# General Business Category > Entrepreneurship and Business Management Forum >  Five things you must consider when starting a business.

## tec0

This is a short post on what must be done and what must not be done, when it comes to starting a new business. I  found myself in this situation time and again and realized why "some people" will keep on failing at business. 

First and foremost do your own research on the product and determine if it is short term or long term. This is very important to calculate sustainability and future competition and or if the supplier is giving you a good deal or not. It will also communicate if you are able to do rebate, carry parts and stock and other responsibilities warrantee/guarantee to keep the consumer council of your back. 

Second aspect is the financial burden, this connects to the first step in a strong way. Buying stock is but one aspect, storing and distribution will also carry cost and with it responsibility towards the product. All of us have seen a damage box sitting on the discount table right? That is a avoidable loss to begin with. Shelf-life is also a major aspect when buying the product, if it is short term especially, it would be worth noting how fast a product goes "if that is a constant or not" how long it will take to restock said product. 

Thirdly, is getting the word out, simply having a product doesn't mean someone is going to magically find you. This is why systems like social media, internet, local radio and general advertisement is so important. It also locks into the second and first step. On your research it is important to know how you found your information and how easy or hard it was. It will also give you a good marketing strategy as to how to go about listing the product and it's information and how to draw the customer your way.  It connects to the second step as well as you need to add the financial requirement for said advertisement.

Forth step is probably the most important step as this is the actual introduction between you and your supplier and the introduction between you and your customer.  If you took the time to do step one properly you can show both interest in the product and knowledge of the product. The supplier agreement is an absolute must have and needs to accommodate your needs as well as their own. A strong agreement allows you to deliver to the customer, and handle returns from the customer and above all is able to minimize your cost in returns "where in if possible". Be strict on damage products and don't give your customer "something old" when they are paying you good money. 

The biggest most important step is the fifth step!  Don't involve people against their will like pushing your idea down on family/friends and expect them to pick up responsibility and become the primary driver of the business. A lot of new businesses have this and simply kills any chance it had. Identify responsibility and only reach out to someone if that someone is willing and able to accept responsibility.  If you cannot accept responsibility it doesn't matter how much money is backing you, you will fail if not in the short them then in the long term because responsibility starts with YOU as the OWNER. Not the friend or family. 

I have seen 41 businesses fail "to date" where the main responsible person FAILED to do these seemingly simple steps.  

Yes there is much of that I have missed but I am sure each of us knows a few people that made these types of mistakes. 

Please feel free to add to the list.

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Rory (12-Sep-15)

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## Blurock

The most important thing when starting a business is money. Without cash you will never get off the ground. Calculate what you need and multiply by 10. Your estimates will never be correct as it may take months before you make your first sale. In the meantime you have to pay suppliers, rent, telephone, wages/salaries etc.

Once the money runs out, you are stuck!

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## BusFact

Well, I agree that the number one reason for business failure is a lack of money, but you also run the risk of throwing good money after a bad idea and in having more cash available it simply means you will lose more in the end.

If you are getting into a business which you want to pay your salary with from month one, then yes you are going to need a lot of cash.
If you want to set up a new business with all the bells and whistles of an established firm in order to create credibility then yes you will need a lot of cash.
If you intend on going into certain types of business such as traditional retail then yes you will need a lot of cash.

But it is quite possible to start a business without much cash. Rent and salaries, for example should not be a consideration for a new small business. It does limit initial growth, but "boot strapping" is still viable.

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## GertH

Great write-up tec0, thanks! I strongly agree with your third step, it's incredibly important to market your product / service, without customers you might as well close your doors. Your marketing can also be the deciding factor of how well your business scales and grows, yet again, an imoprtant factor for any business  :Smile:

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tec0 (04-Nov-15)

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## daisyli

Great idea, not involving people against their will.

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## adrianh

The step(s) that everybody seem to miss, except of course the prospective financier is this: 

1. Do your numbers make sense

Even a mediocre financial person is able to see by looking at the numbers whether you understand what it takes to run a business. Most start up businesspeople do not realize that financial people are able to read numbers and get a picture of the overall mindset of the author. If you fail this part then you are doomed.


2. Do you fully understand what you are busy with.

Ok, so lets say you have a great financial mind and you've convinced the financier that you understand the numbers now comes the tricky part. Are you able to answer various questions off the top of your head; how big is the market, who are your customers, woh are your competitors, how are you going to make money in the industry, do you have industry experience and and and...if you are unable to answer any of the questions off the top of your head then you don't know your stuff. Industry experience; financiers hardly ever back people with no industry specific experience. That fact that you are a brilliant woven basket salesmen does not make you a brilliant yoyo salesman if you have never been active in the industry. 

