Grunke column: Ten Things To Do if You’re Starting a Business
In my 20 years’ working with businesses, I’ve observed and advised many entrepreneurs as they worked through the challenge of transforming concept into company. It’s been my great pleasure to watch plenty of those new businesses succeed. But I’ve also seen businesses fail. Often, the reasons for failure trace back to basic missteps that could have been avoided.
Russ Fletcher, founder of Montana Associated Technology Roundtables, recently asked me for my 10 recommendations for anyone thinking about starting a business. While no two businesses are alike, I do believe there are some basic steps that every entrepreneur should take in order to maximize the chances of success. Here they are, offered in no particular order.
Ask for help
There is a myth that entrepreneurs should go it alone. It must be part of our culture’s ideal of rugged individualism. In fact, businesses rarely succeed without a team of people offering expertise, ideas and advice. No matter how smart you are, no matter how great your business idea is, you will need assistance and fresh perspective from others. We all know someone we view as successful — go have a cup of coffee or a beer with that person, discuss your ideas and ask what he or she thinks.
Have a bold plan — and write it down
One of my favorite sayings is, “Hope is not a strategy.” Business plans come in many shapes and sizes, but the most important item is to actually have a plan — whether on the back of an envelope or in a detailed pro-forma. Your plan with goals is your road map. At a minimum, you must clearly answer two questions: What are you trying to accomplish? And, why? Maybe you are simply trying to create an enterprise that supports your family. Maybe you want to create the next transformational industry. Your plan’s goals should be big and bold. They are supposed to be a stretch and hard to attain, but attainable in the end. Write out your goals and then periodically review them to ensure you aren’t getting sidetracked.
Focus and find your passion
It is very rare to find an entrepreneur who can execute all of the essential activities of a company. A successful business must certainly develop a useful product or service; but it also needs sound financial systems and a sales & marketing strategy. I believe it is possible for a person to be strong in one of these categories, potentially two, but not all of them. Which of these are you good at? Once you know the answer, you’ll be better equipped to choose the right partners and professional advisors to round out your company’s needs.
Choose your business partners carefully
Next to choosing a spouse, this might be the most important relationship decision that you will make. Make sure you choose partners who bring their own skills, knowledge and creativity to the business. They should also bring a complementary vision and set of values. It is very important that you clearly define roles and expectations for any potential business partner. Also, if you will be sharing an ownership stake in your business you’ll need a well-planned exit process if things don’t work out or there’s a retirement or death.
Employ professional advisors
Professional advisors cost money — but not having professional advisors might cost you your business. The five most important professionals to help your business are your banker, your accountant, your lawyer, your insurance agent and your human resources expert. Begin developing an ongoing relationship with each of them early — well before you think you need them. Make sure they understand you, your business and what you are trying to do. Think of them as part of your team. Interview each and make sure they are people you can work with. Once your business is up and running, meet with each of your professional advisors at least annually to discuss your progress.
Contact your local economic development organization
In my work as CEO of Missoula Economic Partnership, the most common question I’m asked is, “What can you do for my business?” My answer almost always is, “What do you need?” It all starts with a conversation. There are literally hundreds of different economic development programs available to help businesses grow and expand. As an entrepreneur, your time needs to be spent developing your business, not wading through the labyrinth of financing options, workforce training programs, cash grants and other resources that may help you. All you really need to know is that your local economic development organization DOES know the programs that could be available to you. So go see them.
Find the right capital
“It takes money to make money.” True. But what’s often forgotten is the importance of finding the right money. Very few businesses are profitable from the get-go, so you will probably need enough capital to survive the tough first year — maybe even years. Knowing how quickly you can achieve a cash positive position is important to understand. Additionally, actual capital needs are often drastically miscalculated. It is crucial that you have a sound financial advisor to help you work through your capital needs. It’s also important to remember that the best source of capital is revenue.
Think beyond the capital
Capital only buys you time and assets; a working business needs much more. Maybe you need introductions to potential customers or access to a supply chain. Make a thorough list of what you need — and more importantly, who can help you fulfill those needs. This also helps you identify the holes in your business plan.
Meet with building & planning officials ASAP
A common mistake is to not meet early enough with building and planning officials. This can cause unnecessary delays in opening or operating your business — delays that cost you money. If your business requires new construction or significant building improvements, I recommend hiring building professionals to help you through the process. They understand it, you don’t; and your time is better spent focusing on other things. Before you pick a site, make sure it has adequate physical infrastructure and the communication and broadband infrastructure you’ll need. You also need to ensure that you can legally operate in your proposed location; otherwise you will need a variance or perhaps a rezone. Many hurdles can be avoided by meeting with the appropriate city or county planning staff and discussing what you want to do.
Know your competitors — and be different
You must be able to specifically identify your competitors and explain how you will differentiate your product or service. It is really all about understanding the market viability of your business. If you are a pioneer, what is your go-to market strategy and what are the barriers to entry for competitors? If you are opening a business with a familiar model, what is your strategy to draw customers and make a profit? For both scenarios, a clear understanding of the landscape around you will prove critical.
BONUS: Learn and be patient
Whether you’re a first-time entrepreneur or a seasoned business professional, keep learning. There are hundreds of opportunities to expand your expertise. Read books, read industry publications, take a course in basic accounting or in business etiquette. In Missoula, the Innovation Initiative offers free professional development opportunities throughout the spring and autumn; online, visit MissoulaPartnership.com for information. Most communities offer seminars and classes through their Small Business Development Centers, community education programs, community colleges, economic development organizations, trade and industry organizations, universities — all of which can help you grow your business successfully. Take advantage of them all.
Finally, remember that it will take patience to do all of these things right — let alone see a profit. It may take a year or longer. But as long as you are moving forward, it can happen.
James Grunke is CEO of the Missoula Economic Partnership. This column originally appeared in the January 26, 2014 edition of the Missoulian’s InBusiness Weekly.