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Tag: Starting Small Business

  • 5 Steps to Start a Small Business

    Steps-to-start-a-small-business

    With everyone talking about the economy I decided it would be a good idea to discuss an approach to small business that if followed would minimize the number of failures. These 5 steps to start a small business provide a solid foundation to any venture and should not be ignored. It is in the success of small business that the economy finds its strength so, take notes.

    1. Take a Look in the Mirror

    When thinking about starting a small business the first thing one should examine is their personal financial situation. You are your first business and the way you manage your personal finances is a reflection of how you will manage the finances of your business. If your personal finances are in order and you make more than you spend, you are probably ready to begin thinking about other business ventures. If on the other hand your situation is the other way around and you spend more than you make, I would suggest that you get your situation turned around before venturing into the world of small business.

    The management principles that lead to financial success on the personal level are the same principles in the business world. If you are employed you are providing a service to your employer and in exchange they are compensating you with a salary or an hourly wage. Think about this for a bit, you are already playing the small business game. Where are your week spots? Are there spending issues? Why are you looking to start yet another business? Examining your current situation with this perspective will give you an idea of what to expect if you were to get another business off the ground.

    2. Understand the Small Business Marketplace

    Before getting started make sure you understand Small Business Volatility. The most notable characteristic of the small business marketplace is its resistance to success.  The fact is the majority of small business startups will close their doors after two years of operation. If you don’t take note of this reality you are positioning yourself for failure. One of the biggest contributors to this reality is the fact that small businesses generally don’t have much money behind them and businesses fail because they don’t make enough money to cover their expenses.  In other words the small business marketplace is a marketplace averse to error. One must know where each penny is going and how each penny will help the bottom line.

    That said, there are advantages to small business. Being small means you are flexible and fast. You won’t have the layers of bureaucracy to slow you down when you need to make a decision or change something up. Leveraging this reality can afford you opportunities that your larger counterparts cannot act upon.  Commonalities exist among the small business and large business paradigms but keep in mind a small business approach will not work in a large business environment, and a large business approach will not work in a small business environment. Most consumer based organizations that we are accustom to follow the large business paradigm so keep yourself in check because a Wal-Mart approach to a custom boutique is a recipe for failure.

    3. Begin with Service

    Outside of yourself your first small business should be service oriented. There is a smaller financial barrier of entry for service based businesses than there is for product based models. This means you will reach a break even faster than you would if you decided to go with a product based model. Think about a janitorial agency. The startup costs would be rather small, especially if you had supplies you could use around the house.

    Additionally many service based business are better suited to handle fluctuations in demand. Market fluctuation can be killer for smaller organization. A service based model can have its expenses tied closely to the actual delivery of the service. This means unless you are providing the service, you are not incurring costs. There will be some overhead but not as much as there would be in a product oriented environment.

    4. Be Willing to Change Direction

    I have heard it said that companies change their focus an average of 5 times before they find success. As you begin to fulfill a need your intuition on that need will grow, as it does allow it to direct your company. Microsoft for example began in traffic analysis hardware, not software. There is freedom to try multiple directions (one at a time) to figure out how your company can best add value. Eric Ries in his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses calls this “the pivot”.

    5. Dig In and Get to Work

    These precautions will safe guard you tremendously as you pursue each business venture but they are worthless if you don’t act. In order to make you business work you will have to work… a lot. A common trait I have witnessed among successful business men is their drive to get things done. They don’t sit around and wait for this or that, they figure out what needs to be taken care of and take care of it. The journey doesn’t have an end, being a business owner is a continuous effort to perpetuate your organization. If you don’t eat and breathe your business chances are you will play second fiddle to someone who’s passion is the business you claim to love.

    I hope you find this helpful. I know may people want to know How To Make Easy Money Fast, which can be done, but not continually and not with a small business. Business is hard work that will take time to produce fruits but trust me when I say diligent effort invested into a focused business will pay off handsomely in the time. Remember, the small business is the heart of our economy and anything that can be done for the sake of small business is a cause worth pursuing.

