When Should You Go Into Business?

Starting A Business

Volume VI

When Should You Go Into Business?

We now know who and why one should leave the relative comfort of being an Employee, and venture into the scary  world of Entrepreneurship. We also know what we need and with whom we should go into Business. We know what is the best size to start with, depending on the nature of the business. Another important question is when. If you've recognized yourself in the details of the portrait that are starting to appear within the lines of the Volumes I through V of this Blog Segment, then you know that part of the answer to that question is, when you have reached the ceiling of your professional progression. When working for someone else offers you no upside any longer. If you've reached that impasse, you know that if you wish to keep going up and forward is to go into business on your own. You also know that you have the skills, focus, vision and overall knowledge required to do so. However you still do not know when. Today, tomorrow, next season, next year? Is it a question of timing? If yes, timing with what? So you see, "when" is a complicated question to ask oneself and a complicated question requires a simple answer and that in itself demands deep thought and long consideration. You need to have your capital ready and available. You must know with whom you are going to partner if necessary. You have already identified who is going to work with you, for how much and when they will be available. You have already selected all the equipment you require and know where to find it and when it can be obtained (delivery lead time). You have a clear idea of what materials you need, in what quantity and delivery frequency. You have located the premises where you need to be established, evaluated your logistics requirement and already have planned either the purchase of the transportation equipment or have an estimate and draft contract from a logistics and transport company to respond to your needs. You know what product or service you are going to provide and most importantly you know to whom you should sell. so, if you know all of this, how do you know when to start? It should be easy to now, right? As soon as possible is what comes to mind, but it doesn't really answer the question. When is as soon as possible? What is possible and what is not? The earlier you are completely ready the earlier you may start. So let's see if we can determine when that could be.


Your Capital:

Unless you have the entire sum you will need to sustain your enterprise for the first year, already deposited in a bank account somewhere, you will need to know, how much your funding partners or financial lenders can make available to you, when and under what conditions. You need to know that, so you can plan your launch and immediate development. Most Angel investors and Financial Institutions will not give you a lump sum for you to "blow" it all in a few days of euphoric spending fever. Most likely, you would have included a funding schedule in your Business Plan, detailing chronologically the various phases of your development stage and the funding requirement for each of theses phases. It provides flexibility to both you and your funding associates, which allows for corrective maneuvering in your business navigation as you move along the path of early growth. Some phases may require less or more funding depending on how the market reacts to your input in it (as a consumer for your supplier and as a provider for your customers). Always keep in mind that the Market is a fluid mass of data, ever changing, always variable, influenced by uncounted factors and is thus very very difficult to predict with detail and precision, besides a general direction of a trend, but always surprising at the local level. So stay observant, alert and prepared. That is the definition of flexibility in business. Plan for a specific course of action, but ensure that you have Plan B, C, D...all the way to Z and back. Always be ready to scratch your plans and move in a different direction at full speed without blinking. This applies to all points in business, not just your finances and capital needs. You may have a certain amount of capital you are counting on, and suddenly be faced with a sudden loss of that capital, for whatever reason (bankruptcy of the bank in which funds are deposited, dramatic loss of the value of your securities portfolio if that's where you had your funds invested, inability to sell an asset at the opportune time, because market may have turned against you [i.e: Real Estate Asset]..etc). So ensure that you have the capital needed, have it available to you in quantity and in time as per your projections.

