10 Steps to Starting a Business

Starting a new business? Here are 10 basic steps you must take to get your business up and running.

1. Are you meant to run a small business?

Running a business is hard work. There is no way we can fool ourselves into thinking otherwise. It takes the right kind of personality and dedication to run a successful small business, as well as a certain amount of business skills.

There are many self-evaluation surveys on the internet a person can take to assess your skills and also your business idea. I believe the first thing you have to do is believe in yourself and your product. You must be passionate about what you are doing before you can succeed.

2. Business Structure

Sole Proprietorship: you are the only employee as a self employed individual and as such as responsible for all aspects of the business including insurances, taxes, responsibility, etc.

General Partnership: you have one or more partners and share all responsibilities either equally or as pre-agreed upon prior to creating the partnership.

Corporation or limited company: this may be beneficial if you want to expand your business within your own country or internationally. Legal advice is advised prior to determining if this is beneficial.

3. Research your Market

Has the market been saturated with the same type of business? Is there a need for your service or product? Who will your competition be? What are the current and future trends that can impact your business?

By researching your business idea and potential market you will have an excellent understanding of who your customers will be, who your competitors are and what the industry trends are. This information will be needed when writing your business plan.

4. Business Plan

This very important written document shows the details of what your business is, what you will do, how you will operate it and what your business goals are.

This document can be used to arrange for financing. In fact you probably will not receive any financing if you do not have a business plan.

I struggle with writing a business plan myself but I know it is necessary and work my way through it and I use it as a guideline to follow, making changes as necessary. It is like a blueprint of your business.

5. Financing

You will not be able to operate your business if you do not have enough money to develop your business and operate it daily during its early start up days. You will also need to have enough money for your personal expenses until you are able to draw a wage from your new business. Be prepared – this could take up to 2 years before you see any extra money come your way.

Obtaining financing can be through your bank, personal lines of credit, loans, family or other sources of funds. You will need to provide your business plan to your potential lender so they will see how you have planned for your business – development, growth, etc.

6. Choosing a business name and registration

This isn’t as easy as it seems. If you are using your personal name you probably don’t need approval but if you choose something else you will need to have it approved and registered. Check on your local business laws as to the requirements for registering and how to protect your business name.

For example: In British Columbia, Canada, sole proprietorships and general partnership names are not protected and can be used by anyone who chooses to. The only way of protecting your business name is by incorporating it.

Please do some checking prior to requesting your business name to ensure it isn’t already being used. Also give some serious thought as to a name that will fit your product or service. It can be very expensive to change after your business is up and running and you decide you don’t like the name.

Register your business following your local legal guidelines whether you are a sole proprietor, partnership or limited company.

7. Domain name

It doesn’t matter whether you are a traditional “bricks and mortar” type business or an online business you will need a domain name to identify your internet website. By choosing your domain name, researching whether it is available and buying the rights to that name you can sell or market your products or services online.

8. Taxation

Check with your provincial, state or federal taxation agencies to ensure you are charging and paying the appropriate taxes.

9. Research for other Legalities related to your business

This will depend upon the type of business you are operating. Considerations regarding the applicable laws, taxes or restrictions you should be aware of if you plan to export goods to another country, sell products or services to other businesses, manufacture good, or hire employees. Do you need to purchase a business licence for the location you are operating from? Even home based businesses must have an operating licence and work within the legal guidelines.

10. Receiving Advice

You can’t do it all. No one can. It’s important to know that not everyone can take care of every detail relating to your business. Get advice from a lawyer to ensure your business is operating legally within the laws of your area. Hire an accountant to help you establish a book keeping system or to take care of your accounting for you. If you are not experienced or sure of yourself in different areas of your business – get advice! That’s the best advice I can give you. Don’t be afraid to ask for help.

Why Internet Businesses Fail

Why Are There So Many Internet Startups Failing Today?

In the real world of brick and mortar business, every day millions of people are dragging themselves from their comfortable beds, performing their morning rituals of washing and breakfast to head to their jobs. In their daily grind some are thinking that there must be a better and easier way to make a living.

