Thinking about starting a business? Here's 7 things you must do first.
We met 15 years ago when we were both working in corporate telecommunications, wearing power suits and heels (that were far too high) and we’ve been besties ever since. At first we bonded over our love of the film 'Point Break', crab pasta and a shared and overpowering desire to obnoxiously take over the dance floor after a few drinks. Fast forward to mid 2017, throw in a number of career changes and some offspring. We’d always been keen on working together again and had been throwing around ideas for quite a while. Then one rainy day in June the decision was made - "let’s do this!" Of course the first thing we HAD to decide on was a name, who wants to talk about viability and business planning when you’ve got the oh so juicy decision of naming your business?
Seriously though, in all our years of experience looking after retail franchisees and small businesses we had seen far too many fail to reach their potential through a lack of planning and adequate market research from the outset. We knew what needed to be done before spending a cent on this genius new business idea of ours, we had to do our due diligence. This is where we asked ourselves the hard questions, not only to quantify that this idea had legs but also, to ensure that it was truly what we wanted to do - once we had an understanding of the amount of hours we needed to put in each week (initially unpaid) to make it a success. You don’t want to find out your business is not really your thang 12 months down the track once you’ve sunk a lot of money and a shed load of your precious time.
Before we even put a business plan together we did the following 7 things:
1. Defined the opportunity.
Helen had been working in social media and continually met clients who needed help with more than just digital marketing, and we’d both met people who had started a business doing something they were passionate about but didn’t necessarily have the core business skills to make the business as successful as they’d visualised. We saw a gap in the market, and felt that our target market could benefit from quick and affordable business advice. Small business owners tend to spend so much time working in their business that its hard for them to work on their business and this was our mandate.
The initial concept was that small business owners would provide us with their top challenges and we'd present them with the quick wins and a clear strategy on how to implement. We wanted to help business owners find direction and have an easy to implement action plan for growth. We had a couple of initial offerings and we also road mapped the other products and services we would be launching in years 1 & 2.
2. Validated and quantified our idea with market research.
We did the market research on our offering and pricing by going out to a group of small business owners and offering a simplified/condensed version of one of our planned launch offerings called a ‘Mini Business Review’ for FREE, yep, for FREE. Now this was not like asking people to answer a questionnaire, it was time consuming, an investment in their time and ours, but we’ve no regrets. 80% of the businesses we did our research for have turned into paying customers, and it also gave us some authentic testimonials and reviews to kick start our profile.
As this point we also conducted a SWOT analysis to understand our strengths, weaknesses, opportunities and threats and a detailed competitor analysis.
Understanding what our competitors were doing helped us in defining our unique selling proposition (USP). We already knew what our USP was, but it was validated when we saw that it differentiated us from others.
3. Determined our ‘Why? - Here’s what we asked ourselves.
What’s the motivating factor behind wanting to start a small business?
For some people it’s a passion project, because they just love making organic soy candles (for example), for some they see an opportunity and just think it’s a real money maker, and for others they just don’t want to work for other people and aren’t fussed about what they do as long as they no longer have a boss! For us it was all about flexibility, doing something we felt passionate about and working on our own terms.
Does the business need to supply an income in the short-term or is there financial support elsewhere? For us, in our businesses infancy, we only work part-time hours so we’re realistic about the financial opportunity that this business can provide us. That means, we’re expecting a part-time wage vs. a full-time wage - and in the first year we won't be drawing a wage at all, but putting everything back into the business.
Where do you want to be in 1, 3 and 5 years time? Coming up with a smashing new business idea is uber exciting but it’s a long game and a hard slog. If you’re looking for something short-term there might be other more viable ways to make money.
4. The budget - what were our startup costs + the outgoing expenses for our first year in business.
A crucial step and will help you make a informed decisions. How much money will you need to invest before you can even start selling your wares, and what are the ongoing operational expenses going to be in year one? This needs to cover:-
- Advertising budget, including traditional and digital marketing (Google Adwords, Facebook advertising etc.);
- Outsourcing (Facebook Advertising Expert, SEO and Copywriter etc.);
- Subscriptions (Website Email, Social Media scheduling apps etc.);
- And typical expenses such as legal, accounting, insurance, buying stock etc.