  • Where to Start Small Business Search Engine Optimization (SEO)?

    So you run a small business, you don’t have much money behind you, and you decide the web is a great place to increase your marketing efforts. A website is relatively inexpensive to build especially if you can carry some of the technical burden, and it provides a means by which you can reach the world.

    Sounds like you have a plan…right?

    Well, yes and no. While it is true that a website can be built for very little and once it is live it is accessible all over the world, the site will not generate traffic if you don’t offer something of value. Search engine optimization (SEO) can help your small business but regardless of how amazing your domain name is, and no matter how many friends you may have on your personal Facebook page, your website will do little for your business if the content is not as delicious as a ripe piece of fruit.
    I say this because great content is the first step to a quality site which means it is also the first step to effective SEO. Start by writing about and discussing the topics that your readers want you to touch on and don’t compromise for the sake of a keyword. The keyword game is a vital part of search engine marketing but it is not what provides the root value on your site. I discuss this method in a more detail at How To Increase Site Traffic, For Free!.

    A Tale of Two Sites

    Allow me to provide you with a quick case study. This is a study of yours truly and two sites I put together.

    Site “A”

    Like most people I began my pursuit of building money making websites with the idea in mind that I could simply write some content, optimize for a few phrases, and repeat the process to create some cash flow. I started with one site, three keywords, and gave myself one month. The domain was keyword rich and I was familiar with the topic so this was going to be easy.

    I laid out the plan and each day for a month I worked on a different part of the site. I set up a link wheel, commented on forums, and posted new content every chance I could. The month went by and I ranked #1 for my main keyword. I was happy.

    As time went by I would occasionally return to the site to moderate a comment or add a post. Traffic inched along and AdSense revenue began to come in. At the time I remember being so pleased with what I had accomplished, as I should have been not everyone has completed such a task. However, I did not realize that the site

    I had built offered little value to the readers that found it on Google. Consequently the bounce rate was quite high and the only users that came to the site were the ones who had never been there before.

     Site “B”

    As an entrepreneur I am always on the lookout for great new opportunities and one of those opportunities came in the form of a business associate’s desire to increase his business online. We agreed that I would take care of the website if he created and compiled the information. With that he began emailing me articles to put on the new site.

    This individual has been involved in his industry longer than I have been alive. He has published articles in magazines, and is very familiar with the each player in his arena. In short he is a fountain of knowledge and an amazing resource of high quality pertinent information.

    I leisurely formatted and posted each article until the site comprised of 50 or so entries. I did nothing in the way of keyword research or link building. The site was simply a compilation of all the information that my partner had provided.

    Initially we did not see a huge spike of traffic but over the course of a few months traffic began to come in. Additional articles were added and a few videos were posted to keep the site growing. Each article was quite lengthy and covered topics I wouldn’t have even known to have touched on if I was building the site by myself.

    The result? Site B currently out performs site A in all regards. Site B brings in twice as much traffic, has a lower bounce rate, and boasts repeat visitors. Consequently it has also received more external links. People actually want to visit site B, the visitors to site A were more or less tricked into stopping by.

    Conclusion

    What you can take away from this is that no amount of “gaming the system” will outperform true value. Take the effort you want to invest into the latest technique and put it towards establishing value for your target market. If you do this you will build the foundation for something that will not be affected by the change of an algorithm, or fall to a change in technology. Site A is not a spammy site that tricks its visitors but it does rely heavily on how Google’s bot indexes it into the SERPs. If Google change the algorithm the site could lose all of its traffic.  Site B on the other hand gets a portion of its traffic from people setting out to find specifically that site. They know it exists and they want to visit.

    In term of sales if you can create something of true value not only will it sell better, people will voluntarily sell it for you. How many ads do you see for extremely high quality products? The products that make up the majority of the ad space are the ones that have stiff competition and need the marketing to push buyers in their direction. Companies with a solid competitive advantage need not worry about playing of the emotions of their customer base, the product speaks for itself.

    I don’t want to bash SEO because I believe it is a hugely powerful tool but I do want to emphasize that it is only part of the equation. Remember brands like Rolex or Ferrari sell on their name; they don’t sell because they rank in the SERPS.