You need to understand that financiers back people who have already put their nuts on the line to learn the industry and are looking to expand their output though investment....but here is the catch, every single investor is going to ask "What's in it for me".  Entrepreneurs are of the mistaken belief that people will invest money in their new en devour simply because they have nothing better to do with their money, it doesn't work that way. The investor can leave his money in the bank and get a fairly risk free return. The question that you need to ask yourself is can you give your investor his cash back with more interest than he can get by simply leaving his money in the bank. If the answer is yes then you need to be able to quantify the associated risk, and of course the bigger the risk the bigger reward the investor will want.

I am of the opinion that each and every entrepreneur needs to look at his own business in the same critical way that an investor would. If you are unable to convince yourself that you should put your balls on the line for your business then you will never convince a financier.

At the end of the day the only thing that really matters are the numbers. Know your numbers and you are halfway there.

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## Conspirors

One of the most important aspects of starting a business is knowing your customer and what they need, also showing them what they need in the future.

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## ians

25 years ago, on the 15 feb I decided to take the step. 25 years ago the fail rate within the first 5 years was 50 % .

The bank requested some documentation to show them i had done my homework and had all the figures  worked out. 25 years later i still not produced this piece of paper. I have overdrafts on all my cheque accounts. I was offered  R 100 000 facilty on my credit card.

I had done absolutely no  customer research.

I bought a golf and a 6 ft ladder. 

Trust me when i tell you it hasnt been as easy journey. I have made more mistakes than i would like to remember.

My goal 25 years ago, was to just last 5 years. The business just kept growing and growing. 

All you need in life and business is will power. If you want it bad enough you will go and get it no matter what it takes.

Cash flow is king. A R100 million contract is worth nothing until it is in your bank account. No matter how big or small your business,all it takes is 2 or 3 bad customers and you fall faster than rand after a budget speech.

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## ians

Another danger for small business. These People who get contracts then look for others to complete the contract. Be Careful out there, i have been approached twice and turned them both down. 

Big estate developments another quick way to go bankrupt  

All that counts at the end of the day is cash flow. Cash is king.

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## Susan Smith

I agree with the cash flow problem.  I am in the service industry.  You deliver the service, and the clients (especially big ones) try to keep their cash in their banks as long as possible. What is supposed to be a 30 day agreement sometimes extends to 6 months.  I've got rid of those clients.  I need awesome clients that will pay and appreciate what I have to offer.  

I have had successful businesses in the past, and closed them down when changing course.  I love what I am doing now, so much, that I am expanding and branching out. Quite daunting. I started with nothing, did everything myself.  I have found myself still doing most things, although I am starting to outsource some things to free up my time to do marketing and promoting the business.  It's been a tough ride, opening up just before the recession hit.  

My reputation has been my brand though, so word of mouth, delivering what I promise, I think is key to ensuring referrals and repeat business.  

So, for new businesses:-
- watch every penny - you don't necessarily need fancy offices, stationary and machinery unless it is a critical part of your production.
- drop your standard of living - you are a student all over again
- don't live off your business if you can help it
- keep up to date with your money - understand where your break-even point is, and where your profits start to emerge. Look at your statements every day, track your invoices, and payments.
- keep your suppliers happy, as they will give you grace when you really need it
- you will get to a point where you are not coping with the workload - and at this point, it is to ask yourself what you can outsource, or hire someone to do
- your business must be your passion, but it must be something that can ultimately run without you.  You want to build something you can sell and walk away from and which does not define you.

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lventer (02-Sep-17)

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## SSS100

Know and understand the stages of business cycle: .. Stage 3 is very critical and hard to accomplish because GOOD employees and NOT easy to get and you need them to get into stage 4... Expansion

Stage 1: Seed And Development
This is the very beginning of the business lifecycle, before your startup is even officially in existence. You’ve got your business idea and you are ready to take the plunge. But first you must assess just how viable your startup is likely to be.

Stage 2: Startup
Once you have thoroughly canvassed and tested your business idea and are satisfied that it is ready to go, it’s time to make it official and launch your startup. 
Many believe this is the riskiest stage of the entire lifecycle.

