What are the rules every new entrepreneur must abide with in the process of building a new business? What are the specific steps every new businessperson should follow to get the business running? What is the exact formula for success in business that never fails?
Well, if you are a person who has some experience with business and its operations, processes, and dynamics, chances are you know that answering those questions isn’t easy.
The reason being is that in fact there are no specific rules entrepreneurs must follow to be successful. Similarly, there are no particular steps that should be followed when creating and building a new business. And obviously, there is nothing called the formula for success.
Experts and gurus can talk about formulas for success all they want, but in reality and practicality there’s no such thing.
When a person is thinking seriously about starting a new business, and when s/he actually starts a new one, it’s common to experience a state of uncertainty. S/he will go through points where s/he is not sure what should be done in the business. It’s like staring at a blank screen that you’re asked to turn into an animated scene.
The problem most of the times rises from a lack of knowledge of the business. The person who’s building the business doesn’t know enough about it, doesn’t know any of the key people working in the field, hasn’t read enough about the industry and its ruling dynamics, etc.
I’m not saying that you should spend years studying the business and its environment. But at least you have to develop a general vision of the key pieces and how they all fit together.
When you look closer into the process of building a business from scratch you’ll notice a set of remarkable aspects that should be considered carefully. Those can be put into a set of questions that you must find answers to before jumping into action.
Those questions will help you get a focused view of your business. They will give you a sense of the business and how it should work. Remember that this is not meant to help you create rules or plans that you’re going to follow blindly, but rather, it’s an effective mental process where you start creating the business in your own inner reality, which gives it a huge chance of incarnation in the outer world.
1. What business are you in?This is the first question that you must ask yourself and find a good answer to before even pondering the idea of developing a business plan.
If you don’t really know what business you’re in, if you the business owner feel confused about what you do for a living, it’s a safe bet to say that your customers will feel more confused about it. As a result, you’ll not be able to communicate the true message of your core business, and eventually, you’ll fail to connect with customers, and you sure know what follows.
So it’s basically crucial to know exactly what is it that will make you money. What is the thing, or things, that you’re going to do for customers that s/he will be willing to pay for.
What is the importance of the value you’re business will generate to your potential customers’ lives?
If you were asked by a customer, a friend, your spouse, what business are you in, would you be able to explain it in less than 15 seconds? What you will exactly say? Write it down in a neat and brief sentence.
Answering those questions will help your mind focus on the core of your business. And by the core of your business I mean the processes that are the essence of your business and that are responsible for generating the bulk of your revenues.
For example, Starbucks provides customers with a variety of products and merchandise such as, coffee, cold drinks, books, films, etc. But what’s the core business of Starbucks? Is it just selling coffee cups? Not really. The core business of Starbucks is providing customers with coffee, and other products, in a warm and conversational climate.
That’s the heart of Starbuck’s business. And that’s what most of its competitors don’t provide. Here we have a good model. A company that has something of value to customers, and that knows how to communicate this value to customers in such a way that allow the company to be a leader in the industry over many years.
If you’re planning to create an online business presence, as most businesspeople do today, the same thing must apply to your business.
Think how you’ll answer this question: “What business are you in?” through an email message, a chat session, a video, or any other medium you choose to reach your customers online through.
2. What is the nature of your business?We’ve talked about the importance of knowing your core business and identifying the things that you do for the customers which they perceive as valuable and are willing to pay for. Now I want you to think about the activities, processes, systems, people, or any other elements that would facilitate the process of generating and delivering value to customers.
This is called in the business literature “supporting activities of the value chain”. This naming “the value chain” actually helps you visualize the process of value creation and delivery. So you have to view everything you do in business as a part of a long series of activities that allow you to generate and deliver genuine value to customers, and this process is what will generate you the real income.
This is the most efficient way of making money. Other than that your options are very limited, and ending up in prison is one of them.
Every single action you take contributes to and affects the flow of activities in the value chain. And conditioning your mind to view your actions plus the other elements of your business in this context will give you an advantageous perspective on the business as a whole.
But the really important thing here is that it’s not enough to just analyze and understand those value creating activities. What you need to do beside that is looking before and after those activities.