  • Small Business Financial Help

    The reason there is such a need for small business financial help is because of the inherent realities that come along with the small business marketplace. Small business volatility has been discussed previously, but I want to explore further what can be done to combat financial concerns. Oddly enough, you are probably sitting on excess capacity that if tapped into can bring about the financial help you are looking for.

    It is common knowledge that most small businesses will fail, but the reasons why are relatively few.  I have compiled a quick list of why failure may occur. Each reason listed ties back to the financials at some level. Basically if a business can’t make money it cannot survive.

    Businesses fail because:

    1. Businesses don’t make money because they can’t full fill a need
      1. the need doesn’t’ exist
      2. the need has changed
      3. the need is being fulfilled elsewhere
        1. the market is not aware of the offer
        2. the competitive advantage is weak
          1. The need is overly demanding
            1. Demands a higher quality than what can be produced
            2. Demands a shorter lead than what can be provided
        3. location is a deterrent (convenience)
    1. Small businesses don’t make money because there is a low profit margin
      1. The need exists but is not such that it will support a new business
        1. Small market
        2. Competitive market (high financial barrier of entry)
          1. The cost of fulfilling the need is high relative to the sale price
    1. Small businesses don’t make money  because market fluctuation = demand fluctuation = inconsistent cash flow
      1. Overhead costs are often fixed and constant.

    The question becomes; how can you get more money out of your small business? The Theory of Constraints (TOC) boasts that a few simple changes in the way you address the organization can increase your profits by as much as 60% without spending a single cent. This is done by assessing your organization, applying the Five Focusing Steps  and making the appropriate changes required to increase the company’s throughput.

    TOC assumes an inherent simplicity within an organization and seeks to eliminate the core conflict that is causing the organization’s poor production. The conflicts can be policies, procedures, or assumptions that have been left unchallenged. Once identified a plan is put into place to address and eliminate the conflict in pursuit of the company’s goal to make more money now and in the future.

    Companies often have a great deal of internal capacity that is not exploited. Once identified it is quite surprising to think so much capacity was left idle. The reason for this is that underlining assumptions are made which blind the people closest to the problem. Case study after case study has shown how a simple change in a paradigm or a process can yield huge monetary gains.

    TOC has defined a hierarchy of three metrics to address in order to increase the bottom line. In order the metrics are;

    1. Throughput
    2. Inventory Investment
    3. Operating expense

    Throughput (T) is “The rate at which the system generates income”. Expressed as an equation Throughput would read: ( (Sales Price-Truly Variable Cost)/Time). Increasing Throughput is the first priority, and is often increased simply by identifying and exploiting the constraint of the system. Throughput of the constraint is often referred to as Octane: The income/unit of constraint for a particular product. Think about this for a second, the first priority is “the rate at which the system generates income”! Any other concerns should be subordinated to throughput.

    Inventory Investment (I) is “The things we buy with the intent to sell”. Inventory is the sum total of the costs spent in buying things up until the moment someone actually pays us for them. Inventory is often expresses as Dollar-Days which is the sum total spent multiplied by the number of days held. Addressing inventory is the second priority.

    Operating expense (OE) is the cost of converting “I” into “T”.  All costs associated with the business lumped into one. Don’t be confused by using allocated costs.  Costs may be good for reporting, but not for managing. Operating expense is the third priority and will consist of costs such as labor. That’s right, labor is an OE.

    Using these metrics you will begin to identify where and how your company is either loosing or earning money. If the principles of TOC are properly implemented Throughput should increase, Inventory investment and Operating expenses will decrease. When this happens, your net profit will see a rise, your return on investment will increase, and you will also see a positive upturn in your cash flow.

    Hopefully this helps you to see how the financial help you may need is under your nose, and well with reach. As a smaller firm you will need to remain agile and conform the ever changing needs of the market but understanding the above will help you to do so with a much healthier profit margin. In closing I would like to add that your current financial crisis is only a symptom, it is not the problem. The problem is inherent to smaller firms and will remain if you don’t diversify and grow. Best of luck to you all and God bless.

