Start-up

Do You Watch Shark Tank?

 

12-01-15 shark-1384087-639x426You have probably heard of the show Shark Tank, which airs on ABC. The show is about entrepreneurs who pitch their products and ideas to a group of wealthy investors who are referred to as “sharks.” Hopefully, the sharks will bite and offer to invest some of their money in the fledgling businesses.

Many times the sharks pass up on investing in the new business, which is very eye-opening for the entrepreneurs. Other times, more than one shark wants to invest in the business because there is a lot of upside, and the risk seems worth it. There are some great business lessons to be learned by all of this.

Research the market: Are there enough people that are willing to buy your product? Even so, what price should you sell the product for and who is your target customer?

Business model: Is there enough profit to be made? Does it make sense to spend a lot of money for the return that is generated? Is it costly to acquire customers?

Careful with your funds: Some entrepreneurs invest so much money in their product that they are now broke. Worse yet is that the product may not even be viable. Even if the business is good, the entrepreneur is eager to sell and may end up taking a lowball offer just to recoup their own investment.

Lack of Experience:  When a product is good, the problem that entrepreneurs may have is usually manufacturing, distribution, and additional capital. Instead of selling a piece of your company, an alternative is to work with qualified professionals, such as consultants, attorneys, accountants, and competent employees.

Businesses are started every day. Some are successful, but unfortunately, many are not. The key to increasing your chance of success is to plan and be well thought-out. Just like preparing to take a test as a student, you have to study ahead of time to increase your chances of getting an “A.”

Thinking of Starting a New Business?

Starting a new business can be an exciting endeavor. You get to be your own boss, create your own hours, and possibly achieve a greater sense of satisfaction. But what should you do to make sure your business is successful?

Proper planning goes a long way, and a business plan is an excellent starting point. A business plan should contain the following information (sample business plan can be seen at score.org):

General Company Description: What will your business do? What are your goals? What do you expect of the industry you will operate in? Will your business be structured as a sole-proprietor, partnership, corporation, or S-corporation?

Products and services offered: If you are a contractor, which type of construction will you perform – residential, commercial, or both? Will you be a general contractor or have a specialty such as plumbing? What are your competitive advantages and disadvantages?

Marketing: It is a good idea to perform some type of market research to make sure there is demand for your products or services. How will you obtain customers or clients? Will you serve a specific industry or niche?

Operations: What will the daily operations of your business look like? Generally, how will you run your business and manage employees.

Management and Advisors: Most likely you will be managing all aspects of your business during the beginning stages. You must realize though, that you cannot be an expert in everything. Advisors will help you to start off on the right track, save you time, money, and keep you out of trouble. A short list should include at a minimum: a CPA, attorney, insurance agent, banker, and a mentor. Never underestimate the value of a qualified professional advisor!

Start-up Expenses: You will need to estimate your expenses to start your business even before you begin operations. Some expenses can include legal fees, accounting fees, office equipment, software, machinery, vehicles, insurance, and marketing expenses. You need to know how you will pay for these expenses also. The funds may come from financing or personal funds used to capitalize the business.

Financial Plans & Projections: This should include a projected profit and loss statement for at least the first year, but it is also helpful to project the first 3 years, which is what I recommend. You want to make sure that when accounting for sales, the number is realistic and you can state how you will achieve this number. This also coincides with your marketing plan.

There is a lot to consider when starting a new business, but it is important to be thorough to insure its success. A little planning goes a long way to help your business start off on the right foot and avoid costly mistakes. Business planning is so important that it even makes sense for existing business to create a business plan to get back on track and take advantage of opportunities.