Stage 3: Growth And Establishment
If you’re at this stage, your business should now be generating a consistent source of income and regularly taking on new customers. Cash flow should start to improve as recurring revenues help to cover ongoing expenses, and you should be looking forward to seeing your profits improve slowly and steadily.
The biggest challenge for entrepreneurs in this stage is dividing time between a whole new range of demands requiring your attention– managing increasing levels of revenue, attending to customers, dealing with the competition, accommodating an expanding workforce, etc.
Hiring smart people with complementary skillsets is necessary to make the most of your company’s potential during this phase, and so any good founder will be spending a lot of time directly involved in the recruitment process.
It is essential that you start to come into your role as head of the company in this stage. 

Stage 4: Expansion
At this stage you might feel there is almost a routine-like feel to running your business. Staff is in place to handle the areas that you no longer have the time to manage (nor should you be managing), and your business has now firmly established its presence within the industry. 

Stage 5: Maturity And Possible Exit
Having navigated the expansion stage of the business lifecycle successfully, your company should now be seeing stable profits year-on-year.

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## Dr Thomas

Some things I wish I had known from the start...

1) It's much easier to supply a product to a great demand than to supply a great product where you have to create the demand.  In other words, just because you have a great idea or great product, doesn't mean the market is ready for it.  Companies spend millions convincing consumers of the 'next big thing', but most people resist change and as a small business focus on giving people what they want rather than on convincing people of what they want.

So if you want to start a business, first find a demand to supply rather than first trying to supply a demand (I hope I'm making sense!) 

2) Marketing is 50% of the business.  The best idea/product in the world won't make you money just by itself.  And in fact, some really stupid/dodgy products can make money just from sheer marketing.  It's better to have a smelly donkey cart hooked up to a stallion than to have a beautiful carriage hooked up to a two-legged mule.  The donkey cart can at least go somewhere.   Rather have a relatively dull business hooked up to a decent marketing campaign than have a brilliant business concept but no marketing.

3) Keep overheads and costs low.  You WILL make mistakes in business, but your mistakes are directly proportional to how much money you're spending.  If you're spending a lot = big potential mistakes.  You WILL lost money when starting out in business (mistakes cost money), but small costs = small potential mistakes.  Also don't sign lease agreements, if possible, unless you have a proven moneymaking concept (by proof, preferably this means you have been paid for the service/product even before you signed the lease).

4) Accept that failure is a necessary stepping stone to success.  Very few business people are successful from the start.  You have to be able to emotionally and financially be able to cope with failure.

5) Almost every business needs to 'pivot', that is, it needs to change what it does to remain profitable.  So don't fall too much in love with what you business does in the beginning, you have to change it after all.
This guy on YouTube explains this point better than me: https://www.youtube.com/watch?v=-2m6JkJvv4w

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## Blurock

One of the biggest risks in a startup is to run out of money.
If your budget shows you need R1 million, you will actually need 10! This may not apply to buy and sell, "me too" businesses, but in manufacturing that is definitely the case.

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## Electrode

Considering that I lost my business due to non-payment from my 'business partners'. All I can say is make sure you know who you are dealing with. Because if they are corrupt or untrustworthy in any way you will end up exactly like me. I lost my business, lost my livelihood and above all lost my physical stock. Even if there is a rumour of your partners being unethical in any way or form you should take note and base your actions on that rumour. I ignored the rumours. Lastly allays use a legal aid.

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## Justloadit

In my experience, the acceptance and signing of a contract is no guarantee that it will happen. The deal is only concluded when the money is in the bank, especially if part of the terms and conditions includes investment up front.

I made this mistake by investing a huge amount of money in development upon signature of the contract, and when the project was almost complete, and I requested the deposit as per terms and conditions before work started, it never materialised. Fortunately I was able to survive, but it did hurt me financially for a few years where my nest egg was depleted and I had no spare capital to do other ventures.

Yes I could have gone the legal route, but it would have been spending good money after  bad investment. Legal battles are not cheap or for the faint hearted.

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## Electrode

> In my experience, the acceptance and signing of a contract is no guarantee that it will happen. The deal is only concluded when the money is in the bank, especially if part of the terms and conditions includes investment up front.
> 
> I made this mistake by investing a huge amount of money in development upon signature of the contract, and when the project was almost complete, and I requested the deposit as per terms and conditions before work started, it never materialised. Fortunately I was able to survive, but it did hurt me financially for a few years where my nest egg was depleted and I had no spare capital to do other ventures.
> 
> Yes I could have gone the legal route, but it would have been spending good money after  bad investment. Legal battles are not cheap or for the faint hearted.


