Most people aspire to own their own businesses without clearly identifying the best way to do it. The ever-changing needs of consumers makes it even more complicated for entrepreneurs to select the right business to own. Most people already know that there’s a world of possibilities out there for anyone who wants to start a business. The question is: how can you possibly narrow the possibilities down to find the type of business that’s right for you? Business success research proves that most businesses do not survive for more than three years after inception due to poor business selections at the outset. It’s paramount to choose a business which you understand from an operational standpoint or for which you have a particular passion.
Types of Business Structures
There are different business structures to choose from: sole trader, partnership, limited liability, trust, proprietary limited company, incorporated association and co-operative. There are also a few complex structures like a joint-venture (JV). You may want to contact me personally to discuss the most appropriate structure for your situation. For the purpose of this business guide, I will concentrate on sole trader, partnership and limited liability. You will need to decide on which business structure best suits your business and personal needs.
Businesses are mainly categorised as either product or service type. If you are a trained professional, such as an accountant, architect, or a specialist on any ailment, your business is naturally going to revolve around the professional services that you provide. However, there are many professionals who also have the opportunity to offer related products if they choose to do so. For example, if you’re an Information Technology (IT) specialist, you may decide to sell computers, software and hardware.
For untrained professionals, the key to deciding whether to focus on products or services when thinking about starting a business is in determining where your true talents lie and what you most enjoy doing. When making a decision, do not base it simply on whether or not you enjoy selling or are good at it. You will be involved with sales no matter what type of business you start.
Once you have identified the business to own, you will then have to make an informed decision whether to start one from scratch or buy an existing business.
How to Write a Business Plan
A business plan is a road map which will stipulate how you shall steer your company to achieve the goals and objectives which you have set. Most people, especially those starting a sole proprietorship business, do not prepare a business plan. For those who have done so, most of them are sub-standard. Preparation of a standard business plan will help make your business successful.
A business plan is quite often the entry-level requirement to getting government money, investor capital or bank loans. Although you may have a complete picture of the business in your mind, investors and bankers need to see if you really have an understanding of the business. The business plan also provides you with a blueprint to succeeding in business. It provides you with the direction of your company and also serves as a guidepost for your employees.
The business owner’s primary job is to manage and run the business. The term “manage” implies planning and execution. The very process of business planning helps reduce risk. Successful entrepreneurship is often the ability to build a business by taking calculated risks. If you’re putting your life savings on the line or borrowing other people’s money, it is your responsibility as a business owner to not take foolish risks. The business planning process does not guarantee success, but it surely decreases the odds of failure.
The business plan has different sections which I will discuss in greater detail.
Executive Summary and Introduction
- Write the name of the business, its principal operating address, and any other information which would inform people where your business is located
- Identify the business ownership. Is it a sole proprietor type or is it owned by a number of directors? Include percentage of ownership for each of the directors if it is a limited liability company
- Briefly explain the goods or services which you offer
- Specify the market which you intend to reach and service
Vision, Mission, Objectives & Values
Vision: This is the broad goal which you want to achieve, a statement of your strategic intent – a picture of the future. For example, if your company is to provide Cloud-based internet services in Bangkok, your vision could be: “To provide the cheapest and fastest Cloud internet connectivity in Bangkok.”
Mission: A mission statement should identify the core values to which the business is committed, the core purpose of the firm, and visionary goals which the business will pursue to fulfil its mission. The mission should mirror the vision, and elaborate on what shall be done to realise the vision. Using the example above, an appropriate mission would be, “Strive to offer cheap and first quality internet connectivity by investing in the latest technology and innovation.”
Objectives: These are the pre-set goals which the company should achieve. The objectives are grouped into two categories.
I.) Short term objectives: These are the goals which the business should achieve within the first year following business commencement; and
II.) Long term objectives: These are goals which the business should achieve within five years after business commencement.
Values: These are the principles, morals and ethics which the business strives to uphold. For example, how the business is committed to customer satisfaction and how it practices a culture of excellence.
Evaluate your business statement by answering the following questions:
· Is it longer term, but still time-defined?
· Is it clear on the major benefit(s) that you seek to achieve?
· Does it provide for some method of measuring success?
· Does it omit specific references to “how” things will be done?
A good mission statement will contain the following components:
· Specify target market/s and potential customers
· Identify principal products and services
· Specify the geographic domain
· Identify core technologies
· Contain an expression of commitment to survival, growth and profitability
· State the key elements of the owner’s business philosophy
· List the company’s core values
· Identify the desired public image
An effective values statement will include:
· Approximately 5-7 core values
· Values that can be demonstrated as actions or behaviours
· Values that are aligned with business processes or people
Products & Services
- Identify in detail all the products and services which the business offers
- Explain how each and every product or service shall be composed and made available to the intended customers
- Explain the use and benefits of your key products and services
This section will identify all the revenue generation activities on which the business shall capitalise to generate revenue that will sustain the business. This is evident when a professional decides to work as a freelance expert. This section is customised based on the specific products you sell or the particular services you provide. For example, a photographer who owns a studio and sells photographic materials, might list the following:
- Camera sales
- Picture frame sales
- Film sales
- Camera memory card sales
- Photograph/Video coverage charges
Capital is defined as the initial investment which you shall put into the business before you commence operation. It is also defined as assets available for use in the production of further assets, wealth in the form of money, or property owned by a person or business, and human resources of economic value.
This section includes some basic accounting, but you don’t need an accounting degree to write this. It has simple arithmetic which is easy to understand. Just list all the expenses which you expect to incur before you commence operations.
Research & Development
All businesses need to continually improve their products, services and business processes in order to anticipate and respond to the ever-changing needs of customers, especially in line with today’s technology boom. This means investing time and money into researching these needs, then developing products and services to meet them. Research and development together with the design of new and modified services will form an essential part of making your business more profitable and productive. Then you can be sure that your career as a freelancer will be successful.