The first thing you should know about starting a new business is - it is not for the faint of heart.
Starting your own business can be very rewarding but it can also be very stressful and extremely demanding. If you like the security of a regular paycheck it will be a real wake up call. Many times, especially if you are operating on a shoe string budget, you will not have any guarantee that you will get a paycheck at all. On top of worrying about money, you will most likely have to work more than a typical forty hour work week. Which can exasperate stress levels and be very hard on your personal life. To get through it all you must have a good support system and thick skin.
Here's the bad news...As many as 70% of small businesses fail within the first 18 months. There are a lot of factors that contribute to this failure rate. However, it seems like most entrepreneurs have egos that lead them to believe they will be immune to failure. No one is immune. But what you can do to help your odds is be prepared and that is how I am going to help.
Step 1: THE PLAN
Don't run out and rent a spot and start a business. That's a sure way to fail.
Planning is boring. It's kind of like doing research for a paper in school. Some people love research, but most people don't. Planning can be time consuming. But having all the extra prep time will not only help you be ready to start your business, it will give you loads of time to daydream about how you want every tiny detail to play out. Finally, planning is essential if you need to borrow money. No one, including your family and friends if they are smart, will loan you money without a solid business plan. If you're not good at researching and writing, then you need to hire someone to help you. There are people like me everywhere who can do that part of the work for you. But the key is that you know the business inside and out. Don't just take the word of someone you hire, you need to check their facts and statistics and make your own decision. In addition, to those few of you who have your own savings and don't need to borrow money - you still need to do the research. Do it for yourself, to know that you are making a sound investment.
I am an entrepreneur at heart. I have had dozens of ideas for businesses to start up. Most ideas seem like they are bound for success, but sometimes the more I think about the idea, I come to realize it just won't work. I have spent weeks researching an idea, just to end up scrapping the whole thing for one reason or another.
For the purpose of this exercise, let's pretend I am going to open a luxury dog-walking and pampering service in St. Louis, MO.
Let's get planning - Google is your new best friend! If you don't have your Google search set to auto-complete your requests, you should do that now. As scary as it is, Google aggregates search data from everything you look up and from everyone else who uses Google. They are surprisingly accurate at guessing what you will type next and sometimes they will show you search terms you didn't think to use. Sometimes good Googling is all in the wording of the search term.
What kinds of things do you need to research when you are in the planning stage?
Here is a good starting list (which is not all inclusive):
1. Is there a business like yours nearby (a competitor)? Learn everything you can about them. Look at their website, track down their advertisements, go to their store, use their service, ask people about them, read online reviews, make a list of their pricing, etc. Know them inside and out. I would start by searching "dog walkers in St. Louis, MO". On the first site, I find more than 30 dog-walkers serving different parts of St. Louis. I didn't spend a lot of time checking this because it is an example, but you need to spend a lot of time on this one. Check the internet, drive around, ask your friends and family, check the yellow pages, try to create an exhaustive list because an over-saturated market is not going to be welcoming to a new business.
2. Is there a business like yours anywhere in the world? (Thank God for the internet) Learn as much as you can on a variety of companies in your industry. Don't try to reinvent the wheel, because it is much easier to build your success on the lessons from other people's failures. See what they do the same as each other and what they do differently. Get a feel for the size and success of their business. Look at what specific kind of customers they serve (do they focus on particular industries or social groups). I would search "dog walker" and "dog walking rates" to start.
Sometimes you can approach a company that is not a direct competitor and ask them questions about the industry. But most of the time, I use the internet to find out as much as I can. You would be surprised what you find online. You can find pricing, forms, company policies, schedules, number of employees, employee salaries, customer lists, supplier lists, annual revenues, etc.
3. Are there any articles or blog posts on your type of business? These can be a gold mine. Reporters are typically very good at research. They will often provide statistics and reference where they obtained them. You may also find links to more reference material related to your field. If you Google your type of business and find a bunch of articles talking about the demise of the industry - think seriously about walking away. Unless you have a sure fire industry changing idea, your company is not going to be the exception to the industry trend. The search of "dog walker" is pretty broad and returns a lot of business listings, so maybe we should try searching "trends in dog walking".
4. Are there any trade organizations that relate to your new business? Trade organizations are usually loaded with statistics about every aspect of their specialty business. They can give you trends and historical data, which are both important. They can also be a good source for finding competitors and suppliers. Search "dog walking organizations" and you get International Association of Canine Professionals, National Association of Professional Pet Sitters, National Association of Dog Walkers, just to name the first few.
5. Figure out who your potential customers are. This depends on what kind of business you are starting, but try to be as specific as possible.
I am a high-priced dog walker and pamper-er, so my customers are people who own dogs and have a lot of money and want to pay me to take care of them.
6. Once you know who your customers are, you need to figure out how many of them there are. This is your MARKET. (Market = the maximum number of potential customers in a given area)
If I was preparing to start a luxury dog-walking business, here's what I would look for:
- What is the total population of my city? (or whatever geographical area you are willing to service). Search "population of St. Louis", returns 318,069
- Since dogs are usually owned by a whole household and not just an individual person, we need to look up the number of households in St. Louis. Search "number of households in St. Louis" and you get a website full of city-wide facts, including households at 175,639.
- Since our dog-walking and pampering service is aimed at higher income customers, we need to find out how many high income people we have in our market. For the purpose of this exercise, let's assume high income is more than $80,000 a year. A search of "household income in St. Louis" returned zipatlas.com, which has a list of population and income by zip code. Here are the three highest income areas:
zip code = 63131, population = 16,396, income = $112,017
zip code = 63124, population = 9,819, income = $95,719
zip code = 63141, population = 20,025, income = $81,180 - What percentage of people own dogs? Search "how many people own dogs in the us" returns several results, the top result being the Humane Society, which says 46% of households have at least 1 dog.
I'm not going to lie, translating this information for our purposes will require some math skills...
318,069 total population in St. Louis divided by 175,639 households = 1.81 people per household
16,396 + 9,819 + 20,025 high income people in 3 zip codes = 46,260 high income people in St. Louis
46,260 high income people divided by 1.81 people per household = 25,558 high income households
25,558 high income households multiplied by 46% of households own dogs = 11,756 high income dog owners
This is your market = 11,756 high income dog owners
I can tell your eyes have glazed over from all those math equations and statistics, so we are going to break here until tomorrow...
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