Last week, I begun a series on common business startup mistakes. In the first post, I looked at the effects of Lack of Vision.
I also shared my personal and business experience in this area and gave tips to help you create an empowering vision for your life and business.
Today, I want to explore Poor Business Startup Preparation.
Preparation is an area that people know is important, but often overlook when it comes to starting a business.
Failure to Plan is Planning to Fail
Brian Tracy, a leading performance expert, teaches that “Proper Prior Planning Prevents Poor Performance”. He calls it the 6Ps of Planning.
Preparation is all about planning. Very few people have been able to succeed in business without having planned in advance.
Your business startup preparation plan needs to identify the following:
- The most suitable business for you.
- Your ability to succeed or fail in this business and/or industry.
- What the market wants.
- The type of planning that will work for you and your business.
Let’s look at each of these in detail.
1. Identify the most suitable business for you
Not all businesses are suitable for everyone, and not all businesses are made equal. Find your perfect business and then work with it.
Your business should incorporate some skill, talent, knowledge or experience that you already have. You may need to look for funding to start and grow the business. However, this should be a business that you can start easily without having to go back to school.
Your perfect business is based on something that you love and have a natural inclination for. Chances are high that you’re already doing this thing, but not necessarily getting paid for it.
If you’re not sure about the ideal business to start, read through this series I wrote on how to choose the perfect business for you.
The 4 articles in the series will guide you through the process of identifying the business that is easiest to start, and that will be most fulfilling for you over time.
2. What is your ability to succeed or fail in this business and/or industry?
Before you start celebrating and run off to register the business and start marketing, you’ll need to find out whether you’re cut out to succeed in business and in this specific business or industry.
This research is different from market research because at this point, you’re simply finding out whether this is a business that you want to get into or not.
Here are some simple steps for the business idea research:
- Conduct a personal analysis to find out your personal viability to succeed in the industry (done when identifying your perfect business).
- Collect as much information as you can about the business and industry. You can do this online, and from books and newspaper. Also attend industry-related events so that you mingle with people who are already in the business.
- Find 3 to 10 people in the same business or industry and interview them. If you can, find at least one person who has failed in that business. This person will be your best source of information about what not to do, and they might give you pointers about where the industry is headed. Ask them:
- how they started.
- what mistakes they made and the results.
- how they were able to turn around and succeed.
- Evaluate the information you’ve gotten using a SWOT analysis. This will give you the best indication about the viability of the business and the skills, people and experience you need in order to succeed.
You also need to conduct a business idea research from published material and people who are already doing similar businesses. This will give you information about the business and industry .
3. What does the market want?
Having found out your most suitable business doesn’t mean it will succeed. A lot of people start businesses that sell what they, the founders, want and like. But is this what the market wants?
To start with, if you’re trying to force something into the market, you’ll find that the market can be very harsh. If it’s something people don’t want or need, they will not buy.
So you will need to check whether this is something the market:
- wants or needs.
- is willing to buy.
- is able to pay for.
These 3 factors have to be present for your business to succeed. You could be selling something that people want and are willing to buy, but they’re not able to pay for.
Second, you need to identify the ‘lag time’ for your business. Lag time refers to the window of opportunity within which a business will make money.
In today’s market, things move so fast that you can start a business today and then have to wind up in the next few months because something new has come up and your business is now obsolete.
This is what happened to business people in Silicon Valley. Those who got in first made money. Those who came in after the lag time was up made huge losses. This is a common scenario that affects people who don’t prepare for the business in advance.
One of the best examples in Kenya is the now defunct Simu ya Jamii by Safaricom. The people who got in when Simu ya Jamii was starting made a lot of money.
Those who came in when mobile phones were starting to be accessible to the common mwananchi lost out big time. However, Safaricom made its money either way because they dropped Simu ya Jamii and quickly moved on to the more lucrative opportunity – MPESA.
Again, the people who registered as MPESA agents when MPESA was launched made, and are still making, a killing. Those who came in later are making money, but the profits are much lower than before. The market is also flooded with MPESA agents, which increased competition.
