Six Steps for Starting A New Business

How Do I Start a Business?

It is likely that a person wishing to go into business has a pretty good idea of the kind if business they would like to run. This is generally based on skills the individual has or needs in the market that have been identified as business opportunities.

If there is just a desire to be an entrepreneur then the process for identifying a possible business can begin by looking at the kinds of needs that exist in the marketplace. How do you identify market needs? How do people come up with ideas that people don’t know they need until they see them?

The process to identify new products that can result in new businesses is discussed in previous posts to The Manager’s View in:

http://gwrresearch.blogspot.com/2012/11/new-product-development-process.html,  

http://gwrresearch.blogspot.com/2012/12/want-to-find-new-product-for-business.html

After the business opportunity is identified, starting the business requires a process outlined in these six steps.

1.    Identify the Job to be Done for the Consumer

After deciding on the business, it is necessary to create the guiding principles of the organization. This is best demonstrated by the following exercise.

For this exercise assume that you have decided that you would like to open a bar or pub. You can begin by thinking why people come to a bar and what they might expect. These are the jobs the bar is being “hired” to do.

As a partial list we might find some of the jobs are:

              -  Social interaction,
              - A source of food and drink,
              - A place for entertainment,
              - A business meeting place,
              - A place to meet friends,
              - A source of status (e.g. A place where important people gather).

2.  Look at the Market Place.

It will be important to learn as much as possible about bars in the market.

Things you’ll need to know are how much money is spent in the market at bars, restaurants and similar types of businesses.

Information is available from sales tax data as well as industry sales sources that can be helpful in determining the size of the market, the average revenue per establishment, the average amount spent by consumers and so on.

This information will be very useful in determining the competition and the strategy that should be employed. For example, it may desirable to look at high-end bars and restaurants if they generate the highest revenue. This doesn’t necessarily equate to profit and deeper research may show that smaller bars have more consistent revenues and a higher profit percent (not absolute dollars) than the high-end bars.

Obviously, the strategies for a neighborhood bar and a high-end club will be different so it will be important to decide what you have as a driving motivation or vision.

3. Create a Vision and Mission Statement for the Business

If you review the types of jobs a bar is “hired” to do you can find a meaningful basis for a vision and mission statement.

Your mission statement might be:

- To provide a place (in geographic area) that will provide a friendly atmosphere for people to gather for social and business functions.

- To provide a selection of fine alcoholic beverages and hors de oeuvres

- To provide a venue that will attract key business, political and community leaders.

Your Vision might be:

To create a place that will attract celebrities and community leaders by:

- Attracting high caliber wait staff and managers focused on customer satisfaction,

- Creating a facility design that allows patrons to hold private discussions,

- Establishing the facility in an easy access high security area of the community,

- Working with vendors to provide new and “old favorite” selections on the drink and hors de oeuvres menus.

- Maximizing long term financial returns for shareholders,

- Working with media outlets as partners to promote the exclusive nature of the business.

4. Using the Vision and Mission Statement, Create a Strategic Plan

The overall strategy for the business outlines how you intend to create the organization envisioned in the vision and mission statements. The strategy might be: To attract a patronage that will simultaneously benefit from being seen at the bar while providing status to the bar as a VIP gathering place which will, in turn, allow pricing and marketing to reflect a premium market position. This will be accomplished by:

- Holding events that will attract high profile individuals,

- Holding events that will attract leading media coverage,

- Inviting key community leaders to conduct business luncheons in the bar’s meeting rooms,

- Offering to sponsor charity entertainment events,

- Using premium pricing strategies,

- Hiring and training quality wait staff,

- Offering high end beverages and hors de oeuvres,
- And so on.

5. Using the Strategic Plan Create a List of Activities to Create the New Business

This list will need to be comprehensive. A brief list of the activities that will need to be accomplished will likely include:
                  - Identify a location for the facility,

- Identify the furniture and equipment needed,

- Identify the media outlets that would be helpful,
- Identify the staff and mangers that will be needed,

- Identify the building/renovation requirements for the facility,

- Identify the level of customer service training that will be required.

- Make media contacts and begin a preopening marketing campaign,

- And so on.

This list will be important when building a business plan. The activities listed should include all elements required to open the bar and execute the strategic plan.

The items on this list need to be arranged in sequential order and order of dependence. In other words you’ll want to identify and secure a facility before you order furniture and equipment. Additionally you cannot begin training before you hire employees. This helps define the critical path or the path that determines how quickly the implementation can take place.

Mind Tools has an excellent approach to critical path planning at:

http://www.mindtools.com/critpath.html

6. Create the Business Plan

The business plan will use the strategic plan and the critical path plan to build a month-by-month financial plan that covers all activities required to open and operate the bar for a given period, say six months.

Once the critical path planning is complete and you are comfortable that all of the activities have been included, you can begin establishing costs for each activity. This will provide an estimate of the cash that will be needed for establishing and operating the business. This will be your first pass at an expense budget. The budget will outline when and how much cash will be needed for equipment, supplies, manpower, training, computer software and hardware and so on.

Along with the expense budget you should schedule revenues to begin flowing in when the bar is open.  Revenue will start slowly and begin to build, so additional cash support will be needed until cash can be supplied from revenue generated by the bar.

It is important to understand that the budget is merely a quantification of your business plan. The better your planning is, the better the budget will be. The better the budget, the more likely the outcome will reflect that which was planned.

Copyright 2012 GWR Research