Your Partners:

If you have gone through all the phases described in the first 5 volumes of this series, then you have already determined whether or not you will need financial and equity partners. In the event you do need partners, you've chosen them carefully, you've selected them not only for their funding abilities, but also for their knowledge and skills, as well as for their contacts in the Industry in which you wish to evolve. If at all possible, those contacts should be on the Supply side as well as on the distribution side. If you're going to take someone's money to  put into your adventure, it behooves both of you to take advantage of every asset you both have. This will further increase the chances of success of your company for both of your interests. Equity partners who do not bring in funding, are partners because they, along with you, bring to the table, exceptional know-how, skills thus will occupy an intrinsically valuable position within your organization. Just like your funding partners and your lending institutions would require of you, your equity partners must have "skin in the game" at least as much as you do proportionally to their equity share. Their efforts will be compensated proportionally to their share of equity when all goes well, then they should share in the losses in the same proportion, should the affairs take a negative turn. This will keep them motivated and give them the proper incentive to strive for the success of the enterprise as much as you would. A boat goes faster and smoother if everyone on board, rows in the same direction towards the same goal. On the other hand, your funding partners, even if they are "Silent" partners who do not directly participate in the day to day activity of the company, are not exempt to put in their best efforts. Most likely, those are wealthy individuals. Nobody stays wealthy out of sheer dumb luck. These partners, have a plethora of contacts both in your market as potential customers and among potential suppliers, or service providers. They may have contacts with authorities which is always advantageous to have to speed up administrative processes of permits, licensing... etc. They may have contacts among with the local, regional or even national press, which is always advantageous for Public Relations and Communication purposes. Everyone must pitch in and have its interest directly tied to the success of the Company.


Your Staff, suppliers, providers:

As a start up, you must start with only the absolute essential, the skeleton crew. This is important for many reasons. Theoretical knowledge is good but its value is compounded with actual practical experience. Each of the Staff members, including you and your partners, may have skills, knowledge and even experience in each of your allocated tasks individually, but most likely this is the first time all of you will work together. There is always a required time of adjustment for any team. Everyone must learn to work with the new unfamiliar tools, equipment, unfamiliar surroundings and unfamiliar procedures. Therefore, it is important that everyone is on the "same page". Before the company is launched, you must already have your staff selected. Everyone must be ready to step forward when the time comes. You can not start your business with half of your necessary staff missing because of remaining prior obligations. It is better to postpone the opening of your business until you are sure that everyone needed will be on board and ready for duty, fully committed. The same goes for your suppliers of goods and materials. You must iron out the details of quantities and delivery time, prior to opening your business officially. Most of the time, financial arrangements must me made prior to that date to ensure all is ready in a timely manner. Deposits may have to be made in advance, as well as  licensing, permits and whatever required authorizations are issues that may have to be resolved prior to the actual start of business, that includes, registering of corporation, retaining professional services such as legal counsel and accounting services depending on the nature of your business. You Enterprise may or may not produce income from the very first second it is officially open for business, but it will start costing you from right then and every second of every day thereafter. That is the one constant that is constant to all businesses no matter what sector of industry, market it caters to or country in which it is established. So be sure everyone is ready exactly when you need each and everyone of them, whether they are your staff, your materials or goods suppliers or professional or other service providers. Business is a never ending war for survival, make sure your army is ready for battle from the very first skirmish.

Your Equipment:

Some Businesses do not require any equipment, other than what is now, common to everyone, meaning communication equipment such as Personal Computer, cell phone and very little beyond that. Most consulting businesses fall in that category. Until you have developed it to a scale where you need to hire full time staff, your equipment may be limited to what you already have and use in your private life. Most companies, however require a minimum of equipment. Retail stores, need at least, cash registers, appropriate software, a location opened to the public with sufficient space to display the goods for sale and store the reserve inventory. Make sure you have the proper equipment that will allow you to do your daily tasks with the least amount of effort, time, and cost for the most amount of revenue. Verify that it is the right equipment for what you require and that it is in proper working order.This defines your business' efficiency.  You must also ensure that you and everyone of your staff know how to properly operate all of the equipment or at least the one each staff member is assigned to. The training of your staff on that regard comes before you open for business, before the first customer walks in, if you are in commerce or before your very first order comes in, if you are in the manufacturing sector. This goes back to the same mantra of being as prepared as you can be before the task is undertaken. There is always a certain amount of "on the job" training, but you must minimize it as much as possible by getting your crew all the prior training you can. Errors cost more than time, they may cost an order, or worse a customer. Although you can never eliminate the possibility of human error, you must reduce the eventuality to the minimum chances of occurrence.

