Unlike her co-workers, Camille* had been ecstatic at the news of the closure of the company she had worked at for nearly 20 years. As she mentally calculated her expected redundancy package, she was delighted that her dream of starting her own catering business could finally become a reality.
As soon as she received her final pay cheque, Camille turned her attention to setting up an upscale eatery that rivalled the bistros found in South Beach, Florida. Awash with cash, she spared no expense in creating the right décor and an enviable menu. Excited at the prospects of her first business venture, Camille opened her doors with a flurry of promotions and pizzazz.
Fifteen months later, Camille is singing a different song. Gone is the optimistic fervour of the newbie entrepreneur; today Camille is burnt-out, broke and begging for someone to buy her out. What went wrong with her grand business idea?
“I really had no idea how hard it would be to run a small restaurant,”Camille revealed.“After a while, the stress of trying to manage inventory, deal with staff issues, and constantly attract customers became too much to handle.”The business has wiped out her nest egg and she is now desperately seeking an exit solution.
Camille’s painful experience is an oft-repeated story recounted by many disillusioned entrepreneurs. Unfortunately, people who exhibit the right qualities to win in business can still end up losing the entrepreneurial race, because they are not aware of all the rules of the game.
Andrea Graham, CEO of the Business Development Agency, explained that while having a positive attitude is important, new business owners are often over-confident about their potential and under-prepared for the harsh reality of the world of business. Although careful planning was not an absolute guarantee for success, Graham admitted, it was essential to properly assess a business opportunity before jumping on board.
Graham, a 30-year veteran business owner, pointed out some of the key factors that must be considered before starting an enterprise:
Is Your Business Idea Viable?
Getting a business inspiration is easy; making it profitable isn’t that simple. Graham encouraged entrepreneurs to properly explore the feasibility of their ideas before opening their doors. You can’t base your business solely on personal tastes, she explained.“Just because your family and friends like your cooking, it doesn’t mean that everyone else will.”
It’s crucial to do the necessary market research to determine if you can attract customers to purchase your product or service, Graham cautioned. You must have a clear picture of the demographics and the desires of your target customer group, she continued, so that you can design your offerings to meet their needs.
What Are The Start-Up and Operational Costs?
Graham recalled a client who had spent all his money outfitting his new wholesale store and had no money left to buy goods to sell.“Before you spend a dollar,”she appealed,“you need to itemize every cost associated with starting the business.”Furniture, fittings, machines, stationery and stocks are just some of the expenses that you have to finance before you make any money.
Having enough money on hand for daily operational costs is also vital. Graham declared that you must have enough initial working capital to keep your doors open in the first few months, as it will take some time to generate enough sales to meet your bills.“Even if you have a winning idea, if the business is under-capitalized, it will not succeed.”
How Will You Generate Sales?
“The days of putting up a store sign and waiting for customers to show up are gone,”Graham asserted.“You must have a properly designed strategy of how you are going to attract your customers to buy.”Once you are clear about your target market, you can use the most appropriate marketing media to directly reach them, she explained.
It’s important also to have a sales plan to meet your operational expenses and income targets.“For example, if you know it costs you $80,000JMD each month to pay all your bills,”Graham illustrated,“then you will need to calculate how much of each product you need to sell to produce that amount of profit.”
Do You Have A Written Business Plan?
Another important consideration, Graham noted, is the type of ownership structure that would be best suited for your operation. Decisions about staff acquisition, business location and funding sources must all be properly thought out before you begin operations.
To evaluate all this information and make a final feasibility assessment, you will need to prepare a written business plan, Graham concluded.“Proper planning can prevent you from losing money on ill-conceived ideas, and help to speed up the progress of your business.”If you intend to seek financing from a lending institution, a business plan will also be required.
Graham recommended that before embarking on entrepreneurship, you should get expert advice from a business counsellor who can help to create a strategic plan for your business success.
Copyright © 2010 Cherryl Hanson Simpson.