In my experience I personally found the legal route to be a total and complete waste of time and money. The legal system is designed to absorb as much funds as possible and never conclude ever. Thus the whole legal system is utterly useless for the average person.

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## AgriBusinessPlans

> This is a short post on what must be done and what must not be done, when it comes to starting a new business. I  found myself in this situation time and again and realized why "some people" will keep on failing at business. 
> 
> First and foremost do your own research on the product and determine if it is short term or long term. This is very important to calculate sustainability and future competition and or if the supplier is giving you a good deal or not. It will also communicate if you are able to do rebate, carry parts and stock and other responsibilities warrantee/guarantee to keep the consumer council of your back. 
> 
> Second aspect is the financial burden, this connects to the first step in a strong way. Buying stock is but one aspect, storing and distribution will also carry cost and with it responsibility towards the product. All of us have seen a damage box sitting on the discount table right? That is a avoidable loss to begin with. Shelf-life is also a major aspect when buying the product, if it is short term especially, it would be worth noting how fast a product goes "if that is a constant or not" how long it will take to restock said product. 
> 
> Thirdly, is getting the word out, simply having a product doesn't mean someone is going to magically find you. This is why systems like social media, internet, local radio and general advertisement is so important. It also locks into the second and first step. On your research it is important to know how you found your information and how easy or hard it was. It will also give you a good marketing strategy as to how to go about listing the product and it's information and how to draw the customer your way.  It connects to the second step as well as you need to add the financial requirement for said advertisement.
> 
> Forth step is probably the most important step as this is the actual introduction between you and your supplier and the introduction between you and your customer.  If you took the time to do step one properly you can show both interest in the product and knowledge of the product. The supplier agreement is an absolute must have and needs to accommodate your needs as well as their own. A strong agreement allows you to deliver to the customer, and handle returns from the customer and above all is able to minimize your cost in returns "where in if possible". Be strict on damage products and don't give your customer "something old" when they are paying you good money. 
> ...



Money is not what crashes businesses, it is lack of planning. I work as an agricultural business consultant specialising in poultry. People  approach for help in starting farms often with plans in hand and other collateral. Many of the project reports are shockingly generic, overly optimistic and making broad and sweeping generalisations. I understand that this is because of enthusiasm for their vision.I work to help them protect their bottom line and find a business model that is financially viable and realistic. I think that people need to account for all possibilities. These resources may be of interest / help and have takeaways for any business: 

https://thebigbookproject.org/agri/p...rming/project/

https://thebigbookproject.org/agri/poultry-farming/profit-calculation/

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## Nydaycien

When starting a business, the most important thing is your business plan. Many business startups tend to fail because of poor planning. You must plan your resources and steps so that you do not lose your business focus and divert to non-essentials

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## Blurock

Starting a business is not easy. The posts below has valuable information for the budding entrepreneur. One of the most important elements are to have a passion for your business, but this can also be your downfall if not considering the facts and wanting to push through regardless what you believe in. 
It also does not help to start a business and then keep it a secret. I have learnt this from the foremost marketing guru, Peter Drucker:
"Because the PURPOSE of a business is to create a customer, the business enterprise has two - and only two basic functions:
Marketing and Innovation.

Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."

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## Tshidi

Good morning & thanks for accepting my request... I want to start my own business but I have fear of what if I won't manage it well, I have so many what ifs that are negative... & I have this other good ideas about my company, is it normal to feel that way? How can I overcome that fear...

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## adrianh

You overcome fear with PLANNING!

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## ians

> Good morning & thanks for accepting my request... I want to start my own business but I have fear of what if I won't manage it well, I have so many what ifs that are negative... & I have this other good ideas about my company, is it normal to feel that way? How can I overcome that fear...


If you havent even started yet and you feel like that ... i would hate to be in your shoes when the shyte hits the fan and go terribly wrong ... like the kinda day i am having today ... and i have been doing this for 29 years. 

You should be feeling confident ...excited and ready to conguer the world ... otherwise you are in for a rude awakening.

From someone who has been doing this for a long time ... been dropped in projects ... without a clue ... had to work out the details and make it happen  ... I have managed to complete every project within the time frame ...but not the budget ... i am a sucker for quality and commitment. 

I've seen many a company start and fail ... put your big boy pants on a take a chance ... you will never know unless you try ... you might surprise yourself and do really well.

