In today’s economy it is very tempting to hang a shingle outside your door and be in business, or go to the county office and register your name, but there is more to it than that.
First you need to research. You need to research the industry, research the location you plan to operate in – it is location, location, location. Research the financial trends for the industry you select. Research your competition. As a Small Business Development Center Director, a number of potential clients and entrepreneurs would come to me and say, “I want to open a business. There are no competitors in the area.” Wrong. If you have internet access in your area, you have competition.
Opening a small business is a lengthy process if performed correctly. Researching the industry is the first step. Writing a business plan with financial planning is the second step. Within a business plan you will research your market, other potential products, identify the fluctuations in the market and know the trends.
Since the Great Recession of this century, banks no longer do business on a handshake. The local banker wants to know you know your business, that you recognize potential losses – their cause and effect on your business, and that you have a vested interest. Vested interest to a banker means 200 percent involvement. Owning a small business involves you, your family, your relatives and your friends – the business is your life. Unless you are agreeable to sleeping and eating your business 24/7, don’t even entertain the thought of venturing forth.
I had an older couple who loved making tortillas. Their idea was a tortilla warmer. He was a machinist and well versed in the manufacturing industry. She was a housewife but excellent baker. They had designed a tortilla warmer. They invested their retirement in the packaging, the logo and placement of the tortilla warmer. They had placed the item in local Spanish markets in the barrio of southwest Houston. They could not figure out why they were not selling. One issue is that the tortilla warmer had packaging issues – it could not be configured for a welcoming display on a shelf or end cap. They also had priced themselves out of the market. They were first generation to America and trying to live the American dream, not realizing that Target could sell the same or similar item for $5.99 versus their $16.99.
In another situation, I had an older gentleman near retirement who loved to cook. Everyone loved his cooking and was encouraging him to open his own restaurant specializing in Soul Food. Excellent idea for a small town, but in that small town there was “restaurant row” with similar offerings for less, and a restaurant on every corner.
As part of a university/SBDC project, a team of 10 students helped him with research, the business plan, his financials and marketing plan. Their conclusion was that he would not make money and go out of business shortly after start up. They were correct, and unfortunately he did. Now, in this case, he had research, he had knowledge of the food industry, but selected to ignore the market.
If you are determined to move forward, your next step is researching the industry. Start by identifying industry associations, such as the National Restaurant Association, the National Manufacturing Association, etc. Simply typing in “associations and trade associations” into Yahoo! Produces a plethora of information and links.