  • Starting Up a Small Business

    If you are looking into the idea of starting up a small business there are a few things you should know before taking the leap. Small business is tricky business and unless you know what you are doing you will end up like the majority of people who give business a try by shutting your doors in 2 years or less. The up side is that you can be successful in starting up a small business if you keep in mind a few main realities.

    Volatility

    In a previous article I dug a bit deeper into small business volatility but it is worth mentioning again especially in the context of getting a business started. Small business exists because large business has carved out a method to meeting the needs that doesn’t reach everyone in a market place. In other words small business is small business because large business has deemed the pursuit of such market places not worth the effort. Large businesses seek opportunities that exist in well-established mature markets. These would be markets that yield smaller margins but are also less volatile. Consequently this leaves the more dynamic and volatile markets for the small businesses. This is part of why small businesses don’t last long, they compete in an ever changing market place.

    So, what does this mean for you? It means that the opportunities that will exist for you and the business you aspire to open will be opportunities that require quality and custom solutions quickly. This also means there will be a good deal of work involved in order to gain market share for you niche. Abandon any idea of providing a single product or service, you will need to diversify your products/service, customers, and possibly industries. To combat the ebb and flow of the small market place you will need diversify all aspects of your company.

    Alignment

    Ok, now that you understand a little about the realities of the small business market place the next thing to look into is how well your potential business aligns with who you are. In the beginning stages of a business the founder is the business and the business is the founder. To offer the most value the business should be the embodiment of you and you should be the embodiment of the business. The realization of a single opportunity should not be the only deciding metric for starting a business. As an example; A few years ago I had the opportunity to start a frozen yogurt shop in my town that would have been modeled after a profitable model that was doing well in other cities. I did my homework and found that for $40,000.00 I could have everything I needed to open the doors and start selling yogurt. I decided against it for two reasons, 1. I live in a four season’s area and I did not want to have a feast or famine demand and 2. I am not that crazy about yogurt.  Now, the opportunity was there, and since then many of these shops have opened, but I didn’t want to invest 80 hours a week into a frozen yogurt business.

    Market Positioning

    So you have an idea that aligns with who you are, and you have come to understand the nature of the small business market place, how are you going to position your product or service? How are you going to meet the needs of the customer? The answer is somewhat laid out above, but because of the nature of the small business market place you will need to become a high quality, quick turnaround company. Small businesses have the advantage in small volume custom areas. Your competitive advantage will be your ability to cater to the specific needs of your customer. In factors of competitive advantage I explore in more detail where a competitive advantage exists, here I am stating that as a small business you have no business competing on price.

    Margin

    You are your business, and chances are you do not have much capital behind you. This means that achieving a positive cash flow situation as quickly as possible is key. Cash is king and without it you don’t have a business. The upside is small volume high quality work demands top dollar. That’s right, by being a small business you are competing in a large margin arena. The mark up on your products and services can and should be high. The market will let you know when you are too far out of range, but a healthy profit margin is to be expected with small businesses. Individuals that fail to understand this begin to lower their prices in hopes of gaining some sales but what they don’t realize is they are diluting the market and putting themselves out of business. So, don’t be afraid to charge for your work!

    Growth Strategy

    The last thing I will mention for those looking to start a small business is that a growth strategy is imperative. You need to have an idea of where you are going if you ever expect to make it as a business owner. By nature small businesses should only remain small for a while, if you company is not growing it is dying. Markets mature, customer needs mature, and guess what… your business should also be maturing. Knowing where your business is headed will allow you to take the appropriate measures today to set up for tomorrow’s market. A growth strategy can be vague. You don’t need to define every variable, but you should use your intuition to determine where you should position your company.

    If you are planning on starting a small business understand it is a lot of hard work and there are no rules. There is no one telling you what to and not to do, you will be responsible for your success or your failure. You must be persistent and willing to invest more of yourself than the next guy in line. If it were easy everyone would do it, but because it is demanding there are only a few to compete with.