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Strategy for a Small Business Startup

What should I sell? Quickly, right off the bat, most people reply, ďSell what you love.Ē But the quickest answer is not the best answer. You should sell what people want to buy. Sell what people are desperate to own. Sell what they will buy regardless of cost. Sell something to solve a serious problem. Sell what people canít resist buying. Sell what people crave.

Is there such a product? There are many products and services like these. When you are sick, medical services are an urgent necessity. When your car dies on you, replacing it is an immediate preoccupation. For your first prom, nothing is more important than the perfect outfit. If your roof leaks, youíll be in the market for a roofer.

Do you need ideas about what to sell or what service to provide? Browse the telephone yellow pages for ideas. Look at whatís selling on eBay. Read the newspapers and the Internet business news. Watch the businesses in your neighborhood. Which ones are expanding and which ones are closing their doors? Study franchise businesses for clues to what succeeds. Then consider your own experience, skills, knowledge, contacts and interest.

Market Analysis for a Small Business Startup

Analyze the Market. Talk to people in your target market, either informally or with a scientific marketing research program. Who will use your product or service? Will you sell wholesale or retail? How old are your customers? Are they male or female? What is their income level? Where do they live? Whatís the best way to reach them?

Analyze the Marketplace. Who are your competitors? What are they selling? Where are they selling it? How do they sell? Are they making money in the business? What is the advantage or edge their business has? Is there room for your product in the marketplace, or is it already too crowded? Is there an unmet demand that you can fill? Contact professional associations and trade groups to find people who are already in the business and talk to them.

Business Analysis for a Small Business Startup

Analyze Your Business. A business plan will help get you on track. How much does it cost to provide your product or service? Can you price your product to cover its costs? Can you buy the produce wholesale and resell it? Will you manufacture it in house or using a contract manufacturer? What are the costs of materials, labor, overhead, storage, shipping, and packaging for your product? What suppliers will you use for raw materials and services? Is labor easily available with the required skills for the business? Are supplies readily available? Will you use outside distributors or in-house salespeople to sell your products? Can you draw on the advice and experience of others? Do you already have experience in the field?

Financial Analysis for a Small Business Startup

Analyze the Finances. With many businesses, you can start out small and learn while you grow. Others businesses require an immediate large-scale commitment of capital and resources. Do you have enough money to support yourself during the startup? Will you keep your day job in the meantime?

Create a spreadsheet for your business with expected sales, costs and profit month by month. A spreadsheet of cash flows from the business will be useful to show how much additional investment the business will require. As the business grows, will it generate enough cash for the expansion? Will you reinvest the profits in the business for more equipment, inventory and advertising? How much capital will you raise by borrowing and how much capital will you raise by selling an interest in the business? Where will you get additional money, from friends and family, the local bank, venture capitalists? Will you ask for extended terms from suppliers? Will your customers pay at the time of the sale, or will you carry accounts receivable? Will you factor your receivables? How many units must be sold every day, week and month to cover the costs of the business? Will you sell by catalog, telemarketing, Internet store, bricks and mortar store, outside sales force, wholesalers?

Risk Analysis for a Small Business Startup

Analyze the Risks. Will the product be salable two years from now, or will interest die out quickly. Can others copy your product easily and compete against you in your market? Is your product safe to use and well-designed? Will changes in technology affect your product? Do others own trademarks or patents for similar products? Will you be locked into using one supplier or one wholesaler for any reason? Will you rely on a few customers for most of your business? How will economic changes affect your business? Is it easy to buy more inventory? Are prices for raw materials stable, or fluctuating? Is credit freely available? If sales arenít as good as expected, what is your contingency plan? How does inflation affect your business plan? Does your product need to be updated frequently? Are your competitors making money? Are your competitors consolidating into a few big-name or big-box companies? Are friends and family enthusiastic about the idea, or must you go it alone?

Success Story for a Small Business Startup

Don't be overwhelmed by these issues. But the more prepared you are, the more likely youíll succeed. My favorite story is about Fred Smith, the founder of Federal Express, the overnight delivery service. As an undergraduate at Yale, Fred wrote a business paper about starting an overnight mail service. Usually an excellent student, he received a C for his paper. The professor returned the paper with the remark that the idea would never work. At that time, air transportation was unreliable and unfriendly. Shipments often took a week. Most of the time the freight companies could not tell you where your shipment was. In his Yale paper that was graded C, Fred pointed out the substantial weaknesses of air freight industry. After graduation, Fred Smith went on to prove his professor wrong. Federal Express, now known as FedEx, is a publicly traded company with a market value of $31 billion. Way to go, Fred!

You have the insight and moxie to launch a successful business. Many people donít recognize a successful business idea at first. People often dismiss a potentially marketable product. Donít let them rain on your parade.

I hope life brings you much success. I wish you a very happy day.
-----     Surfer Sam  

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