All these millions know someone or know of someone who has “made it” by quitting their boring existence and become their own boss using their own computers in the comfort and ease of home.

While the idea of working from home sounds like an ideal solution, most are just not preparing. Many of these unhappy people will just quit their jobs and jump right into the first internet marketing business they find with no preparation, no knowledge of what they are doing, no education, and no hope of success. Failure is their only option and they are not even aware of it.

According to many sources, more than 90% (Ninety percent) of all Internet business start-ups end in failure within the first 120 (one hundred twenty) days. And that number is all too accurate: NINETY PERCENT!

This alarming failure rate goes unheeded for a number of reasons:

1. Many don’t know the statistical probabilities they face.
2. Many don’t see themselves as being part of the failures or they wouldn’t leap.
3. Many are talked into things they are unprepared for.
4. Many don’t know the basic tenant of – “If you fail to plan, then you plan to fail.”

Of course, success is still a possibility. There IS that other 10% (ten percent) that do succeed. For them, success doesn’t happen by accident. And success isn’t just a crap shoot. Success happens because of some very important factors.

Success happens because people learn about internet marketing and how it works. They do not expect to get rich quick or be able to make a killing overnight and retire to a tropical isle.

It is strange but somehow the same people, who wouldn’t dream of starting a real world business, think they can make a go of an internet business even though they have no business background.

People think that an internet business just means that they no longer have to get up and go to work. They think they can simply work when the feel like it and still make a good living. They do not understand that any business requires them to work hard and sometimes work long hours.

Some Wrong Ides on the Internet

That 90% failure rate of new Internet businesses really is not surprising when you think about the sort of people who start an internet business.

Most people seem to think that being a successful internet marketer is as easy as getting a website built and getting their own domain name and they could not be farther from reality.

Being a successful internet marketer requires self-discipline. People read books like “4 Hour Work Week” and think that partying all night, sleeping until noon and then 3 or 4 hours with a computer will make them rich.

There is not a magic button to push to have instant massive traffic to their million-dollar-like website and fistfuls of cash in their bank. It is just not going to happen.

Internet marketing does not run on auto-pilot. And while established internet marketing types do not put in the long, boring hours they have built their businesses by doing that in the past.

It does not happen overnight for anybody. Most people are not prepared for the time requirement necessary for an internet business to achieve success.

They Do Not Have a Business Background

All businesses whether large or small, Internet or “brick and mortar” have two things in common: they are a BUSINESS and must be operated like a business! Business people must understand accepted business practices.

There are simple and basic concepts like “acceptable over-head expenses in relation to projected income”. All entrepreneurs need to understand profit and loss and what constitutes each.

It is not a requirement to have a college degree in business to be successful but it wouldn’t hurt. On the other hand some basic business knowledge is an absolute necessity.

If it is difficult to balance your check book, then it might be a good idea to keep your day job and forget about being in business.

Yes, you can hire an accounting firm that will tell you WHEN to make tax deposits, but they will not tell you IF you need to make tax deposits.

An accountant can tell you if you made a profit but not how you make it. If you have no business background get some good business advice before you consider opening any business.

The fact is that all successful businesses follow the rules of sound business principles. A successful business is not an accident. The numbers tell the story that only 10% of all new internet businesses are successful or are even still in existence after their first 120 days.

Even the expectation of profit is not reasonable for the first few month.

Have sufficient resources available for everything from startup costs to personal needs for a period of time. It’s called “capital” and there is no alternative to plenty of it.

They Do Not Have The Right Mindset!

Most of us have heard the phrase, “He has an attitude!” And it is often a derogatory remark made about a person with a negative attitude.

The word “attitude” is important when thinking about marketing start-ups. A good attitude or a good mind set will not guarantee success but a bad attitude or a bad mind set can guarantee failure.

Let’s examine a few attitudes that will absolutely guarantee failure:

1. I can work when I want to. This is absolutely wrong! You cannot just work when it suits you. Expect many long and sometimes boring hours of hard work for your business to succeed.