Your Location:

There are several reasons why, where you business is located matters.  The 2 most common reason is for logistics on one hand and proximity to your market on the other. If your business caters to the public directly such as a Retail Store, then you must establish yourself where most of your customers will find you easily.  The easiest place to pick is either close to where your customer base lives, or where it works. This nuance is determine by the nature of what you are offering. A baker will better serve his customers if his store is close to where they take most of their meals, which would be home. A Breakfast-Lunch Restaurant, however will be better located where his customers are at the time they need his fare, meaning during their work day, so close to business and other places of work. Nevertheless, some restaurant who only open for dinner, depending on the standard of cuisine it serves may find that close to nightly entertainment centers or high end neighborhoods with mixed activities, (both residential and commercial) may be where they will see most of their customers. If you market your good and services to a broader geographical area than just the local one. If you are a national distributor or an exporter [or both], then proximity to your client base will become irrelevant. In this case, proximity to a logistic center, such as an Airport, a Train Station or Highway may be more important for logistical reasons.  Access to qualified and skilled labor pool may be the determining factor for choosing your location if you are in the manufacturing sector, particularly if your product fabrication is labor intensive. Finally, fiscal incentives may not be a factor all by itself, but certainly a contributing factor in electing your business location. Given equal advantages between two locations, you may chose the municipality, state or even country that will be the most advantageous in terms of regulations, taxes, government attitude toward businesses. So you must have considered your business location very carefully before you decide to open your business. Your hometown may not always be the most suitable. Give it some serious thought before you open. The cost of moving your business is always much more than estimated.

Your Product/Service:

Whether you manufacture a product or are reselling it. Whether you simply provide a service, you must have tested it before you launch the business officially. As you know, nothing is ever exactly as planned. Test your skills, the materials, the tools, the finished product or the way your service is provided in a controlled environment before you do it for a "Live" costumer. Make sure that what you are providing is exactly to your satisfaction and, most importantly to the satisfaction of your eventual customer. Use a sample of population that approximates as much as possible your customer base. Do so using your family and trusted friends, if you cannot afford a professional testing program. A home made test is better than no test at all. Everything is better on paper or in your own head than in the real world. So ensure that your vision of what you are providing is in tune with the "Real World" by testing your product and service.

Your Client/Customer:

Prior to the official opening, or launching or your business. Before you start incurring all the daily expenses of the day to day operating a full blown business, study your client/customer base. Survey it directly. Visit it, communicate with it directly. Make sure you know exactly what they would expect from your product or service. What would satisfy them to such a point that they will repeat their business with you and become loyal. Knowing your market base is important, almost as important as your customer base knowing you before you open. You may be the best manufacturer/supplier of the best product/service in the entire Universe, if no one knows you and your product exist, it is all for naught. Opening your business without communicating your existence and that of your product/service and its future availability to your customers may be one of the costliest exercise in the life of your business and may even ensure that its life is so shorten that it may never take off beyond the first installment of monthly bills. Tell your customers, who you are, what your product is, how much it is compare to your competitors and most importantly, tell them why they should buy that product and why from you and not anybody else. Do it and do it before you are officially open, you can not afford to wait for the sales to come on their own, you must sale as much in advance as it is reasonable to do without harming your reputation by overselling sooner than you can deliver the orders.


So you see now, that choosing when to open your business is almost as important as deciding what type of business to open. Misjudging when can be so costly that your business may fail before it has a chance to live to take its first breath, being essentially aborted right when it is ready to step into its intended market. You must open your Business, whichever type of business it is, exactly when... ALL YOUR DUCKS ARE IN A ROW. Exactly when you have made sure that you and everyone and everything around you and your business is ready. Not a second before. Success in business is difficult enough as it is. You do not want to open timidly, blindly, unprepared, unassisted, and empty handed. Make sure that you hold as many cards as you can possibly hold before you enter the game and be ever alert. Business is war and war kills. Your goal is to be as agile, strong and alert as you can so you can survive the journey until you exit according to your strategy.

