Plan To Get Out Of Your Small Business Before You Get In

Everyone knows someone who has decided to go into small business but did you know that 70% of all small businesses fail within the first 12 months of operation?

That failure rate, in some countries, can reach as much as 85-90%. Setting up a small business is actually one of the most difficult things you can ever do. And to make matters worse, the vast majority do it for the wrong reason.

I have started a number of small businesses over the last 10 years and every single one of them has been started from scratch and went on to grow into a thriving business. Just recently I have decided to sell one of the businesses off because it had done what I expected it to do.

This might seem a strange thing to do but actually it is the first issue you need to think about when starting a small business.

Believe it or not, most of the people who actually set up a small business do so for the wrong reasons. I've also done the same. What do I mean by the wrong reason? Most people start a small business because they believe they can do a better job then their current boss. Perhaps there is an element of truth in this. However, most small business owners really want improved employment conditions with an increased income. To be fair, there isn't anyone who can really blame you for desiring that. However, if this sounds like you then I would advise you NOT to get involved with your own small business.

One of the major things you must give some thought to up-front before getting started with your small business is the image you want it to present to others. How do you want your customers and clients to see your business? What is your personal vision of success? Where do you want to go with the business?

The second thing is this. How will you know when the business is "done" i.e. when it is finished? How will you know when you have finished creating what you wanted to create? And even more importantly, how will you then get out of the business?

The thing is, you see, most men and women when they go into business have no idea of an exit strategy. This is really bad. Before you ever start a business, the first thing you must work out is how you are going to get out of the business.

For example, I started a small car cleaning business a couple of years ago. My wife was the main driving force behind the idea because she wanted to see if she could build a business from nothing. We planned to part with the business once it was all set up and making money. But the question remained of how were we going to sell it?

The truth of the situation is that we could indeed have taken many different approaches with eventually selling the business. We could have franchised it, sold it off to another small business entrepreneur or even let it float on the stock market.

We originally decided our aim was to sell it off to another small business owner. But, even with that in mind, we still set it up so that it could still grow and provide more opportunities for the new owner. In essence, we had removed the risky bits for them on how to operate the business by clearly spelling out and documenting everything they needed to know in order to run the small business successfully.

Such an approach worked for us. It could for you too.

About the Author

Go here for information on Government Grants For Starting A Small Business page. To search through all the pages of the website, visit Guide To Starting A Small Business

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Key Components of Your Small Business Plan

One of the best ways of achieving lasting financial prosperity is through entrepreneurship. The financial, lifestyle and personal advantages of starting your own business make doing so an excellent way of controlling your destiny.

Starting a business requires you to complete a number of steps and make some key decisions. Though part of your overall plan, you’ll need to decide on a business structure, and obtain the necessary licenses and permits. In addition, determining which financing options will meet your short-term needs and long-term goals is crucial.

One of the keys to a successful business startup is having a business plan that provides a roadmap for your enterprise.

There are many different formats for business plans, and you will have to play around with structure and layout to find the perfect look for your company. However, when you are starting a new business, there are certain aspects that you absolutely should include in your plan, no matter what format you ultimately use. By remembering to include these things in your plan you can show stakeholders that you have thought out your business, since you answer all of their questions before they can ask them.

First, answer "What business are you in?" by describing your business. What is the market need that you are addressing? Will there still be a need for this service or product in five years, or will your company evolve to change with the needs of the consumer? Also remember that "what" includes a mission statement. What are your goals for the company and for yourself within the company? The most important of the "what" questions deals directly with potential investors-what are your start-up costs and projected earnings over periods of time?

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Did you know?

In starting a small business you should never think you can do it alone! One of the best ways to increase your chances for success is to find and work with a mentor, someone with business experience who can guide and assist you.

A good resource are the Small Business Development Centers run by the US Small Business Administration which can link you to organizations to help your small business grow and prosper.
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Next, clearly identify your customer. Answer the question "Who?" by noting what groups of people you will target with advertising and what groups are most likely to buy your product. Also be sure to address other "who" issues. Who are your investors? Who will run the company? Who will be the employees? Who is your competition? Answers to all these questions indicate that you have a clear understanding of your business operations.

Talk about "why" questions as well, although these may be more indirectly implied within the business plan. Why is there a need for your product or service? When talking about competition, explain why your product or service is superior or why yours targets a different demographic. Stakeholders will be asking "Why should I be involved in this enterprise?" so be sure to answer that question with as many positive details as possible.

Lastly, and most importantly, answer "How?" with great detail. You've said what you wanted to do, who your customers would be, and why the business would be an asset to the community, but this means nothing if you don't have a straightforward plan as to how you will go about doing this.