Once the budget is down on paper (so to speak), it might be the case that you decide to approach the business a little differently. We have met many people who, instead of investing on their own website initially started selling their wares on EBay, Facebook, Instagram, Big Cartel and Etsy, and with Amazon Marketplace having launched in Australia, there are so many options. This is a great alternative for those who don’t have a lot of upfront capital and allows for ‘a toe in the water’ so to speak. We ourselves started and ran our socials for eight weeks before officially launching and got some great feedback and intel - it also gave us a chance to have a nice feed already waiting for prospects when we finally turned our lean generation taps on.
5. Completed our Incomings (sales forecast) including pricing.
We knew we needed to be realistic about how much revenue we were going to generate in the first year, especially given that in the first six months we were only going to be selling our consulting projects. As part of the sales forecast you need to set your price if you haven’t already. We recommend setting the price AFTER you understand the operating expenses as you need to ensure the business model can make a profit in the long term. In setting the price some key considerations are; your competitors; your operating expenses; the stock buy price (potentially cheaper in bulk) - to name a few. You also need to think about the cost of shipping, especially if you have a range of products of different dimensions and weight. If you charge a flat rate of $10 for shipping you need to model this against various shopping cart sizes and ensure its not eroding into your margin (aka. profit). It's also a good idea to put some rationale behind your numbers e.g.; marketing activities will drive 1000 hits to the website per week and we expect to convert 1% initially which will result in 10 orders which will be made up of 'X' products at a revenue of '$X'.
6. Customer Profiling.
The great thing about starting your own business in that you can choose who your ‘ideal’ customer is. That is, who you want to attract to your brand and offering and who you want to repel. If you are going to be selling beautiful, hand crafted, one off ceramic pieces where the price reflects the time and energy put into each piece, you are NOT going to want to attract the person who only buys their homewares at Ikea. We really took the time to intimately understand our ideal customer - and we are talking very intimately....What are their values, pain points, where do they shop, what do they listen to, what authors do they like, what flavour margarita do they order at Taco Tuesday? (JK, I stole that question from a podcast, but you get what we mean by intimate!). The customer profile comes FIRST and then the sales and marketing plan comes SECOND.
7. Completed our Sales & Marketing Plan.
Newsflash, opening an Instagram & Facebook page isn’t a marketing plan. It is necessary, it's executing a marketing plan, but it's not THE plan. When we sat down to determine our plan, we looked at our revenue (sales) number and worked backwards. How many leads we needed into our sales pipeline and what was our rate of conversion. What’s a sales pipe you ask? When you ‘open your digital doors’ with an online store, people are not going to magically know you exist. You need to have a plan to generate traffic to your website in order to convert them to paying customers and this is your marketing plan. Our traffic generators are:-
- Our email marketing program.
- Paid digital advertising: Such as directories, Google Ads, Facebook and Instagram.
- Social media Accounts: Facebook, Instagram, LinkedIn, Twitter, Pinterest.
- Collaborations with other small business owners.
- Closed Facebook groups.
Why did we think this was so important before we spent a cent? Because driving sales is time consuming baby! We wanted to understand how many hours a week it was going to take to get Two Girls and a Laptop off the ground and how much financial investment we needed to spend on advertising.
So there, you have it, our story and the 7 things we did before spending a cent on our startup business, and even before completing a business plan (to be fair, a lot of this information fed directly into our business plan - so the efforts weren’t wasted). Between us we have three ankle biters, who are aged five and under, and our families and health are our priority. We want this business for ourselves, to help other small business owners grow and for it to be 'on our terms’. We are realistic about time. In some ways it’s a 24/7 job - the buck stops with us, which is great for flexibility (which we all crave) but it also means we need to schedule ‘offline’ time - as we are socially selling all hours of the day. We know we can't do it all ourselves and so we've identified the skills we need vs' the skills we have, and have accounted for the time and financial investment to either learn it, or outsource it.
Are you planning on starting a business in the near future? Or maybe, you're in those early days and asking yourself some of these questions. If you'd like some support (or a couple of ears to listen) to get your business plan off the ground then we would love to hear from you.