This 8 step guide to starting a business will give you direction so you can you can start your business with confidence. I’m Mike Garska, the president of FindAmentor.com and I started my first business in a very creative way with no money in the bank. At the end of this 8 step guide you can read my story about starting my first business. I started my own cell phone businesses with no money and from the trunk of my car and grew it to 3 stores and 3 million in sales. For over 15 years I’ve coached many family businesses on growing or selling their business, or buying more businesses. I coach and facilitate effective communication flow and team building in family businesses. With this guide I want you to feel confident that you are following the right steps to starting your business.
An 8 step guide to starting a business.
- Decide what the right business for you is. Ask yourself many questions. If you are going to go into business for yourself and want to succeed, you will have to commit to the long haul and doing whatever it takes — going the extra mile often. If you are going to commit this deep it is best if there is a passion inside you and /or super high interest in serving through this type of business. Businesses succeed because they serve better than the competition and work through their struggles. It takes work and work is easier and fun if you love what you do and are committed to a purpose. Read our blog about 7 Steps to Find you Passion and Purpose.
- Decide when a good time to start is. If you are working now, and want to start something part time, do allot of research before you leave your job and begin. You may want to get some experience in the business you want to open by working for someone else in the same type of business before you begin yourself. How much money you have will be a determinant in deciding when to start.
Do you have money to buy an existing business? Buying an existing business, after doing proper due diligence, is typically much easier. (due diligence means looking very closely at the business you are buying before making an offer and actually buying the business. If you do not have experience buying a business, hire an accountant and a lawyer and talk to some mentors before you commit to anything. Learn the due diligence process and do it before buying any business.
When you buy a business you typically get the experienced team that took the business to a decent level of success to date. They are succeeding and if you have a deep passion for the industry and genuine curiosity to learn more, combined with the desire to serve better, you can typically increase profits. You will need to be a good leader and continue to develop leadership skills so you can become one of the best leaders. The best leaders commit to life-long learning.
If you are starting a business with little or no money —research before you begin. If you are working take time in the evenings to research, research, and research and quit your job when you are very confident your income will be replaced quickly and before you spend all your savings.
- Do market research and industry research. If you don’t have experience in the field, you will need to be committed to learning through struggle and research. Know your competition. Learn about the suppliers and the customers. If a business is really competitive, that’s usually a sign that it’s a good business and some people are making money and doing well. Don’t be afraid of competition. Do it better. When there’s very little competition it might be a sign that the business idea is weak but not always.
If you have a new business idea, maybe the timing is right. Research before you make a decision on a new business idea where there is little competition. Make sure the market is big enough and viable. Ask how difficult it will be to access and reach your market. Ask yourself, and answer honestly: how much customer education do you have to do to sell your product? Is it feasible? Don’t just rely in your opinions or your friends. Do some actual research. Is there enough of a market? Can you get to market with a price that people will pay? Can you get through the business building phase without running out of money resources?
Ask and find out: What size of business succeeds in this industry? Is it common for people to grow from nothing into a big company in this industry? What is the average EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in the industry and what size of companies reach the top EBITDA? What is the employee to profit ratio? What is the percent of wages to revenue standard? What is the standard cost of customer acquisition and cost of customer retention?
- Commit. Be willing to go the long haul. Always focusing on turning struggle into opportunity into success. After researching, ask yourself if you are willing to do whatever it takes to succeed, to go the long haul, not give up and learn whatever it takes to make this venture work for you? Think long and hard before making this decision. Don’t start your business without a full commitment that you will do whatever it takes for as long as it takes and through whatever struggle comes up. 80% of small businesses fail because the owner either didn’t do enough research before he or she started or because they weren’t able or willing to go the long haul in all the ways necessary for success.
Remember the vast majority of North Americans work for small businesses. Small business is the backbone of our economy. Many small business owners simply have bought themselves a job and struggle day to day to make ends meat. Many are okay with that because they want to be their own boss. The top 10 or 20% small business owners make allot of money and their business works for them rather than them working for their business. To get to this phase most worked long and hard for 10 years. The most successful small business people I’ve met really began to do well after the ten year mark and were thriving at the twenty year mark. Be willing to go the long haul. This is the norm. The exception are those that make it to the top quickly.
- Make 3 plans.
1) Make a business plan.
2) Make an operations plan.
3) Make a cash flow projection plan.
Research these on the internet to see what they look like or watch for future blogs posts from FAM.
- Find out the benefits for you of starting your business as a proprietorship, partnership (if you have a partner) or a limited company and start the business.
Talk to an accountant and/or business consultant to find out the details of each type of venture and which one benefits you most at this point in time. Consequences of each differ from state to state, province to province and country to country. Typically a limited company has tax and liability advantages but costs more money up front to set up and more money every year to complete tax returns.
Once you know which is best for you, start the business or buy the one you’ve done your due diligence on. If you are starting from scratch, maybe do it part time at first if funds are low and you have a current job. Set a deadline for yourself to quit your job and have your business support you. Before you actually quit your job, re-evaluate before the deadline you’ve given yourself and make sure it’s the right decision. Set another deadline if you have to and get some guidance from professionals. Your business will really succeed when it becomes your primary focus.
