Starting a Business

Opening a business and being one’s own boss is as much a part of the American dream as owning a home. In fact, being self employed or an entrepreneur is gaining a great amount of attention in this country’s economy. Citizens of this country are blessed with the freedom to start a business and enter an endless number of markets.

However, opening and running a business is not as easy as many make it seem. If you have flipped channels in the middle of the night, a funny looking man with question marks on his clothes lure others into the idea that there are numerous funds available for people to start their own businesses or that you can earn thousands working from home. This gentleman along with other copy cats are selling you untruths in order to sell their own books.

Business service providers, like the Innovation and Entrepreneurship Center, wish there were easier ways to finance a business like the infomercials suggest. However, the reality is there are no free grant funds for people to start or grow their businesses. There are a small number of technology grants available to companies willing to engage in research and development for departments of the Federal government. These grant funds are highly competitive and come with many strings attached to the funding.

Moving forward on a business, the entrepreneur needs to be prepared to address the financial needs for the business. The entrepreneur needs to be able to sustain their personal finances first before moving toward opening the business. Rarely is a business profitable as quickly as the entrepreneur may think. Planning to sustain his/her personal finances is the first step in starting the business.

In the planning process of opening the business, the entrepreneur should prepare conservative financial statements. These financial statements should identify how much capital is needed to start the business. If the company requires more funds than the entrepreneur has, then he needs to seek outside financing to help open the doors. Usually, a business will seek out a business loan to help pay for the materials, inventory or equipment needed to operate the business.

The first place an entrepreneur should look for additional capital in starting their business is through what is commonly called “friends, family and fools (fff).” This form of capital is the easiest to find and obtain. After seeking support from friends or family, bank loans are often sought after. If your business is entering a fast growth industry and your capital requirements are great, then venture or angel funding may be needed.

Regardless of the type of capital source the business seeks, the entrepreneur needs to prepare a business plan, sound financial statements, and form a solid management team for the business. In addition to preparing the business for capital, the business owner must prepare their own financial worthiness. A good credit score or a cleaned-up credit report will be needed for the business.

The first step towards understanding business capital comes with learning as much as possible about the options, opportunities and the requirements of money and one’s business. Utilizing resources like the Small Business Development Center or the Innovation and Entrepreneurship Center are good places to start.

Start-Up Mistakes

With the help of Jonathan Sapir of Silver Tree Systems, below is a list of common business start-up mistakes. While some of mistakes listed may not apply to you, some of them are relevant. Plenty of challenges arise during the life of a business, avoiding as many of those challenges as possible will save you time and money. Learn what not to do before your own money is involved.

1.   You think that your product must be awesome because your buddies are telling you it is the greatest thing since sliced bread.  Unless they are willing to hand over cold cash to use your product, they are just being supportive and nice. Additionally, do your buddies represent the real market you are trying to reach?

2.  You are finding that your product is so versatile it could solve just about any problem.  This is a clear sign you don’t have anything worthwhile. No single business, not even Wal-Mart, supplies the needs of everyone for everything.

3.  You have found a client, but in your euphoria you have forgotten to ask yourself if this client is an anomaly.  You need to make sure that the client represents a real market, otherwise you are just building a custom solution. You need to be thinking about future customers.

4.  You keep coming up with ideas for all the many different ways you can make money with your product. You can sell it to Wal-Mart, Amazon, Google etc.  If you are not focused on something specific, you are dead.

5.  You choose to work with clients that don’t have a lot of money.  Sure they like your product, but they can’t afford to pay you enough for it, so why focus on them?

6.  You choose to work with a small client first instead of one that will be able to help you get more clients later on.  Just because Joe’s Fish & Chips is using your product doesn’t mean Motorola will be impressed enough to try it.

7.  You think you can’t work with a “real” client early on because it’s too risky.  But you aren’t selling them the product – you are selling them the idea of the product.   If you can’t sell them the idea, you are never going to be able to sell them the product.

8.  You start building the product before you have a (real) client identified.  Again, if you can’t sell the idea, you are definitely not going to be able to sell the product.

9.  You think you can’t sell the idea until you have a product.  This is a major killer – you think that as soon as you have feature X or Y, you can start showing people your idea. One more time – if you can’t sell the idea, you can’t sell the product.

10.  You don’t want to stop or throttle development when you aren’t really sure you are on the right track.  You just want to keep on going, because you just know that soon the product will be so awesome that it will dazzle everyone with its brilliance.   If people aren’t buying the idea, you better stop wasting money now until you have figured things out.

11.  You think that just because your product can solve a generic problem like “collaboration”, you have a sure-fire winner.  You have to ask yourself how your product really stacks up against the competition that is already out there and why people would buy yours, and if they would, for how much.  Often, the current solution being used is simply good enough, and even if yours is significantly better, no one is going to buy it.

12.  You underestimate the power of a penny over free.  If something is free and barely does what you need, you will stick with it versus something that’s much better but requires you to pull out your credit card.

13.  You think that just because someone says they would definitely use your product that they actually would use it – or that they would pay to use it.  Talk is cheap.

14.  You think that just because people say they would pay for your product (and actually mean it), they would pay enough to keep you off food stamps.

15.  You think that just because there is a company making money in your field, there must be a lucrative market that you too can take advantage of.  But there may not be room for more than one successful product in this particular area.  And the incumbent has a much better chance than you do of succeeding.