When you get into a business when the lag time for that business idea is up, the business will outlive its usefulness like Simu ya Jamii, and you will end up losing. So make sure that the business you’re starting is something people will need in the long term.
Also, ensure that you’re still within the lag time. Otherwise, you could end up starting a business based on something that people needed in the long term a few years ago, and so you’re getting in when the lag time is up or at the tail end of it.
Market research is an ongoing process, and it doesn’t stop with your business startup preparation. It’s something that happens consistently in your business. You need to keep evaluating what’s working, getting new things in place, and discarding what is not working.
Third, remember to look for gaps and opportunities in the market so that you can target areas that your competitors are not taking advantage of. Ask people about their problems. Listen keenly to what they’re telling you, then match your products or services to the needs of the market.
I think Safaricom has done this very well with MPESA. They have their pulse on the ground. You will notice that there are always new things coming up through MPESA and these things satisfy the market. MPESA products are also well matched with all sectors of society, from the wealthy to those with low income.
Safaricom definitely didn’t start off this way. But with careful ongoing market research, they have tapped into something that has now become key to everyone’s lives.
For example, there was a time when most people couldn’t fathom spending 100/- a week on phone calls or internet bundles. Today, 100/- is on the lower end of what most people spend on airtime or internet bundles each day.
Fourth, find out exactly what your target market thinks of your service or product, and how well it will be received in the market place. This will mean having to first identify your ideal customers and then going to places where they hang out (online or offline), and offering them samples of your product or service to test.
During the test, you also get a chance to ask them a few questions and get their feedback about your offer. The information you collect should include:
- how much people are willing to pay.
- their preferred packaging.
- where they are most likely to shop for your product or service.
- any other ideas or tips they have for you.
You can use the tips in this article on market research to get started if this is the first time you’re conducting one.
Finally, keep your eyes and ears open at all times and observe your competitors’ marketing tactics. Identify the low-key tactics you like and that are having a positive response in the market, and replicate them in your business.
This doesn’t mean that you copy what your competitors are doing. It means that you simply use the same tactic(s) in your business and put a unique twist to showcase your business positively.
4. What type of planning will work for your business?
You will use all the information you’ve collected in the 3 steps above to create your plans. You need at least 4 sets of plans at startup.
#1: A business model
This will outline how you’re going to run your business. It includes (among others) information regarding production or procurement of what you’re selling, your sales and marketing process, and the overall business management process.
#2: A business plan
This plan basically says, “This is what we do; this is what we stand for – our vision, our mission – our long term goals; these are our short term goals; and this is how we’re going to achieve these goals”.
Undercapitalization is one of the most common causes of businesses failing within their first year. You need a business plan in order to identify the actual amount of capital needed to start your business and run it for at least one year or until it becomes profitable.
Your business plan doesn’t have to be a large document. You can have a one-page business plan that incorporates all the necessary information. However, you will need to create a comprehensive business plan if you intend to seek for funding for your business.
#3: Your marketing plan
You will extract your marketing plan from the business plan. Marketing is all about telling people what you do over and over and over again.
Don’t confuse marketing with sales. Marketing refers to informing people about your products and services and attracting them to you.
Sales refers to getting people to buy from you. Well conducted marketing leads to visibility and likeability. Being able to close sales is what will convert your marketing into business income.
#4: An action plan
This takes everything you have prepared in the business plan, marketing plan, and business model, and turns them into actions that you take every year, month and week.
Without an action plan, you’ll find yourself running around like a headless chicken – totally confused; or you’ll be doing things in the wrong sequence and time.
You need to have a well thought out action plan in order for your business to grow.
Your plans don’t have to be huge documents. You can start with a simple outline of what you will do in your business within the next year.
5. Take action and keep track of progress
A business is a very fragile thing when it’s starting out. It’s like a newborn baby and you need to nurture it, take care of it, and invest a lot of yourself in it.
Take action and implement what you’re learning immediately. In your day to day work, use the Ready, Fire, Aim philosophy which means that you plan, execute the plan, and then amend the plan based on the results you get when executing.
As I noted in a previous article on 5 Reasons Why You Should Not Start a Business, if you have a plan that requires you working on steps A to G in order for your product or service to be perfect, implement the plan as soon you reach step C.
