These can be as complex or simple as you see fit. Please remember that no matter what size of business you are ior intend to be – Cashflow is King [I had an article with that headline framed in my office for 15 years, when I was MD of a mid-sized software house].
Duncan C. Ion
At the very least I would recommend it’s worth writing a SWOT analysis, this will give you focus and allow you to visualise your Strengths, Weaknesses, Opportunities and Threats more clearly and perhaps spot something that’ll be crucial to your success or failure. Depending on how fast paced your industry is, it’s always worth re-evaluating the SWOT analysis every now and again.
Once you’ve written your SWOT analysis, show your friends, family and colleagues and see if they can add to it at all. Don’t worry if they criticise it, if you can’t justify or argue your point, perhaps it needs a little more thought.
Think about income not outgoings. Don't spend anything you don't need to. No fancy offices, coffee machines, cars etc. There's no glory in spending money on office equipment. Think big on income and about how your income scales (e.g. if you're a consultancy and you want to double your income you generally have to double your staff).
The start-up costs start to build up. Weigh up getting a subscription for software against using either Microsoft's express tools or even OS alternatives. Could that money go against other things that would help your business more in the short term (you can always get the subscription at a later date when you have more money coming in).
Defiantly, when setting out less is more. It’s easy to setup i.e. a web development business for only a few hundred pounds but by having lower overheads, it will mean as you earn off your first few jobs, you’ll have more to invest in the company.
What benefit is there to your company if you go out and get the best PC, the biggest office with a couple of secretaries and some flash car? In reality you’re more likely to struggle as you’ll be setting off on the back foot. Make sure you carefully weigh up any purchases, perhaps by categorising them into i.e.:
- Would improve work capacity
- Would like, could perhaps improve work capacity
- Would like but wouldn’t improve work capacity
- Don’t need but look, it’s cool!
If you’ve got investment for the company and can afford to buy all the cool kit from the offset, great but it may be a better idea to keep that for a rainy day. Although I’ve got no proof I’ve always felt that had I not had to earn every penny we had to spend as a business I would have been far more complacent and so lazy and the business wouldn’t be where it is today. Along the same line of thought, I sometimes wonder if I could have done anything differently/better if I did have money to invest at the start and whether it would have got The Site Doctor any further.
And more, discover your minimum required turnover from the beginning. Review it every three months so you are always aware. For example, an experienced three man team will likely require a turnover target of £130k in the first year to take care of wages, tax, NIC, rent, services and equipment. That equates to 13 x £10k projects - no mean feat at the beginning!
This is a very good point, it would be worth noting this down in your targets and goals list [Targets and Goals] as it will give you something to focus on. Think of all expenditures on an annual basis, then when you have the annual expenditure you can work it out on a average number of jobs and/or a monthly figure making it feel more achievable.
Targets and Goals
Have a vision - doesn't need details, just picture in your mind where you want to be (personally and professionally). Keep that in mind and you'll find ways of working towards it
Do the ‘Vision’ thing. Sounds corny, but you must have a defined goal, or you may wander off track. Try to make the vision statement business orientated, not technology based. If you can identify a Unique Selling Point, all the better. If not, work on quality and clarity of process, not price.
Duncan C. Ion
There's a sound psychological basis for this (ever heard the adage about mixing with people you want to be like?). It sounds like fluff but get a clearly defined statement of what you intend doing, frame it, and place it where everyone will see it most of the time. Couch your meetings in terms of whether the result conforms to your intention. You will have lots of opportunities that are not really opportunities at all - the method described will keep you on track.
Personally I can't stress how important targets are enough. Have a set of personal targets as well as business goals -NOT "Make loads of money". The targets should be SMART* (Specific, Measurable, Achievable, Realistic and Timely), write your targets and goals down somewhere as it commits you, you don't need to read them again just as long as they're there.
*Thanks for the acronym Stacey!
When setting out I had a few:
- Turnover £500pm for the first 12months (then rising in year two)
- Pay off all and any accumulated debts that we had (credit cards etc)
- Go on holiday once a year
- Be able to buy and afford to run an RX-8 (long story)
Tick them off as you go and add more as needed, they'll give you focus and drive. I would recommend having a selection of goals including something that would appear to be unrealistic as it will give you something to really strive for. It's also worth telling other people about your goals as in an odd way, it commits you to the goals.
Also, read up on the Chinese concept of "Guanxi". We loosely interpret that as networking in the West but Guanxi is far more powerful. This list is a form of Guanxi.
At the end of the day, a business plan should enable you to visualise your goals as a business which in turn will allow you to focus your efforts. Don’t panic about not achieving everything at once, prioritise and attack one thing at a time.
Setting your rates
One of the best pieces of advise I ever had was
"Don't compete on price, compete on quality"
The tendency when you start out is to say we have low overheads, so lets undercut the competition, but it's far better to price at what the market can afford/expect and deliver better quality.
I agree and this is something that I’ve only come to appreciate relatively recently. When setting out I decided that the first few jobs would be relatively in-expensive to build on our portfolio, this was a real Catch-22 as I felt compelled to deliver amazing results for next to no reward. This temptation is great when you start out. You end up becoming a busy fool, working all the hours given for little financial reward (which limits potential investment in your company). You end up begrudging your clients and if you were to let it continue I would imagine start offering a lower service, or worse decide that running your own company wasn’t a good idea.
We recently re-jigged our pricing structure while analysing where I felt the business could do better and the only difference it has made is to my happiness, I feel far more rewarded for the work I produce. Interestingly the quantity of work being obtained has also increased somewhat dramatically so don’t think that your price will always sway the decision –a lot of the time it’s more about whether the client responds well to you.
It’s also worth pointing out that higher (not extortionate) rates, aren’t always a bad thing, I’ve lost out on pitches before because we’ve been too cheap and the client has opted for a more costly company, this isn’t always the case but oddly being more expensive often suggests you’re better.
Find a niche market with the smallest amount of competition. For example, one of my areas is in identifying website publishers, forming a complete trace and evidence file, then either closing them down, making them amend or dealing with international authorities including Police and courts (so if anyone needs assistance!!!). A looser one is accessibility based SEO. You don't need to cut price in niche markets - on the contrary, income can be higher and continuing.
Finding a niche isn’t always something you can do when you first set out as until you’re within a market you may not know the market well enough. If you do find a niche however, make sure you run a SWOT analysis on it first, it may not be that no-one else has noticed it, it may just be that others have tried and failed –that’s not to say that you can’t make it work however!
One of the main drivers for running your own business is a sense of ‘being in charge of your own destiny’. I started out in 1982 and have never regretted that. Be aware that as you grow the business you also become responsible for others – It’s just a question of stepping up to the challenge!
Duncan C. Ion
It’s defiantly one of the best things you’ll ever do –I would imagine this still counts even if it goes terribly wrong. I was once told that once you’ve been self-employed you’re effectively unemployable ever again and after having been self-employed for 3 years now I can see what they were getting at. I don’t think it’s so much from an employer’s POV but an employee’s, I would find it very hard to give up the freedom/control myself and so will do almost anything to avoid it!
I think this is a nice place to close this article, so in closing I’ll say that even if it fails you won’t regret trying, it’ll most likely be one of the hardest but also most rewarding and filling things that you’ll ever do. The worst thing you can do is not try and end up forever wondering what if…