Seven Steps to Starting a New Business
You’ve got a great idea for a business, and now you want to get it off the ground and take it to market. This is a very exciting time, but there’s quite a bit you need to think about before you can launch. We offer resources to help you get started.
Follow our seven day program to:
- Determine if you can make any money
- Prove you can beat the competition
- Work out if you can afford to start
- Find out if there’s a demand
- Document the processes and business model
- Make everyone aware that you exist
- Take care of legal and administration matters and get started!
You can find day one of our seven step series below.
Have a great business idea? Make it happen
Step 1 – Determine if you can make any money
The first task you need to complete is figuring out if your idea, as great as it is, will actually be financially viable. There’s not much point in trying to take an idea to market if it’s not going to be profitable. Basically what this involves is crunching the numbers. It’s a tedious task, but it has to be done before you do anything else. And if, after you’ve done the math, you’re not going to make any money… don’t bother going any further.
Step 2 – Estimate your overheads margins and start up costs
Identify and figure out all your start-up costs. Raw materials, equipment, office supplies, marketing costs – everything you’ll have to pay for to get your business off the ground. These are likely to be one-off expenses.
Next, calculate your likely overheads such as rent, utilities and taxes. These are the regular expenses your business will have regardless of how much you produce and are on-going throughout your business’s life-cycle.
Then, set some sales goals and figure out what your profit margin could be. This is where cash flow and sales forecasts are important.
Step 3 – Conduct a break-even analysis
It’s essential to have an accurate estimate of how many items (or hours of service) you’ll need to sell each week, to cover your costs and begin to make a profit. If you are borrowing money, the bank will want to know when you expect to break even, as will any other lenders or investors you’re planning to approach.
Step 4 – Conduct a cash flow forecast
To help you identify sales and expense fluctuations each month, generate a cash flow forecast. In order to take action early, aim to predict when you may have too little or too much cash.
Try to be as accurate as possible with your figures. It’s worth putting some time and careful thought into getting these figures right as this forecast is usually the focus for banks and anyone reviewing your business financials.
It’s always a good idea to run your figures past your accountant before presenting your cash flow forecast to outside readers, such as potential lenders or investors.
Step 5 – Conduct a sales forecast
Sales forecasting is hard for start-ups because you don’t have any past records to use as a basis for your forecast. However, you can use external data. Look at trends in your industry, check out past statistics of market demand, and watch your competitors.
Constructing an accurate sales forecast requires good accounting software – or at the least, a well-constructed spreadsheet – the sales you think you’ll achieve over the next 12 months, potential sales from any sales negotiations or anticipated growth from new products or marketing campaigns, projections of what you think sales might be based on your knowledge, and a good understanding the competitive marketplace.
You have covered part one of our series. Subscribe below if you wish to receive the complete seven day series