Thinking of Starting a New Business?
Updated: Aug 2, 2019
At a glance
- In 2017 Scotland experienced a 0.7% net increase in business start-ups representing approximately 2,000 new businesses
- That same year, Scotland had 48 new business registrations per 10,000 residents or approximately 1 out of every 200 people. If you want to start your own business, you aren’t alone
- Only 4 out of every 10 Scottish businesses started in 2012 were still in operation in 2017
Thousands of businesses are started every year in Scotland, but how many of those businesses will be around in five years’ time? History tells us that most of the businesses started in 2019 won’t be around in 2024. Of the businesses started in Scotland in 2012, only 44% were still in business in 2017. What are the successful businesses doing differently that sets them apart from those who have failed? Business strategy plays a significant role in the success of your business; the old adage “a failure to plan, is a plan to fail” is a simple reminder of the importance of business planning when starting your business. As a catalyst to get people thinking and planning for their future business, we’ve prepared a basic checklist to help you develop your proposal, identify potential opportunities and stave off challenges, giving your business a better foundation in the marketplace.
Know what you are going to sell
While it might seem fairly obvious to have a clear idea of what your business will sell, products or services, it is important that the business has a clear vision regarding its purpose. If your intention is to provide a product / service to solve a problem or fill a void in the market, is it fit for purpose? If your product / service is joining a competitive market, what value does it add to avoid being lost in the crowd? It is equally important that the business has the right skill set and experience in providing the product / service; if you or your team don’t possess the optimal skill set do you know what resources are available to acquire these?
Know your customer
After assessing what your business will sell, the next area to research is who you will sell your product / service to. Is your product / service specific to a certain type of customer; i.e. Can you sell your product / service to everyone or is it limited to a demographic, sector, industry, geographic location? Is your product / service standardised, readily available as an ‘off the shelf’ solution, or is it bespoke in nature, tailored to the specific requirements of your customer? Will you be targeting all potential customers in the market or narrowing down to a specific segment / sub-segment of the market? How you engage with your target customer is important as different customers will require different approaches / communication methods. What do your future customers think of your proposed product / service? Are they satisfied? If you don’t know the answers to these questions, beta testing or consumer research can be conducted to refine your product / service offering.
Setting business goals
When deciding whether to start a business it’s good practice to know where you want the business to go, adopting the targets / goals you want to achieve. Remember when setting goals to adopt the SMART principle; Specific, Measurable, Achievable, Realistic, Time-bound. Set a couple of milestones for your business that you want to reach in 6 months, 1 year, 3 years, and five years’ time. This will help you as you make everyday decisions regarding how to run your business, as well as decisions about how to grow and expand your business. Intermittently evaluating, and when necessary, extending your business goals is a great way to ensure that your business is always heading in a positive direction. It’s always wise to create a business plan, and view it as a live document rather than a static one, as a great business plan should continually be reviewed and updated as the business grows.
Differentiate your business
Unless you are developing a brand new product / service, you will likely be entering competitive market. Why your customers will be drawn to your product, rather than your competitors, will depend upon your unique selling point (USP). A USP can be anything, from your brand to the product / service itself, that will positively position your company and encourage potential customers to use your product / service. Keep in mind, if your business sells beyond the boundaries of your town / city or online, your business may have more competition (and potentially more customers), further emphasising the importance of a USP. Another way businesses position themselves in a market is through pricing. In a hyper competitive market, your pricing strategy plays an important role in your value proposition. To differentiate your pricing from the rest of the market, it is worth considering value, cost, and competition.
Funding your business
Cash is King - how a business is funded is a vital aspect of the start-up process. Business start-up capital can come from personal funds, banks, public sources, as well as from investors. Unless you have sufficient personal wealth to finance your business start-up, you will most likely require additional sources of funding. Banks are becoming more receptive to new start-ups and are a good source of initial funding, provided the interest repayments are affordable. Public sources, like grants, are great if available, however, usually require a lengthy application process and in some cases require equal contribution / match funding. If raising capital through investors, it is important to remember that depending on the level of investment / equity purchased, you may no longer maintain full ownership / control of the business. Additional sources of funding may include crowdfunding platforms, like IndieGoGo and Kickstarter, that raise funds from individuals (unusually for rewards) whilst maintaining ownership of the business. Beyond the capital requirements of the initial start-up, maintaining positive cashflows throughout the life of the business is also key to a sustainable business model. Cash flow problems are a major reason why businesses fail; avoid this pitfall by regularly tracking your businesses finances and cashflows.
A final note
It’s important that you’re passionate about the product / service that you provide; many people who start businesses, start them because they enjoy providing a particular product / service. As a business owner you are responsible for all areas of your business, not just the parts you enjoy. Businesses require a significant amount of administrative duties, that take you away from the products / services that you provide. This may include marketing, managing people, health and safety, finances and payroll, working with your suppliers, engaging with your customers and company officer duties (company filings / HMRC). These are all key components of a successful business and may be overlooked or underestimated, as they are not the primary activities of the business. It is important as a business owner, you understand that you may not get to do what you really enjoy all of the time; at least not at first.
Are you interested in starting your own business? Don’t know where to start or just need some advice? Contact us today so we can help your business grow.
Strathearn Strategic Consulting
+44 (0) 7913 413 699