2. I can get rich quick! This is a dangerous one. While getting rich quick is possible, there are too many “get rich quick” schemes that are only ways for the unscrupulous to take advantage of the willing. Expect to be wealthy in whatever time it takes. It is possible to make a very comfortable living in internet marketing but it is not usually quick or easy.

3. I don’t need a business plan. Internet business is still a business. All business principles apply to online business as they do to brick and mortar business. It is imperative that you have a plan for your success based on sound business principles.

4. Internet business people do not have a boss. You are the boss. A good boss sees that all work is completed on time and in full, or you will fail. Set up a work schedule and goals to meet or you will find yourself working at a job under a boss who does do those things and maybe for minimum wage.

Ways to Avoid Failure

Starting a business… any business… has no guarantee of success, period!

Even large multi-national businesses can fail in a new business venture. Failure is always an option and the possibility or probability of success can be enhanced.

You can increase your possibility of success by:

1. Making a business plan BEFORE starting your online business. To remind you one of the things I said at the beginning: “If you fail to plan, then you plan to fail.” A plan for success is a requirement. Have the steps listed in great detail including reasonable cost estimates for completing each step.

2. Expect to work hard to achieve your goals. Never expect things to be easy. Most of the time things are not as easy as they appear. Each successive step will require its own work, time and patience. Sometimes things don’t go right on the first try. Be willing to keep going again and again until you succeed.

3. Do not fall for a get-rich-quick schemes. The internet woods are full of those who prey upon those who are looking for quick and easy ways to become rich. Most are ways for the other person to get rich quick from your money.

The 5 Phases of Selling a Business

Did you know that in 1978 it only took 57 days to sell a business? Compare that to today, when you’ll see three out of four businesses NEVER sell, and the average time to sell is almost a year.

There are ways that you can more effectively sell your business. This article outlines a 5-phase strategy for selling a business more easily and with less hassle.

The Upfront Work

You’ll see below that what you do before you start to sell a business is as critical as what you do once you put your business on the market. Preparation is critical to successfully selling a business, as is having a clear and concise process. A good business broker will understand this, and won’t have you sign a contract until you fully understand how businesses get sold today.

Phase I – The First Meeting

Those business owners who take the time to do all the preparatory work of selling a business stand a much greater chance of actually selling, and will sell for more money with better terms.

In the first meeting, your business broker and you will discuss your financial history, your employees, and your market. He’ll try to understand where you’re strong in the market, and where your competition is stronger. Ideally, he’ll already know your market, perhaps better than you.

The goal of the initial meeting is to see what you need to do to make your business attractive to buyers. It’s a waste of your time (and money) to just sign up with a broker because he says he’ll get your asking price. Remember that 3 out of 4 businesses don’t sell because they’re not in a position to sell.

Your broker should give you an honest assessment, and let you know if you need to go back and add value to your business before proceeding.

Once you’re ready, you’ll move to Phase II.

Phase II – Learn More, Do Research, and Add Value

Phase II is where your business broker starts to take over. He or she will do a tremendous amount of research, including analyzing five years of your financial records. He’ll perform a financial recast for you, research what has recently sold in your area or market, and then hand you a short list of specific ways that you can add value to your business before putting it on the market.

This phase is crucial to your success. You’ll take the time to “recast” your financials into reports that are easily digested by potential buyers and their banks. You’ll want to put all your financial records in terms that enable them to quickly see if the business will give them the profit and income they want.

Taking the time to add value, even if it’s just on paper, can make or break your sale in the long run. You won’t have to do everything your broker successes, but it’s a good idea to at least clean up your financial records so that there are no hidden problems for the buyer.

In Phase II, you’ll decide when will be the right time to sell your business. It may turn out that the best time for you to sell is five or more years down the road, after you’ve done all you could to build value and prepare yourself and your family for the sale.

Everything has to be put on the table during this phase. You want to provide the buyers with all the information they need to make educated decisions about buying or not buying your business. Time spent wisely in this phase can cut months off of the due diligence phase.

