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Relying on Well-Prepared Plan Smooths Business Start Up

Relying on Well-Prepared Plan Smooths Business Start Up

Entrepreneur’s Notebook

by Rachel Mickelson and Tom Starko

For first-timers, starting a business can be a time of excitement and trepidation. Although one can never fully prepare for the challenges and opportunities that lie ahead, there are ways to go into a venture well prepared.

Here are seven factors for the successful creation of a business:

– Understand how your new venture fits into your overall life plan. You will do yourself, your family and friends a big favor if you take time up-front to discover the real reason you want to go into business for yourself.

Think about why you want to start your own business: Are you tired of working for others and not seeing the benefits? Do you think you can do it better? Why are you willing to risk leaving a secure job?

Make no mistake, for the first five years (or more) your business will take up the majority of your time if you want it to succeed. Be sure you are ready to make this sacrifice. Only take the plunge to go into business for yourself if, after careful examination of your life goals and desired contributions, you find a deep, compelling reason that touches the core of your life purpose and values.

– Know your risk tolerance. You probably know your own level of tolerance when it comes to risk, but it is very important to spell this out in detail not only to yourself but to your stakeholders. The odds are better in Las Vegas than succeeding at your own business.

You can, however, control a lot more at your business than you can gambling. Still, there are significant risks associated with all businesses. Are the risks clear to you, to your spouse, your family and financial backers? Are you prepared to put your savings, home or inheritance on the line? There are no right answers, just right questions.

– Vision: Begin with the end in mind. Once you get in touch with your lifelong goals, you will have a much easier time deciding how your business fits into those plans.

Think about whether your business is a growth or value investment, whether you intend to pass it on to your children or if you want to maximize your return and sell it.

Once the overall framework is set for where you want to take your business in the long run, it is solid practice to envision the shorter-term future. Without a picture of what you want to build, your strategy will lack substance.

In its first five years, what major accomplishments should the business achieve, what should it be known for in the community and what innovations should it be we responsible for?

Create a picture of your desired future and make sure you involve those who will be responsible for achieving that vision.

– You can’t plan enough. Most businesses lack a strategic plan. They create one, but it ends up collecting dust or failing to get implemented in any meaningful way. A strategic plan is the roadmap to achieving your desired vision.

In light of that, there are four strategic questions to ask yourself and your leadership team: What’s the core business, who are the customers, what products and/or services will they be offered and how should they be delivered?

Most strategic plans stop here; however, to be successful at implementing your strategy you must build an organization that supports it. Therefore another key strategic question is what people, systems, processes and structures are needed to effectively implement the strategy?

From here you can begin to build your strategic plan and operational plans and budgets and rest assured that, for now, you know where you are headed.

– Create strong governance structures. The more smart ideas from the outside you can get, the more successful you will be. A board of advisors is a great way to start and it will be the cheapest advice you can receive. Conversely, they will prove to be a valuable resource in how your business is governed internally.

– Money isn’t everything but it’s close. More businesses fail because of growth than lack thereof. Why? You can have the greatest idea, products, people and systems but if you can’t afford to finance those increases in receivables, or inventories, or capital costs, or training, or anything else your business needs to grow, you are dead before you start.

There are three givens in a start-up. You will underestimate your costs. You will never get all the financing you need. You will never be able to afford to do everything that you want or need.

Go in with deep pockets with further resources to dig deeper if you need to. And plan for some defeats before they happen. Your plans for contingency should be commensurate with your level of risk tolerance.

– Passion is everything. Passion in business starts at the leadership level. If you or your leaders are not passionate about the product, service, customers, employees and shareholders, then it’s time for a leadership change.

Passion will inspire both employees and customers. They will want to be part of an exciting value chain. They will realize a greater level of service and quality and will become addicted to it.

Rachel E. Mickelson and Tom Starko are partners with DoudHausnerVistar, a family business advisory firm. Mickelson can be reached at rmickelson@dhvadvisors.com and Starko at

tstarko@dhvadvisors.com.

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