say they are; they are fixed. This simply means these are expenses that are ongoing whether you have a lot of sales or “0″ sales. They are expenses like utilities, taxes, rent, salaries other than the wages used in the making of the actual product or doing a service, business fees, telephone, etc. See how these expenses would continue on even if you have 0 sales? Any expenses that fall into this category are fixed expenses. Far too many small business owners never divide their expenses into fixed and variable. As a matter of fact, if you could have a business that had “0″ fixed expenses; this would be the best of all worlds, why? If you had “0″ sales, you would have “0″ expenses. So the closer you could get to this the better you would be.

2. Variable expenses are those expenses that track directly with sales. If sales stop they stop. These are expenses like supplies used to support in the making of your product or doing your service. Such things as shipping cost for raw materials for your product or service. If you have no sales then you’re not going to be purchasing materials so your shipping cost for those materials will stop as well. As an example, if you have a lawn mowing business and there are no lawns to mow, then you wouldn’t be buying gasoline to travel to your lawn mowing site. These kinds of things are variable expenses. If you’re producing a product, it would include supplies used to produce that product like sand paper, glue, finishing materials, cutting tools, etc.

3. Labor and material costs are also directly proportionate to sales. These are things that go directly into the making of the product or into doing the service.

a. Labor cost is the actual direct labor used in the making of product or doing the service. The cost would also include all the fringe benefits like social security, payroll taxes, vacation pay, holidays, sick pay days, etc.
b. Material costs are all the materials used in the making of product or in doing the service. In the lawn mower service as an example it would be the gasoline used in the mower and any other materials used directly in that service. For producing a product it would be all the materials used in the product that is sent to the customer including all the packaging materials.

Average Selling Price

Now when you calculate your average selling price which is your cost of sales (material + labor) divided by (1-gross profit), you can determine how many customers you would need and then come up with what you think your conversion rate would be for converting leads to customers, you can determine how many leads you would need. Then from this and with the aid of the U.S. Census Bureau and some basic research on your own you can actually have a pretty decent idea of what size your market is and is going to be in the future so you can see if it will support your business plan or not.

So if you can put this all together, you can have a complete business operating plan that would show you exactly what your business would need to do to give you the income and profit you would like to have and a rough idea whether your market would support it or not. All you would have left to do would be to figure out how to make it all happen.

It’s like planning backwards.

1. Determine what you want in life
2. Figure out what your business would need to do to give you that life.
3. Figure out how long it would take you to reach it.
4. Figure out how big of a market it would take each of the years you’re planning for.
5. Then see if that market is big enough.

Isn’t this a much better way to go about planning your business? Shouldn’t your business be designed to give you want you want instead of you working yourself to death just hoping for the best?

So how would you go about calculating all this?

There is quite a bit of calculations and you should know a little about business principles but it isn’t that complicated. So first let’s look at figuring out your future needed sales with this formula:

Projected sales = fixed expenses divided by (1-(var exp % of existing sales + mat cost % of existing sales + lab cost % of existing sales + desired net prof %))

So, let’s say you existing sales is $850,000 annually, your fixed expenses are $275,000, variable expenses is $55,000 or 6.5% of the $850,000, material cost is $236,000 or 27.8%, labor cost is $109,000 or 12.8%, and your existing profit margin is $175,000 or 20.6%.

Now let’s say next year you want to have a profit margin of 25% so what would your sales need to be to give you that profit margin? Now you might think you would simply tack on 4.4% more to sales (25% – 20.6%) and you would have it. Well not quiet. it doesn’t work that way because you are going to have the additional variable expenses, material cost, and labor cost too. Remember, the more sales the more each of these expenses and cost will be.

So here is how you would do it:

Projected sales = fixed exp ($275,000) divided by 1-(6.5% + 27.8% + 12.8% + 25% (your new profit margin) = $896,057 (new sales)

You can do this for as many years out as you want. Obviously this is based on your first year’s fixed expenses remaining constant and no consideration of depreciation, inflation, or taxes.

But most likely you would need to increase your fixed expenses because you’re going to probably have more rent, utilities, or such as your business grows. So, you would simple put in your new fixed expense number in place of the existing one for each of the years you would be planning for.

So, you see if you decided you wanted a 35% profit margin at year 5 then you could see how much sales it would take to give you that.

Now it’s also important to know how many more customers you would need as well so you should always look at that unless you have another way of growing your sales other than with new customers.

Let’s say your average selling price for your service is $925.50 and you have one transaction per year per customer.

Using that first years sales example we used above, you would calculate it this way.

$896,057 divided by $925.50 = 968 customers needed for the year. Now if your average transactions per customer are more than 1, then you would need fewer customers. As an example, let’s say your average transaction per customers per year is 2.5 then 968 divided by 2.5 = 387 customers per year.

Now let’s say you estimate your conversation rate to be 3% of turning leads into paying customers with the advertising method you’re going to use, how many leads would need to contact to get 387 customers? Simply divide 387 by 3% and you get 12,909 leads you’re going to need to contact.

Then the question is; is your market going to be big enough to provide you with 12,909 leads for the next year and how many will you need each of the following years?

It may be easier than you think to figure this out. You would do some research and with the aid of the U.S. Census Bureau you can roughly determine whether your plan can be supported by your market or not.

So what do you think? Is it better to build a business plan around what you want in life then see how your business can maybe give you that or is it better to use a sample business plan for a small business where you are probably guessing?

I’d love to help you some more. Please go to http://www.StrategicBusinessSolutionsLLC.com and see what might be available.

Buying an Existing Business for Sale Online

There are several questions in common man’s mind- why people sell their businesses? Why people gaze for buying an existing business? Why don’t people give reality to their own idea instead choose for buying a business which is already been established?

All answers are- BUSINESS!

When you are out for the business, you have to control your feeling and emotions. You cannot come up with any decision quickly and trigger your new business plan without thinking million times. Furthermore, the investment of your lifetime savings and capital that you are saving since past years cannot be done without a proper business strategy.

Starting a new business and operating an established business, both things have a great distance in terms of- time, investment and man power. Those days were gone when Entrepreneurs were shaped their dreams and started a business from a scratch; invested time and money, searched steady employees and nerve-racking expenses more than revenues.

On the other hand, contemporary Entrepreneurs are aiming to buy an existing business for sale. The benefits are great in numbers and can count on fingertips. The advantages you will get with the established business are- its existing suppliers and credit resources, well-trained employees, stock, assets and cash flow from the day you will take ownership.

After, you made-up your mind to buy an existing business for sale, now the question is- where you have to search for the one for which you ever dreamed of? What is the best way to buy an existing business for sale? What will be the procedure to contact potential business owners? The technology is on your door step, you don’t have to go elsewhere. All answers are just near you and its better you have to complete your quest by look it up into online business for sale websites. Select many businesses and choose the good ones from them. Contact the selected business owners; ask about the details you see online and furthermore which comes in your mind.

When you are ready and set yourself to go for buying an existing business for sale; you have to see how fair the business seller is? Do some questionnaire with the owner; investigate business in locality, stealth visits to evaluate the customer service. Specific market research will do help to gauge the goodwill of particular business.

Investing in buying an existing business for sale is the finest option instead to go with a new business. The risk bearing factor is very less compared to a new business. Business plans and revenue forecast look good on paper, but giving them a real picture is the quality of a worthy Entrepreneur. Do not trust on your fate blindly, because without efforts you never get your fate.