There are several things to ask before starting a business; however, I have highlighted five questions that should have been thought through before moving forward.
1) Do I have a solid Business Plan?
First, you want to make sure you not only know the industry you are starting your business in, but how you are going to make a place for you and your business in that market. To do so, you need to specifically lay out what your business is and the need or want your business is satisfying for the consumer (or business if B2B). Then how will you reach your target audience, and who are you differentiating yourself from? Other highlights should include: how your company is organized, market research and analysis, marketing and sales plan, financial projections, and assumptions. Remember, as your company evolves and grows, your business plan should too.
2) Are my projections realistic?
Projections should be a realistic measure of what your business will expense and obtain in sales, preferably on a month by month basis. I say month by month because it is important to know if there is a sale in January, how long before that sale turns to cash? Instantly? 30-60 days? What will you have as expenses (cash going out) until that sale is actual cash in the business checking account? Providing projections on a month by month basis can highlight cash shortfalls, and the need to cover them. This will help you prepare, and ultimately help with your success. Your assumptions, which should be included with your projections, will be anything that you needed to assume in order to complete your projections. The smaller amount of assumptions there are, the better your projections will be.
Take the time to call your insurance agent for an annual quote, negotiate possible lease contracts, get a range of interest rates from your business lender, know what your inventory needs will be, the cost, and when you will need to reorder. There should be a lot of research that goes into your projections.
3) Do I have enough capital, and where is it coming from?
Once your projections are done, look at what you have for capital. Will this amount suffice? Do you need a revolving line of credit to help with cash flow while starting up? Do you have an interested investor and what is their expectation in interest and payments? Can you provide your own cash injection or lend money to your own company? Any way you choose to obtain capital is up to you, but understand how much it will cost you and your company in the end and how it is going to get paid back.
4) What is my plan B? (And plan C & D…)
Not all plans turn out the way we originally designed them. In fact, most do not. This does not mean failure (see back to the ever-evolving business plan). Understand upfront what might be a hiccup or hinder your plan from running smoothly, and make a plan B in case that happens. No one can ever know everything that will go wrong, but if you have planned ahead for a few different bumps in the road, success is more likely.
5) Do I have a trusted advisor or someone I can trust to help with questions throughout the process?
This is important. There is a lot of paperwork and several moving parts to starting a business. Then bring in investors, financing (traditional or through an organization like the Small Business Administration), TIF funding, or grants and you could get discouraged quickly. Having a family member, friend, financial advisor, or trusted banker that is there for you and able to walk you through the process can be critical to the success of your business, and your sanity. Make sure you have someone from the start that can explain the process, so you can make educated decisions.
If you are ready, but not sure who to turn to for help – mark your calendars! State Bank of Cross Plains is putting on a Startup Business Forum as part of The Forward Festival in Madison. At this event people can come hear the panelists talk about their experiences, what worked, and what didn’t. In addition, there will be organizations available to talk to that specifically help startup companies. Watch for the signup to come out soon!
Nick Lombardino is a versatile business and community leader with widespread marketing, operations and sales management experience. Born and raised in Madison, Wisconsin, Nick has spent his professional career helping young organizations become more efficient, accountable and scalable.
Nick is a part of the leadership team at Farwell, a Madison-based advisory firm that helps organizations focus, build and succeed during times of change. Outside of Farwell, Nick is a Founding Member of Atlas Providers, CultureCon and Madison Tech & Society Meetup.