- Hire 3 professionals as you need them and can afford them. When I started my first business, one of my mentors told me to get 2 advisors. A really good accountant and a really good lawyer. I think a good business person has 3 primary advisors. I’ve added having a good business coach. When I started in business there weren’t many business coaches around. The scene has changed. There are many now. Instead of hiring a business coach to start, I used 4 mentors as I was building a business from the trunk of my car to 3 stores and 3 million in annual sales. All of them were successful business people and millionaires. Mentoring is a form of free coaching in my mind. Coaching is more intense and often we commit to a coaching process more because we pay for it. I did hire a business coach after about year 6.
Shop around. Interview a couple or three professionals in each field before hiring them, and making them a part of your team.
1) Having a great, or at least very good, accountant is most important. Don’t put this one off. Make sure you can afford this one. There are ways to reduce accounting fees by doing the books yourself — tracking and recording clearly all revenues and expenses, and simply having the accountant review them at year end to help you file taxes.
Review your business model and 3 plans with the accountant when starting the business. Get feedback. Are the plans on paper viable? Have experts look at your numbers. Revamp plans a minimum of once a year and get outside opinions.
2) When you have to sign contracts you will need a good lawyer to review them before you sign. Read anything you are signing fully yourself. Businesses need to sign leases, buy-sell agreements, supplier agreements, customer contracts or sale agreements, etc. Know the documents. Take the time. Reading them yourself before getting a lawyer’s advice can save money. If you are making up your own agreements have a lawyer review them.
3) Hire a business coach and find some mentors. Don’t go it alone on business process. As your business builds, you will have to hire teams. The best leaders have the most successful businesses. Coaches help us become better leaders. Use one.
If you can’t afford a coach, get many mentors. Make sure your mentors have different skill sets. A really successful business person has 3 skill sets. He or she is a good sales person. He or she is a good counter and accounting person. He or she is a good people person — leader. When a business person can do all 3 of these really well, they are really successful.
- Sell, Sell, Sell. If you aren’t willing to sell, don’t start or buy a business. Learn the best type of inexpensive marketing for your industry. If you have an online business, learn on-line marketing and sales. If you have a conventional business, learn the marketing and sales aspects of the successful competitors and sell, sell, sell. If you haven’t sold before, learn it and do it. There is no way around this part of growing a business. If you really don’t want to learn sales and can afford it, hire an experienced successful sales person or people. Even with a professional sales team, the owner has to sell at different times though, so learning how to do it is critical to ongoing growth and success.
Good luck with your business. Good luck comes with hard work, perseverance, patience, persistence, purpose, passion, good communication and empathy — ability to question, listen and understand others.
This is my story of starting a business with no money. I was fired from a job when I was 28. I had 10 years industrial business and industrial sales experience working with other companies in the rolls of Expeditor, Shipper Receiver, Purchaser, Inventory control, Inside Sales Person, Sales co-ordinator, Outside Sales Person, and Sales Manager. I knew how to sell and service Oilfield, Forestry, Mining, Petrochemical and Construction companies. I had a great base of contacts and past clients as well as a very good reputation for offering and servicing great products and services.
I didn’t have any money saved so I had to figure out how to start a business with zero funds. I approached one of my mentors, a business owner who sold and rented industrial construction equipment. He set me up as an independent dealer of his equipment lines an doffered a monthly guarantee.
I needed a car to get to clients offices. When I got fired, I had to give back my company car so I needed a new business vehicle to get around and work. I approached a vehicle leasing company that sold or leased every make and model of car. I told the General Manager that it was the same purchaser who bought trucks and cars for companies that bought the construction equipment and since I would be contacting these people to sell them equipment I could also sell them cars and trucks. I asked for a free car and in exchange for representing the leasing company. He didn’t agree to a free car but he agreed to lease me one at his cost. I went for it.
The next thing I needed was a cell phone. I wanted to be able to have quick contact with customers and I wouldn’t be home to receive calls. Cell phones were new to the world at that time. It was 1987. They were only available in a car mount and cost $3000.00 to buy and over $300 per month on average to operate. That was a big budget for someone starting a new business with no money but a better option than using a much less expensive paging system and pay phones.
I approached one of the two cell phone stores in town at the time and gave the General Manager the same spiel I gave the car leasing manager. It was the same purchaser who bought trucks, cars and construction equipment for companies that bought the cell phones and since I would be contacting these people to sell them equipment and vehicles I could also sell them cell phones. I asked for a free phone and phone line in exchange for representing the cell phone company.
He didn’t agree to free but he agreed to set me up as a dealer, sell me phones at wholesale and give me a free demo phone line. I agreed and they sold my personal phone to the car leasing company so it could be included in my lease payments. I now had equipment lines, vehicle lines and a cell phone line to sell to construction and oilfield companies. I was in business and could afford my monthly expense commitments with ease. They were under $500.00 per month and the Equipment Company guaranteed me $800.00 per month when I signed the agent agreement with them. My expenses were covered and I started selling.
Within a few months it was clear that the cell phone business offered the best opportunity. I had sold some vehicles and equipment as well as many phones, so the managers of those lines were happy with me. I decided to drop the equipment and vehicles, parted ways on good terms with the managers and owners, and began to focus on cell phones. Within nine years we had 3 stores, reaching 3 million a year in sales and often had 2 of the top 10 stores in the country.
I used creative thinking and negotiating to start my first business. Can you be creative? Can you hone your negotiation skills? I think so. Good luck in starting your business. Follow the 8 step guide above and be creative.
Mike Garska, President.