Just dont make the mistake of thinking bussiness is a way to make tons of cash ... i dont know ratio but i do know more people fail than succeed.

You need to be a real sucker for punishment ...but at the end of the time ... the most valuable asset you will ever own ...is your time ... do with it what makes you happy ... if you fail the first time  ... as Adrian says .. plan a little better and try again ... you will fail ... just dont take personally ... its just bussiness.

Trust your gut feel ... network ...learn from your mistakes ... make a lot of friends but dont trust anyone ... dont let shyte get you down.

By the way dont forget the bussiness plan ... i am thinking about putting one together next year ... I hear you need one to start a bussiness.

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## Dave A

> You overcome fear with PLANNING!


Planning certainly helps. Not just in one's mind, but WRITING IT DOWN. There is something magic about putting pen to paper.
(Or perhaps nowadays - start typing, or using a mind map etc.).

But critically, when it comes to defeating fear, one can't linger too long in the planning stage. 
Paralysis of analysis is REAL.
Once you have a plan, you need to take ACTION.
Get started.
Get going. 
Start moving.

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## adrianh

> Planning certainly helps. Not just in one's mind, but WRITING IT DOWN. There is something magic about putting pen to paper.
> (Or perhaps nowadays - start typing, or using a mind map etc.).
> 
> But critically, when it comes to defeating fear, one can't linger too long in the planning stage. 
> Paralysis of analysis is REAL.
> Once you have a plan, you need to take ACTION.
> Get started.
> Get going. 
> Start moving.


I agree with everything you say. There is no point in having a detailed blueprint and then doing nothing (Or having a detailed blueprint that is fundamentally incorrect). You really just need to get your thoughts on paper and at the same time think about the ways in which you can minimize your risk. I am one of those people who believe in organic growth and organic change. Everything evolves over time.....

I can't develop a perfect plan and then follow it to the letter. The best one can do is to lay a plan, try it and adapt quickly to changing information and circumstance.

As long as we learn as we go its all good!

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## Blurock

Agreed, planning and calculating the risks and benefits is essential. So many business people laugh at the idea of drawing up a business plan, but how will you run your business if you do not understand your supply chain, your markup, profit margin, target market and competitors? Just to name a few factors. One does not need an elaborate business plan such as drawn up by business consultants, but at least do a swot analysis and a cost/profit and risk analysis.

I was once approached by a person who took a "golden handshake" to start his own little cafe business. He had no clue as to where he would buy his supplies, or how he would compete with the guy 200 m further down the street. When asked whether he had a business plan, his eyes lit up and he gave me a plan of the premises he intended to lease!

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## adrianh

I think that when one starts out with your own little business you have to look at things from a totally different perspective. You need to start with the amount of money that you want to put in your pocket at the end of each month. Lets say you want to put R10k in your pocket then you need to extrapolate from that basis. when one looks at business top down your personal income gets lost somewhere at the bottom.

So, if you want to make R10k for yourself per month then what will it take:
1. If you are selling stuff then consider the difference between the price you buy vs the price you sell at. Also consider other costs (transport, taxes etc) This tells you how many items you need to sell. Are you able to sell enough?
2. If you are providing services then consider your hourly income vs your hourly expenses - this will show how many hours you will have to work (and also the minimum rate you should charge) - do you have enough hours at your rate?

YOU HAVE TO BE ABLE TO ANSWER the above questions before you start. This is the most basic business plan. You have to remember that a small business is not a charity - you have to at the very least pay your own salary. (I am not saying that you cannot be flexible about what you plan to earn - I am saying that your own pocket is THE most important thing in your small business when you start)

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## Justloadit

Many years ago I wrote a book titled, "Starting and Running a Small Business", which was targeted at my then customers who were vending prepaid airtime. Their success would lead to my success. So the last part of the book does refer to the prepaid vending model. Never the less the contents are educational.

If anyone is interested, you can download it.
If you wish to print it and distribute it, please get my permission, as it took many hours to put it together, and there is a lot of personal experience shared in the information and solutions.

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adrianh (15-Jul-20), Blurock (15-Jul-20), Dave A (15-Jul-20)

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## Blurock

> Their success would lead to my success.


This is an important principle that that very few people or corporations consider. 
1. Your supplier is a very important link in your business. By supporting and paying on time, the supplier may expand and add new products or services which may add value to your business.
2. Your customer is very important as repeat business requires less advertising as you become a trusted supplier who gets the first call. 
As your customer grows, they may buy more of your product/service creating a win/win situation.

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