Take the feedback from the market and update your product or service before releasing Version 2 to the market. Use feedback from Version 2 to create Version 3. Keep working on this cycle until you have something that the market wants or that you can sell at optimal prices.
This is what market leaders like Microsoft and Apple do and we keep buying their ‘not yet perfect’ products each time they’re released.
As soon as you know what you want to do, and have found out that it’s doable for you, fire it out to the market. Modify your plan using the results you got from the market, modify your plan, readjust your aim, and then fire again.
Most people work with Ready, Aim, Fire! They have their plans and are still trying to make the plans perfect before implementation. That does not work in business. Take action and don’t wait for perfection.
Having a well thought-out action plan will help you keep track of progress on a daily, weekly, and monthly basis. This will in turn let you know when it’s time to make make changes or to abandon things that are not working. Having this information readily at hand will help you update your plans accordingly and keep your business ahead of your competition.
When you have the Ready, Fire, Aim mentality, you’ll be taking constant action and updating your products or services to match the unique needs and desires of the market. You’ll also keep track of your progress on a constant basis, learning from your actions, and making the necessary changes quickly.
A business owner who utilizes this mentality grows their business very fast – faster than somebody who’s forever planning and taking little or no action.
This series on common business startup mistakes answers the following questions:
- What are the common startup mistakes?
- Is it possible to avoid these mistakes (and how)?
- How can you recover if you've already started your business and made some of these mistakes?
- How can you reduce the chances of you actually being the one that messes up your business?
People read articles, purchase materials, attend programs because they have a goal and then they do nothing with the information they’ve received. The information in this series by itself will not have any impact in your life or business if you don’t take action on it.
When you start your business, you won’t know exactly how the business will end up, despite having created your plans. You may have your dream or an idea of how you’d like the business to shape up.
It’s important to allow your business to grow in the direction it wants to grow. So let your business and the market guide you, even as you keep your eye on the vision and plans you’ve created.
Learning alone will not help you. Learning and implementing what you’ve learnt is what makes things work.
When I started my business, I had no coaching or training programs. All I knew was that I wanted to coach and teach. And so I found out what coaching was about, purchased a few home-study programs, signed up for Neuro-Linguistics Programming (NLP) Practitioner training, and started coaching.
My first coaching client was a bank who helped me open a business account. She got interested in learning more about coaching as we completed my forms, and I invited her for a sample coaching session. She took it up and signed up as a client at the end of the sample session one week later.
At that point, I didn’t know exactly what I was doing and so I was implementing what I was learning in class each week. I don’t think I’ve enjoyed coaching as much as I did with that first client, even though her fee did not even cover the cost of fuel for me to go to our sessions.
Fast-forward to today and I have 3 branded programs and a mastermind. I’ve also written a business startup book, set up a couple of blogs, have a mailing list, and I’m now very clear about what my business is about and where it’s heading.
All these things started from the desire to take a risk and take action on my dream. There has been a lot of learning, creating and testing (remember Apple and Microsoft?) as each new client or group brings something exciting to my business.
That’s my story, let’s now create your story.
Where can you start?
The best place to start is by evaluating how well you’re doing in terms of preparedness. Rate your business startup preparation on a scale of 1-10:
1 = “I am totally unprepared and have nothing in place.”
10 = “I have everything in place, my plans are ready, and I’m taking action.”
Once you know where you stand, read through this article and the previous one once again, and start working through them from the beginning using the steps below:
- Create a vision for your life and business.
- Identify the perfect business for you.
- Research your business idea, and complete your SWOT analysis.
- Conduct market research using a prototype of your product or service.
- Create your business model, and business, marketing, and action plans.
- Create a system of to keep track of your progress daily, weekly, monthly, and yearly.
Next week, I’ll continue with the next tip on common business startup mistakes
I’d love to hear from you. In the Comments below, let me know what your experience has been with business startup preparation. Also feel free to share one tip that has worked for you in this process.
(Image Credit: iosphere at Free Digital Photos)
The complete Common Business Startup Mistakes series is:
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