Again, try to answer questions before they arise. Assuredly, your potential stakeholders will still think of questions that you have not addressed, so be sure to know your plan, the business, and the market before you attempt to present your plan. Remember, lay the groundword and always be positive. If your plan is solid and you've answered the previous four questions, you are well on your way to positive reactions to your business idea.

Remember, that one of the keys to success in any endeavor is have the proper attitude and expecting success. Make sure that your business plan exemplifies this positive approach. Constantly visualize what your operation will look like when it's up and running and how you will feel at that point. Never waver from your pursuit.

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About the Author: Michael Saunders has an MBA from the Stanford Graduate School of Business. He edits sites on Starting a Small Business and Articles on Small Business Management.

Small Business Planning

by Yuri jagrine

Small business planning – no excuses, you need to write it down! Before you condemn me and say “he’s dead wrong”, let me share what I have seen. There are two schools of though about starting a business – one is “Jump In” and the other is “What If”. Both sides have strong reasons to uphold their opinions but in the end they want the same thing - success - they just take different paths to get there.

Two Schools of Thought

The “Jump In” crowd say that one of the simplest things that prevents getting started is ‘paralysis by analysis’. This concept is that you can dwell over your idea and the details behind it for such a long time that by the time you tell yourself you’re ready, you’re actually too late because the market has changed, and you have spent so much time and money trying to get to that point. The idea to prevent this paralysis is to just do it – just start the business, start acquiring customers, start delivering your product or service, deal with the problems and you will learn the your business by doing.

The entrepreneurs whom I’ve dubbed the “What If” are the people who understand that mistakes are costly. Some mistakes are burdensome when you’re bootstrapping the entire operation, others can be so detrimental to the business that they could break it. To prevent these errors, these people want to know what they are getting into and they take the time to look at the market, to look at the future customers, make sure that the basic financial equation [ Revenue (-) Costs = Hey, I can make money off of this(!) ] still holds.

Why You Need One

So you have an awesome idea, right? Great, now all you have to do is go out and do it! Well, that’s the same thing as being 14 and saying that you have an awesome idea to start driving and you’re going to do it. You can get behind the wheel of the car, you can get the engine running, you know about the gas pedal – I mean you’ve seen everyone else do it, so you pull out on the street and 2 minutes later you’re looking at a wrecked car. Sure, you’re still alive and the car cost $10k, but don’t you think you should at least ask about the rules of the road?

Here is why I say you NEED a business plan. No matter how well you think you know what you’re doing, you just haven’t thought it all the way through. A business plan does not have to be elaborate, does not have to be a 40 page color document, it doesn’t even have to be a quick 10 pager, I’m saying that if you can “write” it in your head then even that is great. A business plan is taking the time to ask yourself the basic questions about your new operation and coming up with the answers. The answers make up the plan:

1. Executive Summary – what is the nature of your business
2. Product/Service Description – what are you selling
3. Market Analysis – who is buying
4. Management Team – who is helping you
5. Operations Strategy – how will you deliver
6. Financial Plan and Projections – how much money can you make

Different Types

So, why is there so much talk about putting a business plan together and one being better than another? Well a business plan not only allows you to gather your thoughts about your new business, it also serves as a resume to partners and investors. Different levels of investors require different levels of analysis and insight. A financial institution such as a bank may want to see some specifics about sound financial operations; do you know what they want to see? Looking at thousands of business plans is the job of Angel Investors and Venture Capitalist and they may want to know the precise assessment of your customer base; do you know how to calculate it?

There are several ways you can put a plan together and each type of solution comes with its own price tag and those range from free to $10,000. You can look online and see a similar six-part summary that I wrote above (free), you can buy software that walks you through the different parts (about $400), or you can hire an expert or a consultant to write the plan for you..

It costs How Much?

Here is what you should know about the typical three types of business plans that a business plan professional can create charging per page or per hour. A Level 1 Business plan is about 10 pages, costs between $700 and $1,500 and is used to secure a bank loan. A Level 2 plan is from 20 to 30 pages, costs from $2,500 to $5,000 and is intended to capture an angel investor for an investment of up to $1M. The third level of business plan is intended to secure venture capital in the multi-million dollar range and can be from $7,000 to $10,000. If you think that $10,000 is a lot, you’re correct, but keep in mind that some plans have been written for up to $100,000…but they were used to secure tens of millions of dollars.

There should be no doubt in your head about whether you should have a business plan – if you are staring a new business you need one! Make the right decision of how you will write your business plan, who will write it, how much time and money you will spend on the process and for what outcome you are writing it.

Here is to you making it into the small percentage of successful startups!