HOW TO START A SMALL BUSINESS

A successful small business offers the rewards of earning income far in excess of a salary, the freedom to be in control of your own destiny, social status and the satisfaction of providing jobs for others. However, everything always seems easier than it really is, don't let your dream turn into a nightmare because you have not prepared properly.

A successful small business offers the rewards of earning income far in excess of a salary, the freedom to be in control of your own destiny, social status and the satisfaction of providing jobs for others. However, everything always seems easier than it really is, don't let your dream turn into a nightmare because you have not prepared properly.

So, what is a small business?

Depending on the sector your business will fall into, the definition of a small business changes, according to the National Small Business Act No. 102. 27 November 1996.

The size of your business is determined by three factors:
1. The number of full time, paid employees that work for you. Full time means that they work for eight hours a day, five days a week.
2. The total annual turnover of your business and
3. the total gross asset value of your business (fixed property excluded). This is the value of all of your equipment you use to run your business, like sewing machines, computers and cars but does not include the value of the land and buildings you use.

To qualify as a small business in the manufacturing sector you need to employ less than 50 full, time paid staff members; your total annual turnover must be less than R13milion and your total gross asset value less than R5million.

Other sectors include:
Retail: > 50 staff; > R19million turnover and > R 3million in assets
Wholesale Trade: > 50 staff, > R32million turnover and > R 5million in assets.

If your company does not quite match the above requirements, then use your total annual turnover as an indictator of business size.

Now that we know what a small business is, how would we go about creating one? Our first step is finding a business idea.

Finding a business idea

Choose a business idea for which there is a market demand and which you can serve competitively. With international competition on your doorstep, be sure to choose something you can get passionate about doing well. When it is fun, it is much easier to work hard.

If you do not already have an idea for your small business, there are many sources you can go to and many methods you can use in order to generate business ideas.

Write your ideas in a notebook or on an ideas board. This will allow you to easily track and compare them. Carry a small notepad with you wherever you go, so you can jot down new ideas. Then transfer them to your notebook to expand on them later.

You can generate business ideas from the following:
· Your previous or current employment
· Family, friends and relatives
· Market, social, business or technological trends
· A product or service need you've identified through personal experience
· Your hobby or leisure activities, including travel
· General interest newspapers and magazines
· Business publications, including magazines, newsletters, trade publications, and books available in the business sections of both libraries and book stores
· Trade shows and conventions
· The Yellow Pages

Types of Business Opportunities

There are many types of small business opportunities and many ways of categorising them. However, most small business opportunities fall into one of three major categories: retail, manufacturing or service.

The following is a list of questions which might help you discover new ideas or approaches to developing small business opportunities.
1. What product could I purchase the manufacturing rights for?
2. What product could I assemble, recondition, rebuild or re-manufacture into another product?
3. What product or service could I supply to another producer?
4. What product or service could I offer to gain a small percentage of a large market?
5. How can I add value to existing products or services?
6. What products and/or services could I combine?
7. What lifestyle or fashion trends in society provide a product or service opportunity?
8. What recreational or leisure trends provide a product or service opportunity?
9. What successful products or services could I imitate?
10. What products or services could I market and/or sell?
11. What products could I distribute and/or sell wholesale?
12. What products could I import/export?
13. What types of events could I plan, promote or publicise?
14. What expertise do I have that I could market as a consulting or information service?
15. What skills and expertise could I teach to others?
16. How could I help existing businesses access important information?
17. What existing business, franchise, or distributorship could I buy and operate?

Developing your Business Ideas

Your potential customers or clients are always looking for "value added" in the products and services they purchase. Once you've started developing business ideas, look at each opportunity from different angles, always looking for ways of adding value that will set your product or service apart from that of your competitors.

Example:
Greta Green believes that opening a landscaping business to service upper-middle class homes in a new housing development is a good business opportunity. But she is not alone in this assessment and will face stiff competition in this new market.

How could she improve her chances of success by providing landscaping services that are more convenient and flexible, less expensive, or more accessible to customers?
What other products or services could she offer to complement her landscaping service?
Could she, for instance, combine her landscaping services with general repairs, housekeeping, or babysitting services?
As an added service to her customers, could she sell gardening tools or sell and install lawn sprinkler systems?
Could she find and sell products that have added features or accessories and are:
· cleaner, safer or easier to use
· more durable and easier to replace or repair
· more efficient and functional
· lighter or stronger
· less costly
· more easily stored?

Every business idea will come with its own set of questions and opportunities to add value and make your product or service more attractive to customers.

Reality Check: Evaluating A Business Opportunity

Now that you've gone through the process of finding and developing ideas for possible small business ventures, it's time to narrow down the list to a few key ideas that have the best business potential. Remember that a business idea is NOT a business opportunity until it is evaluated objectively and judged to be feasible.

Keep your list of ideas to be analysed to a minimum of two and a maximum of five potential business opportunities at any one time. Seriously considering and developing too many potential business opportunities all at once will cause confusion and spread your time, energy and focus too thin. At the same time, if you focus too early on only one business idea, you are more likely to become personally and emotionally attached to it, and you will lose your objectivity.

Testing the feasibility of your top business ideas involves time and effort to collect key information. At this stage, most of your research efforts should focus on answering this key question: is there a market for my product or service? To help you answer this question, you can do the following:
· Conduct market surveys
· Conduct focus groups and brain-storming sessions
· Conduct personal and telephone interviews with potential customers
· Monitor your competitors, including talking to their customers if you can
· Test the market with your product or service
· Produce sample products or prototypes
· Talk to consultants and advisors
· Talk to retailers, distributors, agents, and brokers
· Read market research reports, industry trade books, magazines, and journals
· Refer to industry associations and South African Statistics services data
· Refer to the DTI for Small Business

Once you've finished your preliminary research, complete the following questionnaire for each of your key business ideas. This questionnaire is designed to help you test objectively and compare the feasibility of each of your key business ideas. Note: you won't have exact, detailed answers to all of the questions at this stage.

Business Feasibility Questionnaire

1. What exactly is the nature of the business, and what exactly am I selling?
2. Is this business a good match for my skills and experience?
3. Who are my customers and what are their buying habits?
4. Who are my competitors?
5. Why will customers buy my product or service instead of my competitor's product or service?
6. What is the size of the market, and what do I estimate will be my market share?
7. Manufacturing or service business: how many orders or contracts can I have already in place when I launch the business?
8. Retail business: how soon after I launch the business can I expect sales revenue?
9. Who will sell and/or distribute my product or service?
10. Can I produce the product or deliver the service at a competitive price?
11. How much product can I produce, or how many customers can I serve, in the first year of operation?
12. Can I find skilled employees to work for me?
13. What are the projected start-up costs and annual operating costs?
14. How much money will I need to borrow to start and operate the business?
15. Can I obtain the money to finance this business venture, and what is the level of financial risk?
16. Will the projected profits from the business meet my family's needs?

Comparing your questionnaire results for each of your key business ideas should help you decide which one is right for you and which one has the highest likelihood of success.

This article is courtesty the Department of Trade and Industry and Alberta First.
www.dti.gov.za
www.albertafirst.com

Add your comment (3)
2571
...This
written by Nash87, January 22, 2011
Thanks! really needed this article.
4058
...This
written by Vino, August 11, 2010
Gr8 work guys.
This realy is helpful.

smilies/wink.gif
2437
...This
written by taz, May 25, 2009
smilies/smiley.gifextremely helpful tips!





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