What's The Best Size For A Business Start Up?

Starting A Business

Volume V

What's The Best Size For A Business Start Up?

Everything that grows, does so from a smaller size. That smaller size, however, varies depending on the nature of the very thing that is growing. The smallest size is defined by its minimum required nucleus that will enable growth. In other words, the smallest size of anything that grows is defined by the size of the sum of the essentials elements required for it to exist and start developing.  Therefore each enterprise will be of the size necessary for it to be self sufficient and growth capable. The nature of the company will determine the ideal size. The sector of industry gives an idea of general size of companies but as a general rule, a start up company by definition should start as small as possible, how small is what needs to be analyzed on a case by case basis

No matter how much capital you dispose of, to start your company, you do not want to waste it. That would poor management and a sure sign of failure. An enterprise is supposed to use capital as fuel to ultimately produce more capital than it consumes. If not it is called a charitable organization and not a For Profit Enterprise. With that in mind, you need to assess what is the minimum your company needs to be able to function properly and deliver a profit, so it can fuel its own growth, without additional injections of capital into the company from your personal pocket of that of your partners. That will be the minimum in terms of resources, be it capital, human resources, equipment, tools, furniture, accessories and real estate.

As previously stated, each company's minimum will be different. If you are a consultant, your minimum will be yourself, and office equipment such as a computer, a telephone and your brains. That is what will enable you to prospect, meet your clients (using public transportation), open your first account, provide your intellectual service and get paid for it. As you develop your business, you will get more clients and there will be more work to be done in less time than you can physically process on your own in a regular 24 hour cycle. Then you will need to get better equipment (additional software) to improve your administrative tasks in quality and speed. This will free up some time for you to dedicate to the extra consulting work. As you grow more, you will need to hire from time to time an assistant to handle your administrative tasks (a virtual assistant comes to mind, which allows you to pay only for the work being done and only when it is needed). That will enable you to dedicate all of your time to working for your clients. ultimately you will continue to grow and you will need to hire administrative staff full time (at one point it will be cheaper to have an administrative assistant on staff than a virtual self-contractor) and even hire other consultant to share the work load. Eventually, more equipment such as company cars, better telephone systems, office equipment...etc, will be required but by then you'll be well on your way.

If your company is in the business of Buying and Selling things, you will need at least a place to store the goods and most likely  a place to sell them from. Your minimum requirement in this particular case would be for you to lease a small warehouse that includes some office space, or simply a store with a back office. This will be where you will store your goods, administer your company and receive your clients, like a regular store, retail or wholesale. As you grow and acquire more goods to keep up with the pace of sales, you'll increase the size of your business premises for storage, your office space to receive more clients and house more administrative staff so you can sell more.... so you can buy more, so you can sell more... and so on. 

In the case of a company that is in the business of making things, like a manufacture. You will need a place to store your materials, space to house the machinery and the staff who will make the things you sell. You'll need to store the finished product even temporarily until you either deliver to your customers or they come and pick it up. You will need an office to administer and receive the customers and suppliers. Between the investments in a larger facility, than the previous two company examples above, investment in the acquisition of the machinery and equipment for the manufacturing process, and associated logistics requirements (receptions of materials and delivery of goods), your minimum size for this company could be twice or more the size of a regular buy and sell business. 

If you are in the Mining or Agricultural business, your minimum requirement, requires larger land investment, either as concessions or outright acquisition, more equipment, costlier logistics, large office staff and larger producing staff. The same applies to even the smallest of Construction business, which often requires a minimum investment in tools, materials, equipment and transportation.

