When you are thinking of starting your own small business, it is hard not to get carried away by all the excitement.
But for every entrepreneur that makes it look easy, there is another who fails, in fact almost half of all new businesses in Kenya close within three years, according to the Kenya Bureau of Statistics.
So what are the things that you should consider before taking the plunge to give you the best chance of success?
- Be clear about your “why?”
Embarking on the road to being a business owner is one that needs to be considered in detail before setting out. Being a business owner is not for everyone, it is challenging, there is a lack of certainty, it can be very hard financially and it will take a lot of work. It is NEVER a walk in the woods. That said, the upside is wonderful, incredible satisfaction, control for your own destiny, the ability to earn more than you would as an employee and the freedom to run the business the way you want to run it. All of that said, you need to be clear about why you want to start your own business, going in it with your eyes very wide open.
- Know who your customers are
Supply and demand, it is important to know who is going to buy what you are selling. Who is your niche market? Describe your ideal customer? The clearer you are about who you are going to be selling to, the clearer you can be about your branding, your location, your marketing, your pricing; everything. Be as specific as you can about your customers and learn as much as you can about them.
- Check out the competition (and work out how you are going to be different)
Take time to visit any competitors, or similar styles of business. See what they do well, see what they could do better. This gives you the opportunity to figure out how your business offering is going to be different (and ideally better) than your competitors. To start a business without checking out the competition is madness.
- Do your homework on the rules and regulations that might affect you
There are always going to be rules and regulations that need to be considered when starting a business. They vary dramatically from region to region, state to state. Check out the Kenyan Government site and state business support departments. Be warned, not towing the line because you were not aware of a particular law is no defense, especially around things like employment, workplace safety and taxation.
- Get some help to develop a realistic set up budget
When starting a business, it is easy to get caught up in the excitement of the moment. This often translates to over estimating income and under estimating the costs associated with starting a business. I work on a tough formula; double how much everything costs, double how long it will take to set up and halve how much income you think you will make: if it still stacks up, you should be fine. Having someone who understands budgets and small business, perhaps an accountant, to help you determine a budget is a very good idea. It should also be noted that getting finance once you start your new business will be tough and generally credit card based, so getting your funding in place while still gainfully employed is a good idea.
- Make sure you are going to be charging enough
One of the biggest mistakes that new businesses make is not charging enough. They look at being the cheapest as their marketing strategy to attract new customers. The problem is that it is very hard to put your prices up once you develop a reputation for being cheap. It is far better to sell on quality not price. Do your sums, ensure that your prices will enable you to make a good profit.
- Work out how you are going to get customers
Sadly too many businesses invest a fortune in their new business, set everything up, fit out the premises, build the website, stock it and staff it; then open the doors expecting hordes of customers to come barging in. This never happens. You need to have a very good plan (developed well ahead of time) that clearly identifies how you will attract customers. This is considered a Marketing Plan and smart businesses invest in this before they spend a cent on anything else.
- Get your advisers in places
Source your advisers early and get them involved in the set-up of the business. Ensure you have a great accountant (ask other business owners for referrals), a great lawyer (especially if you are leasing a premises), a great marketing adviser to help develop your Marketing Plan ahead of time and possibly a few other advisers like a graphic designer, website developer, IT consultant among others. It does depend on the type of business you are planning to open. Invest in getting the right advice before you start your business and your chances of success will be dramatically increased.
- Make sure you have your insurance in place
Just as there are statutory rules and regulations that need to be adhered to, your insurance needs to be firmly in place before you open your doors. If it is not, you run a very real risk of being sued. As a minimum you will need Public Liability insurance which protects you from people being injured on your premises. This is pretty simply to organize from anyone who offers business insurance, but there are other, more specialized types of insurance covering businesses for everything from fire and theft to income protection for the business owner.
Find a great insurance broker, specifically one that deals with businesses and get advice. Once again, talk to other business owners for their opinions on what is needed and what is not.
- Look for a mentor
Having someone who you can talk to and ask for business advice in the form of a mentor is very advantageous to help avoid making all of the common start up mistakes. A mentor is normally someone older, who has “been there and done that”, who is able to give their time freely, and who has been successful. Having a good mentor to offer advice in the early set up stages of a business would be very wise.