Phase III – Marketing Your Business to Buyers

There are six distinct steps in this phase.

Step 1: Get the agreement signed

You should not have signed an agreement with your business broker before this phase. Why? Remember that I said that you might not be ready to sell for a few years? Your agreement with the broker is a short-term (usually a year) contract to sell your business. It’s in yours and your broker’s best interest to only sign the agreement when you’re ready to sell.

Step 2: Create the marketing materials and package

When you’re ready, your broker will create a marketing package that contains everything prospective buyers need to make a go/no go decision.

The marketing package is a 50+ page “book” that includes all your relevant financials, detailed information about your business, information about your employees and company, and even photos if applicable.

You’ll include relevant plant information, equipment lists, leases, and contract arrangements. You’ll also provide relevant information about the potential growth of the business, the industry trends, and potential issues that may cause problems down the road. Full disclosure is vital to your successful sale because if there’s a problem or issue, the buyer WILL find it during the due diligence phase.

As you can imagine, your business broker will spend a great deal of time preparing your marketing package. However, the hard work that’s put into this phase will reap great rewards in terms of the price and terms you get for the sale.

As your broker is creating the marketing package, he’ll simultaneously be putting together a pre-screened list of potential buyers.

While many brokers send information to potential buyers one at a time, you’ll want to find a broker who contacts all potential buyers simultaneously. I’ll explain why in a moment. This list should be reviewed with you before any materials are distributed.

Step 3: Market the business

This is where things get interesting. Your broker will send all potential buyers a short message (phone, email, mail) announcing the availability of your business. Your broker may also list your business for sale on one or more online “market places” that list businesses for sale. While these can work well for small businesses, they are far less effective for the “middle market” (businesses that sell for over $1 Million).

What they receive is a “blind summary” that gives them enough information to decide whether to proceed and get additional information. Your privacy is protected, and they won’t discover who you are until they’ve signed a non-disclosure agreement and have demonstrated that they have the financial means to buy your business. That final step of demonstrating financial ability is even more important today than it’s ever been in the past.

Step 4 – Refine the buyer list

Now, you’ll choose a short list of potential buyers with whom you’ll want to move forward. Ideally, you’ll have at least two and up to four or five very good buyers. These are the buyers who truly understand the value of your business, and are in a good position to move forward with the sale.

Step 5 – Meet with the potential buyer(s)

Now, your broker and you will meet with the potential buyers for an hour or two. They’ll want to get a better understanding from you about your business, the opportunity, and the risks. They’ll ask some very pointed questions, which is why you should spend so much time up front in preparation.

Any objections or issues they uncover may cause them to turn away or bid a lower price.

Step 6 – Put the business up for auction

Your goal is to create a “bidding war” for your business. You’ve talked with two or three buyers, and each is convinced that they’ll benefit from owning your business.

They’ll submit bids, all at the same time. You provide a specific date for bid submission so that all bids arrive at the same time.

This enables you to easily compare all the offers that are on the table, see how they stack up against each other, and make a wise selection in choosing the best offer that also has the best likelihood of completing!

Phase IV – The Due Diligence Phase

The due diligence phase of selling a business is really the toughest part, and it’s where most deals fall apart. The reason you spend so much time up front, and why you fully disclose the good, bad, and ugly about your business is that buyers WILL find all the issues during this phase.

You run the risk of the buyer backing out or reducing their offer to compensate for the new issues they’ve uncovered. Remember that the buyer’s attorneys and bankers are actively looking for potential problems and risks, so if you’ve already disclosed everything, they will have nothing to find.

They’ll do financial audits, environmental audits, information technology audits, and generally invest quite a bit of time (months in some cases) looking through your business.

Phase V – Closing the Deal

Usually, the final phase starts at the same time as the Due Diligence phase. You’ll get all the paperwork in order, conduct final negotiations, draft additional agreements and exhibits, and get everything ready to go for signing and closing of the deal.