The fact of the matter is that you do not wish to start your business as a "large" business. Assess what you need to produce to exceed your minimum financial requirement in terms of sales to break even, and equip yourself to meet twice that minimum requirement. This will give you time to develop your sales gradually. So by the time you need to reinvest into your company, in order to grow, you would have generated sufficient income and acquired the needed experience to increase the size of your company, just enough so you can keep a steady pace of growth, without overextending yourself.

In conclusion size only matters in terms of the least amount of the resources required to function properly to generate and deliver on the first sales. As the sales grow, the rest of the company will grow along with it.
  

Who Should Be Your Partners If You Open A Business?

Starting A Business

Volume IV

 Who Should Be Your Partners If You Open A New Business?

Once you have gone through the careful thought process that led you to making the decision to open your own business, as outlined in Volume I and Volume II of these series, you need to decide if you can start this adventure on your own or if you will need to share the risk and responsibility with one or more persons. Volume III describes what you need to have before you embark on this journey, so it should be relatively easy to know whether or not you will need help. The question is simple: Do you have all that is required, all that it takes to start, as it is specified in your business plan? If your business plan is your recipe for success, can you bring all the ingredients to the table? 

The main elements required for a successful enterprise are simple to recognize. The very first one is the Product or Service that is going to be supplied. So in that regard, you need to know how you are going to produce it, how much it will cost your company to do so, to whom you should sell it and for how much. The difference between how much it cost per unit to bring that product or service to market and how much you can sell each unit will give you a gross profit margin per unit. Once you have that information, you need to know how much your company will cost to operate for one single year including all fixed and variable expenses, interest and taxes and do not forget to factor in your salary as the "Manager" of the operation. Dividing that overall cost by the unit market price of your product or service will determine how many units should be produced for that period of one year, just to break even. Factor in a percentage for unforeseen expenses (10% is a reasonable number for most sectors), add another 10%-20% to be able to have a profit, half of which should be reinvested in the company to fund its growth. You will have then a fair idea of what you must strive to accomplish that first year. These figures can be broken down on a monthly or weekly basis for easier control and tracking, depending of which industry you belong.

The above is a necessary exercise to determine a number of vital sets of Data(Information). Without that information, you will be flying in the fog without navigation instruments, you'll only know where the ground or obstacles are once you have already hit them. Again, all that information should already be included in your business plan with the figures showing that in detail in the first year projections. So we know you need Capital and how much of it, to start on the first day. Not all of it is required all at once, only access to it is necessary for the first year. The question is, can you access it on your own, either because you have saved up that much capital and have it in a bank, freely available to you, do you have any personal collateral that be put as guaranty to raise funds in the form of a loan or credit line? If yes do you wish to put all of that personal asset at risk for the company? Would you rather share the risk with a partner who could put up his financial assets to raise part of the necessary capital for an equity share (a share of the future company) proportionate to the funds that partner is able to raise.

But Capital is not the only ingredient required. Knowledge of the product or service, particularly fabrication or production Knowledge is equally as important. Do you have the overall knowledge required to bring the product or service to the market all on your own, with just specialized staff or could you again share the burden with a person that would complete you in terms of knowledge by bringing that person's expertise in a field you know but are not as knowledgeable as that person. A symbiotic relationship in terms of Know How is usually the ideal scenario, where you specialize in the Design and the partner in the actual fabrication. A complete team, without knowledge Gap is always preferable in the top management.

What about the distribution and sales of the product or service? Do you have the time, the knowledge and skills set to launch a full marketing and Sales campaign to introduce the company and the products to the market? A partner with the contacts and knowledge and the skill sets required to bring in the first customers is as valuable as if he brought to the table the capital required to survive the first year without any sales. A company, no matter which industry, is like a body without a heart beat, if it does not have any sales force. Even a Mom and Pop shop, has a sales force. It usually is just Mom and Pop but they wear the Salesperson Cap every time they face a client or customer. 