And what I mean by looking before and after the value creating activities is that you have to analyze and understand the relationship between those activities and your suppliers and between the same activities and your customers, plus, the general environment of your business. The environment of course includes your competitors, the market trends, and the industry as a whole.
Being able to understand the relationships between those different factors will give you the ability to efficiently manage those relationships in favour of your own profitability and allow you to establish mutually beneficial relationships with other entities.
Doing that plus foreseeing the business operating along a certain line of time, will give you more insight and allow you to get a general sense of the general direction your business will take in the next few months or, may be, years.
Now I know that change is so frequent that it’s not safe to strictly plan for a coming year anymore, but still planning is something that you should do and move proactively as events unfold as time goes by. However, you’re not supposed to do any planning at this stage.
You’re just getting a sense of the business and programming your mind to be able to handle whatever challenges you think you’re going to face during the process of building the business.
Let me give you a brief example of how to discover the nature of your business. Let’s say you’re starting an online retail store, you set down and start listing the suppliers you’re going to deal with, the materials and products you’re going to buy, along with other different things.
Then you list as much details as you find useful about your potential customers. You can list any kind of information you think is helpful in knowing customers, like, age, marital status, income, etc.
Then, you try to examine the general relationship between your suppliers and your business at one hand, and the customers and your business at the other hand. Then you draw a line that links your suppliers with the business and the business with the customers (do this in your imagination or on paper)
After that, start thinking about the transactions that will take place between all the three parts of the equation. How you’ll be paying your suppliers, how you’re going to get paid by your own customers, how you plan to deal with suppliers, what kind of relationship you want to build with them, and similarly, what kind of relationship you intend to build with your customers. Visualize yourself actually interacting with a customer. What body language will you use? How would you greet him/her?
3. How to keep the business alive.How much money do you need to get the business running? How much money do you have to invest? How much money do you need to borrow? What party will you turn for to get the money?
Now after you answer all the basic money-related questions about the start up of the business, you need to narrow your focus to the very basic process of your business which we called earlier the core business. How much money does this process needs to generate value for one customer? Notice that you can answer this question in general terms since you can’t quantify value.
Value can be perceived differently by different customers, but what you want to do here is to generally estimate what it will cost you to make one customer happy as a result of one exchange.
For example, if your business is a fast food restaurant, what will a typical meal cost you to produce and deliver to a customer. If you have a website about sporting equipment, what will it cost you to offer a product, handle an order, and deliver it to the customer in the most efficient way.
Notice that you don’t need accurate numbers here; however just try to determine general figures. Or, if you can’t come up with any specific numbers yet, then estimate percentages. For instance, what is the percentage of gross margin you will have when you create and deliver value to a one customer (gross margin is revenues less cost of goods sold.)
You can play with this examining various faces and dimensions of the business like, wages, expenses, taxes, etc.
Another important point to think of is how long the starting capital will serve you? Are you expected to borrow more money during the starting phase? How much time do you expect it will take the business to generate more cash than you put in? And, what if you run out of the starting capital? What are your plans? Would you borrow more money? Or would you be OK with no salary for several weeks?
Would you be regularly increasing your investment in the business, or will you just start enjoying profits? Would you prey for growth and expansion, or would you be happy with a small and healthy business?
Also think of all the things that you can do to help facilitate your business performance and make its mission easier. What are the relationships you need to establish for that purpose? Who are the persons or organizations that you think can be of help to you and would be happy to collaborate?
What you’re doing here is previewing the business before it actually takes place in the real world. You are visiting the future and looking at how things will work when you get into the real work.
Again, you don’t have to create any plans, rules, or whatever. You’re even not deciding anything about the business, but rather, you’re just examining it and testing a variety of its conditions and details.
Do this process before starting out the new business, investing in any kind of equipment, tools or supplies, or even developing a business plan. When you answer those questions and let your imagination examines as many pieces of the picture as possible, you’ll all of a sudden gain clarity and vision and you’ll find yourself at a point where you just know what to do next without feeling uncertain or in doubt, because images, insights and ideas will start to flow through your mind effortlessly.
