The New Year is often a time when we make resolutions to change parts of our lives or to begin new journeys - starting a business might be one of those undertakings.
You may have been thinking about starting a business for a while and decided that this year is your year. Let’s think about some of the questions you need to consider before you start up.
Do you ‘really’ want to start a business?
It may seem like a silly question but plenty of budding entrepreneurs jump straight into a business idea and then find they don’t enjoy what they’re doing. The end result is a business with a short lifespan due to a lack of motivation and commitment.
Being 100% committed is the key to all success in life - but also contemplate whether you have enough experience. For example, if you’re planning to start up an IT company but have never marked up any code before, you might want to learn the basics of HTML mark up while finding some experienced coders to work with.
Do you need to ease into your new role? Many new businesses begin as part time start-ups in a spare room of the family home, while the owner retains some working income through their primary job.
Talk to your bank specialist about how they can help your business get up and running.
Speak with friends and family, along with your potential business advisors, to be sure that going into business is for you. Get their take on your abilities to run a business, manage people, and cope with the day-to-day ups and downs.
Are you comfortable being in charge? There’ll be a host of new stresses, and also rewards, from relying on your own production of income.
Consider attending networking events to talk to existing small business owners - and to find out what it’s really like running the show.
Do you have a great idea?
It can be common for new business owners to think they have a great idea without having researched the marketplace sufficiently, to be sure there’s a gap to exploit.
Write down why your business idea will work. What competitive advantage(s) will your business have over the established competition? For example, your angle could be:
- An entirely new type of product - like the recent Whittaker’s L&P chocolate bar that was marketed as a fusion of chocolate and soft drink.
- An improvement on current offerings - such as the introduction of Fergburger to the Queenstown restaurant scene. They created a whole new level of burger compared to what was on the market at the time.
- Location - for example, the rise of mobile food vans in Christchurch has just about turned takeaway dining on its head. Multiple locations are an option for these enterprising businesses.
- Price - can you price your products or services at the lower or higher end of the market? Being the cheapest or the most expensive in town gives you a point of difference. It’s something you could build a brand on.
Use a business plan template to see if your idea will go the distance.
Is there any demand?
Regardless of how amazing your business idea might be, it still needs to be demanded by consumers to have a chance at being successful. Most importantly, this demand has to be sustainable.
You should test your product or service (or even your idea at this stage) to determine demand.
Conduct some market research on a portion of your target market. Record their responses and reactions, but critically, find out if they’re prepared to let go of their hard earned money to purchase your offering.
Be sure to look at local data and statistics on New Zealand population and demand.
Can you make any money?
This is where your research becomes vitally important. Draw up a cash flow forecast for your first 3-6 months in business based on your projected sales and expenses.
Having enough working capital to start up and work towards breaking even is critical so your business has a chance to earn profits. Conduct a break-even analysis to find out how much you’ll need to see each week, and at what price.
Think about business loans and finance to help you get your business past the critical point.
It’s important not to underestimate the benefits of having cash in the bank to build your business succcessfully.
Having your own small business will be one of the best career moves you’ll ever make, so take the time to plan and research your idea thoroughly before you make the leap.