In most cases, the partners are a group of two or more people who pull their resources together to spread the financial risk among themselves as well as to add to the knowledge, skills and contacts base necessary to get the start up business off the ground. From a practical stand point, whether you decide to do it alone or partner with others, you should have the minimum resources to launch the company and survive the very first year, even if the "Worst Case Scenario" develops (i.e.: few or no sales for the very first 12 months). Many of my clients, attempt to put everything together, short of the start up capital and then come see me to help them bring the missing and most important ingredient, the life blood of the business: Money. That is always an exercise in futility, even if hundreds of thousands of dollars have been spent to come to the point where the company is ready to be launched, except for the total lack of capital. Sweat Equity, Professional fees, testing, Patenting costs...etc are necessary and have their value, but when it comes to Corporate funding, through a financial Institution or through Venture Capitalists, that point is invalid, not worthless, far from it, but invalid. That is the minimum requirement for the concept of the New Project to be proposed, the Project itself must exist, be tested and proven as a project. However, it requires funds to bring the Enterprise from Project to a bona fide Corporation. 

Going into business is a risky  endeavor at best, the biggest element of the risk is the loss of capital. A financial institution will analyze the request for funding and base its decision on two major points:

1. The merits of the Business plan and the quality of the project itself
2. The amount of risk to the Project Owners should the company fail. Project owners should have more to lose than the financial backers, should the company fail. To put it crudely, the owners must have some skin in the game so they can feel the heat if the Fire gets too close. 

 As Ziad Abdelnour of The Financial Policy Council puts it in his book*: "Angel Investors need to know that project promoters have something at risk. If they have nothing at risk, they have nothing to lose.They don't put forth their best effort, or they will walk away when things don't go as smoothly as planned" (see my review of Mr. Abdelnour's book here).
Funding is the most common reason, project promoters take on equity partners. The common mistake is to go with the investor that will offer the most funds for the smallest equity stake in the company.  Money is the life blood, but it is not the only important ingredient. If you have a choice between several partners who believe in your project and wish to be part of it by bringing you funds, choose carefully. Choose the one who will bring you something that is currently missing in the mix, besides money. If your product should be marketed through big box stores, then choose an investor with experience in dealing with such market outlet. If the investor can bring his contacts and experience to create a more symbiotic relationship, even if he requires a larger share, it would still be more valuable than an investor who brings just money but has no knowledge of your product or your market. There isn't One single Magical ingredient that will guarantee the success of your company, it is certainly not money alone. The Defunct Solar Energy Panel Manufacturing Company, Solyndra has proven that point beyond any possible doubt. Political connections, abundance of funds and privileged licensing did not save it from utter failure with the first year of it existence. No matter how they tried, they could not compete with Chinese solar panels, sold on the US Market to the consumer for less that it cost Solyndra to manufacture it here, without the shipping, delivery and installation cost. No Political magic and public money could change that fact.

So if you must take on partners, ensure that besides funding they bring, production, distribution and administration sills to complete your own set of skills. 

* Economic Warfare. Secrets of Wealth Creation in the age of Welfare Politics, by Ziad Abdelnour, president of Black-hawk partners. (Chap. "Skin in the Game", p 158)

What Do You need Before You start Your Own Business?

Starting A Business

Volume III

What Do You Need Before You Start Your Own Business? 

In Volume I of this series, we discussed Why anyone should go into business. It is not as obvious as one may think. Volume II pertained to Who should do so.  Not everyone is cut out to take on the pressure and responsibilities. We now will discuss, what is needed to open a business. What preparation must be made before considering applying for registering the corporation. What the budding Entrepreneur must have firmly in mind and in his/her hands before anything else. It is imperative that you know all there is to know about the product or service you wish to produce. You must know who your costumers/clients are, and know them better than they know themselves. Just as important as the previous two points, you must have a deep knowledge of your competitors, their history, capabilities and their share of the existing market. Finally you need to have a very clear and precise idea of how much all of this will cost you for the first year. In other words you need a solid, well thought out, plan of action.

