Are you, or someone you know (Client or friend), thinking about starting up a new business? One of the biggest fears in starting up a new business is the well-publicized statistic that close to 80% of all start-ups fail in the first five years (depending upon the source)! As a business professional whose business over the last 18+ years has been to prepare Professional Business Plans for companies (where most of them are doing so in order to get their funding), I can fully understand why this happens!
business_plan
One of the first questions I ask a prospective Business Plan client is what they think they need in cash to get their business off the ground. What I have found out is that similar to a home repair project taking twice as long to complete than you thought it would, the amount of required CASH to start a new business is usually twice as much as what the prospect thought. This is why the number ONE reason new start-up companies fail is because they run out of CASH!
What is often forgotten is the fact that most start-up companies need about six months or more to reach their normal levels of sales volumes. In my industry, we call this “Ramp-Up time.” Some companies take more or less time to reach their normal levels depending on location, name recognition and the marketing efforts done up front. Many new business owners think that they can open up their doors on Grand Opening day and the customers will come. Not so! It doesn’t matter HOW great your products and services are if nobody knows that you are there!
Marketing
This is where one of the most critical steps you can take in starting up a new business is your up-front marketing efforts. This include (but is not limited to) things such as:
- Social media notifications
- Website development
- Press releases
- Mailing campaigns
- “Opening Soon” signs on the building if it is a “Bricks & Mortar” location
- Publicized “Grand Opening” event
As an example, if you were opening up a Daycare Facility and needed to take a month or so for doing your “Buildout” costs, you could put a sign out front in clear public view that said something like:
“Coming soon – XYZ Daycare Center, opening up on DD/MM/YYYY. Early registrations are being accepted on our website www.xxxxxxx.com”. Act quickly – Limited number of students allowed”.
Your chances will be much better that you WILL have new clients on opening day if you do this. There is nothing more gut-wrenching than a new business owner opening up his/her new store and nobody comes in during that day and the owner already starts to wonder how they can make enough money to pay the rent and the other bills, let alone pay themselves. The Business Owner is always the last one to get paid!
The Second most reason that Companies fail is due to improper planning of all the things that go into starting a new business. That’s why the Business Plan (if done properly, is one of the most critical first steps you can take to get your business off the ground and make it successful. If done properly, you will consider (and allow for) things that affect your business such as ramp-up time, seasonality, staffing needs, actual fixed asset purchases needed (don’t forget the outdoor signage!), and most importantly, Working Capital, which covers your cash requirements in those ramp-up months that allows you to pay your bills and to pay yourself! Most start-up companies do not actually start making a profit until around the 6th month, depending on other factors.
Tame the Machines (small)
I will be one of the Instructors at the Scaling New Heights event in June of 2018 in Atlanta, Georgia. I will be instructing my participants on how to properly prepare a meaningful and realistic Business Plan for either yourself or as a new income stream in your practice from your clients. A resource that I will be making available to the participants of SNH and Insightful Accountant, will be a checklist of things to do BEFORE you open your doors and the things to do AFTER you open your doors! Hope to see you there.
Author Bio: Bob Lamp’l is the President and C.E.O. of Business Plans & More, Inc. Over the years, he has helped hundreds of new businesses get started, covering most industry and sizes from small “Mom & Pop” stores to multi-billion-dollar companies. He holds an M.B.A. in Accounting and Finance and sits on numerous Boards, both “For Profit” and “Not for Profit” entities. He has served on the Board of the Georgia Association of Accountants and Tax Professionals” for the last 17 years and is their statewide “Past President” and current “Vice President”. He is also a Certified QuickBooks Pro Advisor.