Starting a new business is an exciting and challenging task, one in which success brings a variety of rewards and yet failure can be a painful and damaging experience.
Despite this there are 2.0 million SME’s in Australia and new startups opening every day.
This is the entrepreneurial drive at work, the human need to try new things and to stretch and grow. The SME is the economic life force and breeding ground of business. Of the many small start-ups some will go on to become multinational corporations, this isn’t everyone’s choice, or objective and statistically most start-ups will fail within the first three years of operation
Understandably starting a new business is full of challenges and I am often asked how I went about starting my first business and what tips I can offer. Starting a business for most entrepreneurs means a huge amount of sacrifice, hard work, risk and belief in your concept.
My first business came about via a combination of accident, hope and “nearness” to opportunity but if I was to start again I would take these points into consideration:-
1. Think carefully about the business you choose
Last week at a conference I was asked the question “what business would you choose if you were starting again?” A very good question and yet one I felt confident in answering. I would choose:-
- A high volume established industry with proven customer demand
- An industry with a relatively low cost of entry
- A location very close to an established business in the same industry
- I would price my product at the market price or slightly higher
- And this is the WINNER I would out-service and outperform the competition in terms of customer satisfaction.
2. Market your business well – marketing is your cash engine
If you have taken my advice and set up your business virtually next door to an existing similar business you already have potential customers passing your door so how do you convert them. You need a plan of attack:-
I. Check out your competition and look at weak points in their product offering, customer service, display, staff training, customer handling etc. Then do the reverse and observe their strengths.
II. Build your strategy around out servicing your competition; choose customer service and customer satisfaction as your point of difference. A company we have worked with “Chilligin” is a successful on-line and pop-up retailer of fashion accessories, scarves, handbags etc. Chilligin’s founder and director Nikki Gilhome decided from day one to offer Chilligin customers great products, at affordable prices and to package every item whether ordered on line or in store beautifully. “I wanted the customer to have a lovely surprise when they open their home delivery, or for in store customers something to look forward to when they return home” says Nikki. Small details such as carefully designing wrapping paper, stickers and ribbons, tags etc turn the ordinary into an occasion. Effectively the customer gets a double hit of pleasure first the purchase decision and later a beautiful package to unwrap.
III. Train your sales staff to meet and greet customers with genuine warmth, use quiet times to rehearse the perfect approach.
IV. Wherever possible over deliver on customer expectations, the more a customer enjoys doing business with you the more they will return
3. Employ the best staff
When starting a business we need to be careful of costs but a really good staff member is a key asset and a valuable part of your strategy. Don’t cut costs here.
Chose staff who share your vision, who want to grow, who will absorb your training and guidance. Respect and reward them. Encouragement and respect are amazing rewards, how do your competitors reward staff? There are many ways to reward beyond the pure financial and most people I know would rather work for a little less in a great environment than for more in an uncomfortable environment.
4. Review progress and question: Can we do better?
If your business strategy is to outperform your competition by offering better service and customer satisfaction you must work hard at it to keep at the top of your game. Constantly check your competition, both locally and via the internet, overseas. Read everything you can find for new ideas, engage with your customers, listen and learn. Constantly review every single aspect of your business questioning how you can improve the customer proposal, to satisfy and engage more closely.
Your stock and services must always be current and adjusted as closely as possible to your customer needs. Use stock analysis tools so that you know which items are moving and which are slow. Respond very quickly to avoid wastage, move quickly to special out and move any slow stock. Slow stock is dead money and loosing you sales. Buy more of the fast moving items and consider expanding that part of your range with more options.
Change your web presence or store displays daily to build and maintain customer interest. Collect email addresses via direct questions as you input receipt data, small competitions, draws etc. Communicate directly with your customers, be innovative, informative and “the place to go”.
5. Think carefully about finance and assistance
Most businesses will involve you assuming responsibility for some level of debt, make sure you understand the obligations here and your responsibilities. Debt isn’t just a loan, it includes your supplier credit, your rental or lease obligations etc.
It's important to know which type of financing is right for your business and always try to hold three to six months cash in reserve. Are you willing to give away equity in exchange for cash? Are you looking just for an investor or also for a mentor? Is your business plan solid enough to secure a bank loan?
All important questions to consider and remember with an investor you often gain an experienced mentor as well. If I was starting out again today I would look for an experienced investor who could guide and mentor me over any other form of external funding.
We are fortunate to live in an age when so much information, knowledge and experience is available for those who want to search for it. Eric Schmidt, executive chairman of Google, said: "There's a new way to do marketing, and it's to do it with numbers. People do marketing to bring in revenue, to have an impact, and with these new systems you can measure this. The technology the internet brings means you should be able to measure almost everything."
If you are thinking of a start-up read and absorb, plan and then follow through and your chances of success are high.