The Product/service to be produced:
As the future owner of the company that is to supply the product or service, it is of the utmost importance that you know all there is to know about it. Compare your product with those already being offered in the marketplace. Analyze the competition's design, from a functional and an aesthetic standpoint. Compare the customer service being offered with what you are planning to offer. Compare the Market price of the competition to your projected sales price. Compare the delivery time of the other products and see if you can match  those or do better. Study you delivery time with precision, from the time your customer places the order till the time you deliver it to his door, what will it take to improve the delivery time without affecting the quality of the product nor its cost to you and consequently the sales price to the consumer. Study the materials and semi-products you will need to supply your service  or manufacture/assemble your product. Chose carefully, not just based on price, but also on lead time of delivery, terms and conditions of sales, stability and reliability of the enterprise supplying. Their financial strength is very important to you. The stronger they are the better they will be able to give you better payment terms, and the less chances they will fold at the first sign of economic slowdown, leaving you stranded under-supplied at a time when you can not disappoint a single customer. Do not neglect to factor your logistical transport in your analysis of your product. Transport of materials and semi-product from your supplier to you if you offer a service. In addition to that, the transport from you to your customer if you are in the Manufacturing sector.

The Consumer:
Study the demographics of your target market. You need to know who is buying a similar product and service. You need to know how old is the average client, where he lives (urban, Suburban or Rural area). How many of the products does he purchase in a given time period. Does ethnicity and culture play a role in his buying decision of your product, if yes, find out exactly which role and most importantly why. Knowing this will help you better target your customer from a communication point of view as well as in terms of new product launch. If different segments of the population buying different products for their own reasons, knowing such would allow you to produced products targeting each slice of the demographic pie, thus reaching your target more effectively than if you tried to come up with a "One Size Fits All" type of product or line. Knowing who buys that product is important, but even more important is knowing why. This knowledge will allow you to stay ahead of the trends and predict up and down buying trends. It will therefore be much easier to plan ahead for increases staff and materials purchasing when you expect upcoming increase in sales, and by the same token, you will be able to slow down your production in prevision of an expected slowing down. That way you will not be out of stock and miss potential sales when a boom in sales comes by, neither will you overstocked and overstaffed when business slows down, which will eat away at your profits. Finally, there is one point of which you must absolutely know, particularly concerning your own product/service: You MUST know why the consumer would NOT buy your product. It is often necessary to do a test run in order to know just that. That knowledge will give you more insight in your customer base that all the above info combined. If you ask a customer why he buys or uses a given product, he will give you a myriad of reasons, none of which are very crisp in his mind and they often changes based on a multitude of factors. He himself is never completely sure why he would by this one over the other. However, ask anyone why they are NOT consciously buying a particular product and service and you will receive instantaneously, unequivocally the reason WHY. He may not be sure why he buys, but he is certainly very sure of why he is not or would not buy a given product or service.  That is often the clearest message you will get in your study of your customer. So don't overlook that point, too many do to their detriment.

The Market: 
Knowing your product and the product of your competition is important. So is knowing your customer. However, knowing your market is equally as important. Too many starting Entrepreneurs neglect that aspect. You need to know what is the size of the current market for your product (how many Dollars are being spent in a given market for a product similar to yours right now). Yes, even if the market is very large and you are planning to start very small. You must know the size of the market, you must know what share of that market each of your competitors have carved for themselves. This will tell you what is left of the pie for you to conquer. If the slice is too small for an additional supplier of that particular product, then you must know if you can carve your share out of one of your competitors, by tweaking your product to compensate for the eventual lacks of the competitor's product, in quality, functionality, price, presentation, delivery lead time...etc. If that is not feasible, then it is better to know it now and abort the launch of the company rather than forging ahead, spending time, money, effort and credibility to eventually lose it all for naught.

