How will you be different?Are you in the process of planning to start-up a new small business? .... No doubt you've come across the idea of what marketers and advertisers term your "unique selling proposition".
In other words, in a crowded marketplace, what makes your service or product stand-out from the rest. Why should a customer choose you instead of other suppliers that are out there.
In the eyes of your customer, what will be the points of difference between yourself and your competition? ..... Will it be price factors, quality of materials, free delivery, timeliness of supply, length of warranty, support and training, your affiliation with the local community?
But differentiation is only one of the essential factors to consider when planning your business start-up. And by the way, your point of difference will be something you need to regularly re-assess because once you succeed in establishing your business, chances are that it won't be long before one of your competitors identifies you as a threat and "copies" what you've been doing. So you need to stay agile and be ready to adapt to this over time.
For your business plan
Ian Harris is a partner in B + I Lockwood Accountants, a business services firm in Melbourne, Australia. He's highly experienced in guiding small businesses through the start-up stage, so I asked Ian for some of his thoughts.
One of the resources that his firm favours to help entrepreneurs clarify their thinking when developing their business plan is "Business Model Canvas" ...... If your start-up business requires any type of funding or lending from a bank or investor, having a business plan is essential. And it also provides you with a basis for making decisions when you are faced with different options, as you navigate your way through the start-up stage. Here's a short video clip that explains their business plan template. Keep in mind there are many other business plan templates available that you can download ....... But a key thing is that it should be a simple document that remains "live and fresh", providing you with direction and is updated if market conditions or your aspirations change. Here's a short video that explains how to prepare the business plan on one page
Here's what Ian had to say in response to some questions about starting-up a business ......
- As an accountant you’ve advised and observed many, many small businesses over the years. What are the qualities that tend to characterise the small business owner who succeeds? ....... And do you think there are people who are simply unsuited to being self-employed?
There is usually a particular sparkle in the eye of those who are successful. Those who succeed are driven, passionate and energetic. They literally don’t accept defeat. And they usually are very knowledgeable about the industry they are going into. They have done their market research - and typically have planned wisely and thoroughly.
There are definitely people who are unsuited to starting their own business and being self-employed. These people tend to have come out of jobs where they have been used to working structured 9.00 -5.00 hours and being told what to do. They have difficulty applying the intensity required to succeed. I would advise a person who is contemplating going into their own business to carefully evaluate their ability to motivate themselves and to work independently, without direction from others.
- From your experience, why is it that many entrepreneurs when they start-up their business quite often under-estimate operating costs – and over estimate expected revenue?
Yes, this can happen - and it is quite often a causal factor in the high failure rate of start-ups. They have often under-estimated the time required to get the business to market and achieve traction. This creates the need to stretch their material and financial resources further than what they'd anticipated. They over –estimate expected revenue because their optimism and excitement about getting traction has not been tempered with sufficient depth in their market research. So I would advise budding entrepreneurs to err on the side of conservatism when preparing their sales and profit projections in their business plan.
- What are the signs you look for in a business that indicate that it could be ready to grow and expand – and what are some keys to ensuring this is done in a sustainable way?
Strong cash flows. Sales are increasing. They are struggling to keep up with demand. There is stress associated with not being able to keep up.
The critical thing is to understand where the immediate constraining factor is and address it , and then the next one etc. Some people just employ more staff without having done a proper analysis of what the real constraint is. In other words, a more cost-effective solution might not necessarily always be hiring another employee but instead a change in some aspect of your process or systems or work scheduling that improves efficiency.
- Cash flow problems can be a source of stress for small business owners – what advice can you offer around ideally preventing, but if necessary handling, cash flow difficulties?
Do cash flow projections for at least the next 6 months on a continual basis. Understand what you have to bill and collect each week to keep the doors open AND make sure efforts go into meeting this requirement. This awareness will provoke refinements and help to ensure that you focus your energy on the most critical things within your business.
Also, over time you should be able to recognise cycles or seasonal trends in your business in terms of particular times when sales are weak and other periods when they are strong. So you need to think ahead, and ensure that you've "squirreled" away enough money from the "good" times to get your business through those relatively leaner periods, with sufficient reserves that will cover your operating expenses.
Also, over time you should be able to recognise cycles or seasonal trends in your business in terms of particular times when sales are weak and other periods when they are strong. So you need to think ahead, and ensure that you've "squirreled" away enough money from the "good" times to get your business through those relatively leaner periods, with sufficient reserves that will cover your operating expenses.
- Ian, what should someone running a small business be looking for when selecting an accountant? ...... It can be a pretty important relationship, can’t it?
It can be critical. Most importantly the accountant needs to have some appreciation of what your business entails and what you are wanting to achieve in the long run. Too many accountants just focus on solving tax problems rather than understanding the business and ensuring that their client is focussing on the right issues. A good accountant becomes a trusted business advisor.
- Any final pieces of advice that you can offer to the budding entrepreneur?
Make sure you understand your business model (we use the Business Model Canvas to help entrepreneurs define their business model). Make sure you understand what your "backs to the wall budget" is. ....That is they need to understand what sales you need to break-even and then to make a profit. You need to be very carefully monitoring the reality of your business each week (revenue against costs) when you start ..... and sweating when you fall behind. There's no point simply "hoping" that your business will improve.
Having an awareness of your real situation will provoke thought and if necessary, change. Whether such change requires making tough decisions around reducing your operating costs or adjusting your marketing and advertising strategies - the key is to take action when things aren't working. There's the old saying "If you don't change, nothing changes" There's no point putting your head in the sand when there are problems in the business - because they usually don't just go away themselves.
Thanks to Ian, for sharing his thoughts.
In the following video clip, some similar advice is offered - be careful when managing your cash flow when you first start-up, know your points of difference and keep on learning as a small business owner. And one more short video with some tips for planning your start-up
Related articles -
How to run a business; Avoiding small business failure ; Why small businesses fail to grow
Related articles -
How to run a business; Avoiding small business failure ; Why small businesses fail to grow
