Taking the Leap: What to Consider Before Starting a Business

It can be a very compelling and driving force – you’ve got a great idea, a unique service, a fantastic line of recipes, or a can’t-miss product. But launching a business is not the next step…it’s the last step on the road to entrepreneurship. Your time, money, and future are on the line, so take some time to get your ducks in a row and look at the business with a rational eye. Make a Business Plan A business depends on a lot more than great products and services to be successful. Like a newborn child, it has its own life force that comes with certain needs and requirements in order for it to survive and thrive. Plan out the structure and processes of your business first. You will need a hierarchy of management, which may be very limited at first. You will need to keep financial records and file taxes. You will need to determine if you should form an “S” corporation, a “C” corporation, or a limited liability corporation (LLC), which could make a big difference in your profitability. Of course you will also need to find a location, design the customer interface (whether it is a store, a website, or a mailing list), price out everything you will need to get set up, and determine the size and scope of your business. You will need to define your demographic so that you can choose the right location and/or target your marketing properly. You will need to research city codes and know what licenses are required. Making and serving your gourmet lasagna is a very small part of the whole operation, so before you get too far, make sure you are up for all of the other tasks involved and then get things in order. Get your finances and credit in order Make sure your pockets are deep enough to get you through the start-up costs and several months of slow initial sales. Most entrepreneurs have to put more money into the business in the early stages, and don’t take profits out. Make sure that you have the resources to do that and to provide for yourself and family too. If you think you may need funds, get your investors lined up before you begin, when you have a fresh and exciting concept, rather than trying to get them to bail out your cash-strapped venture when it’s already in a hole. Whether it’s friends and family or a bank, you need to get their commitment before you begin. This is where a well-prepared business plan, neatly presented and complete with sales and profit projections, can make a huge difference. Get some expertise behind you Always remember that the world may not share your enthusiasm for your great idea. Remember too that even the best idea is only as good as its execution. Your visions of grandeur may not sell so well in a small storefront on a side street, which might be the best you can afford. Most new businesses fail, and difficult economic times do not increase your odds of success. You need to talk to people. Talk to people who have succeeded and people who have failed. Talk to bankers, even if you may not want their money, as they have seen a lot of success and failure from their clients. Talk to friends, talk to family, and talk to strangers. Talk to people in a similar business and find out the unforeseen obstacles they faced, as well as the factors that helped them succeed. Ask them if they would do it all over again. Starting your own business is a very personal decision with wide-ranging and long-lasting consequences, for better or worse. It should not be entered into lightly, unprepared, or without the full knowledge and willingness to embrace the possible downside if it does not succeed.

The Importance of Quality Over Quantity

Quality over quantity – it’s a simple concept taught to us throughout our formative years – but it’s one that fits like a square peg in a round hole in today’s corporate environment. The reason that it’s so hard to emphasize quality over quantity is simple – businesses are established to make money as quickly as possible and at the highest possible margins. Crafting single high quality products tends to be expensive and time consuming, and must be sold at much higher, less attractive prices to the average consumer in order to be profitable. Lower quality work, produced quickly in outsourced factories with a minimal time commitment per product, tends to be far more profitable, with higher margins as well as a lower, more attractive price point for consumers. Well-known adopters of this business model are Wal-Mart and Target. However, business managers shouldn’t entirely overlook the importance of quality over quantity. If your product becomes known for its shoddy construction – and due to the Internet, word travels fast – your overall sales will be quickly damaged. Modern consumers are likely to scout out opinions online before purchasing goods – wouldn’t you rather that they be greeted by a stream of favorable comments as opposed to a flood of angry ones? If your product is too cheap, it can also get easily lost in the bargain bin at Wal-Mart alongside a plethora of shoddy, similarly named foreign-made products. Let’s take a look at a few examples where quality over quantity has prevailed. In the auto industry, BMW’s business model of selling well-crafted luxury cars in tiers has become a standard for companies wishing to emphasize product quality. BMW offers its flagship vehicles in three flavors – the compact 3 series, the mid-size 5-series and luxury 7-series – all aimed at different markets. In addition, it sells sporty Mini hatchbacks as well as the ultra-luxurious Rolls-Royce in order to appeal to the lower and higher ends of the pricing spectrum, respectively. BMW’s clear separation of its tiers, all while retaining an aura of overall luxury, was the inspiration for Steve Jobs when he returned to Apple in the late 1990s. At Apple, Jobs mimicked BMW’s tiered pricing system with his computer and iPod lines. BMW and Apple are shining examples that offering a quality product on multiple pricing levels can attract the maximize amount of customers at premium prices. A large part of product quality stems from product design. You need to have a product design team that can create attractive designs while keeping costs under control. Your aim should be to create the illusion of an expensive product which is actually cheap to manufacture. This does not mean to cut corners and decrease quality. Instead, you should decrease the amount of necessary components, streamline the design and eliminate redundancies. Johnathan Ive, the head designer at Apple, is a master of this concept. By simply replacing the cheap plastic exteriors of its computer products with sleek, airbrushed aluminum and minimizing the amount of visible screws, he set his products miles above the rest, and customers lined up to pay the “Apple premium” for his futuristic looking products – such as the iPad, iPhone and iMac. Customers will come back if your product feels good in their hands. Quality over quantity – it’s an age old lesson that too many of us choose to ignore. Although sacrificing the former for the latter may grant you a few short-term profits, you’ll quickly run out of steam when customers fail to come back. Favoring quality over quantity will increase your company’s reputation and increase product loyalty, which will keep your business sustainable in the long run.