The Starting Capital:
All the above information adds up the cost of launching a business. Your projections of cost of product or service, for design to delivery will give you the cost of operation that can then be projected on a 1 year and 5 year expectations. Don't rely on your own calculations for this. Invest in the services of a professional auditor, preferably someone certified in accounting with experience in start ups. Choose carefully your accounting firm. Plan to build a relationship with your accountant. He will be your objective adviser and your evaluator during the first years of your business. He will help you navigate your business through its growing pains. You must be confident of his abilities, trust in your fiscal and accounting counsel is very important. It is as necessary as a compass is to the Navigator fighting an Ocean Storm at night. Do not neglect such a point, you'll do so at your own peril. For those of you located or wishing to be located anywhere along the Eastern Seaboard or the USA or in the Caribbean, I can only recommend a trusted friend, Joseph L. Rosenberg CPA. The capital require is not just what you need to open the doors. You must have enough reserve to create a positive cash flow. You may not get your first sale the very first day and even if you do, you cannot expect to pay for your first month expenses with your first sale. Ideally you should have at least the initial amount of funds required to operate fully for the first 12 months of your business existence even if you do not take in a single penny. (Hopefully you will not need to wait a full year to register the first revenue, but that safety reserve will afford you the benevolence of your financial institutions. It will allow you to let your money work for you rather that the other way around. This of course is the ideal situation, but if you cannot have the first 12 months of budget safely tucked away on your business account, you must have at least the first quarter. We will cover the details of this advantage and how it relates to both your financial/banking associates and your suppliers in Volumes VIII and X.

Each of the above points are quintessential knowledge for the Start-up Entrepreneur. Without in-depth knowledge of anyone of these points, the risk of premature failure increases ten-fold. No matter how prepared you are, life, the world, the market will plot together to throw a wrench in the gears of the "proverbial machine" that represents your best laid plans for your new enterprise. Expect it, plan for it and overall prepare for its devastating consequences. If you are prepared, you will be able to recover faster, won't be as affected as much emotionally, which will speed up your reaction and adaptation time so you may learn from it and keep going without stopping, slowing a little perhaps but not stopping. Each point above is required to construct the most rudimentary of business plan. The Entrepreneur needs to work on the details of the elaboration of the business plan personally and on his own. This is not a task that can not and must not be delegated to anyone. The owner of the future business and his partners if he/she has any must put together the business plan, going through each of the above points. Even if it is not perfect, it is required to ensure that the owners understand what it will take to start. Only after that exercise is done, will you be able to present your vision of what you wish to do accurately to the professional business plan writer. S(he) can only address the points you have presented, rearrange them, fine tune them, research the facts and the data behind them, but they must be there in the first place. Otherwise, the business plan will be about a business they envision, not the one you have in mind. Since they are not the ones who will be running the business, their vision is of no use to you if you plan to run your own business. You present what you need and they put it in proper perspective, but they must have something to work with. A business plan is important. It is your road map for the first 5 years. It will help you evaluate your progress and help you keep track and make the necessary adjustments. You need it for yourself, even if you do not need a financial institution's financing or an equity partner's funding capital. It is as important as your mission statement. It will keep you on course and true. .

Going into business is not a flight of fancy. It is a vision that needs deep, careful and patient though and analysis to bring it to reality. You also need to add to it a healthy dose of courage, sweat and a boat load of elbow grease.

So now we know why you should go into business. We also who should start a business and we just discussed what are the basic requirements you need before you take the plunge. Next we will talk about WHO should go into business with you, as equity partners if you need them.

Paranoid Nation, by Matt Towery

"Paranoid Nation" by Matt Lowery is a very interesting book although there were no great revelations, no deep dark secrets, no scandals. it seems to be a fair account of what lead to the final results of the elections of 2008, no apparent bias one way or another, no vitriol, but no platitudes either.

It is not a real page turner either, but a solid middle of the road expose on the workings of American Presidential Elections on both sides of the fence with uphill historical fact checking going back to the historical root causes, leading to some of the events we witnessed during and after the 2008 US Presidential election.

A necessary read as a preparation work for the current 2012 Presidential elections. There is a strange recurrent theme in these elections going back to Jimmy Carter and even Nixon.