How to Start a New Business

Plan and Choose the Right Niche and
Create Good Products

Evaluating and Selecting the Best Business and Strategy for You
Checklist Tips, Guide, How to Step by Step
Read all of this BEFORE you Start Any Bussiness.

Most important in starting a business are
  • A great product with growing demand and uniqueness,
  • Management Knowledge and Experience,
  • Money,
  • Exclusive Territory,
  • A Great Business Strategy.

You can do well in business ONLY if you know what you are doing, have some money, a great product and great business plan. Many related concepts are covered in related sections, such as Avoiding Business Opportunity Scams, then read How to Buy a Business. If you don't have money, you will have to get some, or License your product/idea to a capable company or individuals. You could possibly keep back a percentage interest.

Too many people go into "business" with some "selling gimmick" like MLM network marketing, a scheme to sell money-making opportunites at high markup or some long elaborate wonderful-sounding internet enticement verbiage about sharing profits and affiliates, premiums, discounts, coupons, and false promises or representations. Those are not a business; They are all wanna-be's-- they are "marketing methods" of someone else's so-so products or hot air.

The heart of a real business is a New High-Demand Revolutionary High Performance Product, protected by a process, patent or copyright. It's kinda like being extremely intelligent, or not. Like being beautiful, or not. (Like a famous Auctioneer said: "You can put lipstick on a pig, but its still a pig." The gimmick people are usually selling nice looking pigs.)

Too many people think some kind of profit-sharing scheme is revolutionary, or that automation is revolutionary. No. Those are just some aspects of good management. But not always. Automation can turn a lot of people off. Hard selling because agents have an interest turns some people off. Neither of those is a great product.

Do not ignore the prime requirements above, to succeed. Those are only general main factors in Business success.

BEFORE YOU DO ANYTHING--- Read Tip # 4 below- "RESEARCH". Though not quite as important as #'s 1-3, it MUST be done FIRST. Research makes sure that #1 is what it must be, and begins refining Priority #3, Strategy.

Hopefully you will be able to go it mostly alone as far as ownership, finances and being top managment. Joint ownership and investors are major hassles, even when you like them, so avoid partners, investors and joint ventures as possible.

Starting a business is not really buying a franchise or a business opportunity. Regardless of the type of business, whether corporate owners, LLC, LLP, regular partnership or Proprietor, read this page and related pages.

Whatever you do, you are probably going to need to know about web marketing and what constitutes a good business website and good site promotion practices. There is lots to learn in that area. If you are really going to run a business of your own, study Web Success articles and learn about good web site design and promotion.

To know what TO DO, learn what NOT TO DO---learn what is NOT a good business, and avoid appearing anything like typcial business opportunity and work-at-home scams and network pyramid schemes. If your idea and focus is a gimmick to sell your business model as branch offices, a fanchise or through independnt distributor agents and have NOT emphasized a great unique product---BEFORE you have a few proven running good examples of your own, don't bet much on that.

The hard part, the valuable part of a business is great unique products. This is a tall order, where 98% don't measure up. This is not just wanna-be cool slightly-changed copies or derivatives. It's not repackaging, relabeling or slightly reformulating something existing. This means a new, proprietary WOW product which people try to break down doors to get. Anything else is just a struggle to make SOME moderate profits. For example, though sandwich shops can make a good living, the world is probably not waiting on pins and needles for one more Subway-like chain or one more hot salsa, or a cool windshield wiper with 4 blades for $18 each. Those are "me-too" wanna-be's.

This will seem daunting - Over-whelming at first. BUT Don't Worry-- Your competitors will not do half of this correctly, and will have many vulnerabilities.

Most that survived did so by great products and gradual improvement. Glance over the below info. If it seems very overwhelming, you might best license your idea or product that try to run a business.

Consider licensing your idea for about 2-5% of sales and maybe $1000 or more down. That royalty pays off if the product is a hit. You might have the next billion-dollar idea, but be justifiably intimidated by all this. If you might license it or be a minor corporate partner, get in contact with us to get it going.

1) The priority first requirement is
to invent or recognize and license EARLY a product that is

  • really unusual and new,
  • is somewhat revolutionary--displacing older products, and
  • gets the WOW reaction and offers to buy it from everyone who might need it, in a big portion of the population.
  • is in a growth field, or a growing demographic group, at least in a protected territory,
  • is proprietary, patented or difficult to produce--a near-monopoly.
You want exclusive rights to this high demand product in a growth industry, preferably in a field of your interests, or at least exclusive rights in a growth territory.

Only such high-potential leaders become easy-to-run virtual "money machines". All the other imitators in the Business Opportunity world use such terms, as maximum cash flow, multiple income streams and other embellishments of usually old retread products and ideas in which the principals make money on selling the opportunity to make money, supposedly.

DO not go to Step 2 until you get Step 1 mostly right. Else you are wasting time and money. Otherwise, you'd do better to investing in a good education in a demand field, or becoming a sales rep for a company that DOES have such a demand product.

To describe the type of product again, it is something that is a "game changer". It displaces some other products less expensively or far better. It makes life or work much easier or better. It immediately makes someone very happy, glad to find it and use it. It's something they will want to use again and again. Much of the marketing is by word-of-mouth. It's Brand has the potential of becoming THE generic name for the future of all those products, like Xerox, Coke, Kleenex or Google. You don't search on the internet; you "Google it". See? Realistically, your product might not be that big, or that much of an improvement, but at least you should know how to identify a great product and have some exclusive territory rights. Those are licensed to real (classical) dealers.

Such a high-demand product in a good business becomes a very profitable because of little competition. This pricing power and growth cover a multitude of mistakes. A leading product gains very many advantages. This avoids cut-throat head-on competition that sdestroys margins. If you don't have a leading product, your product, as a late-comer will likely be in the lowest 10% of profits, which becomes just a difficult struggle to survive.

All that said, you can't always wait for the perfect product, but at least wait for a very good one with growing demand.

2) Management should have knowledge, ability and experience, preferably in the field.
It is important that you have some knowledge of the field or at least how to produce and sell the product, and love the product or field, because you will make many mistakes, and have many setbacks. You'll probably become bored a little with it before most people discover it. Your persistent enthusiasm is key to success.

Management should be talented, seasoned and available full time. Nothing kills a good product and good business faster than bad or inexperienced management. There are scores of crucial things to balance and decisions to be made. A company that doesn't know about proper channels of distribution or quality control methods, or people management and cash flow management and solid contracts--- is probably doomed, no matter how good the product.

Novices think that when orders start surging in that they have it made, that they just need to fulfil orders. Fast growth kills as many companies as no growth. They get all twisted up and their cash flow gets derailed, banks call loans, some customers get angry, bad publicity comes out, and ---it's over. OR, they think that volume is the answer, to start competitive pricing. That can be a strategy in the right hands to "put away" weak competitors, but seldom is.

This brings us to another biggie, strategy.

3) Above all other things besides great product and good management is great strategy. A company is going NOWHERE without a good strategy based on research, planning, congruency between company functions, and absolute knowledge about potential competitors and what to do about each.

Strategy looks at every element of the company and strengths and weaknesses and capitalizes on strengths by balancing every function with every other function. The sub-strategies serve the main strategy. This is all enforced by strict budgets, with feedback. It also targets the weaknesses of competitors, such as not being in a territory.

The marketing strategy and financial strategies and staffing strategies are highly related and interdependent. Within the marketing strategy are the brick and mortar sub-strategy and the web sub-strategy.

The web is a dangerous place for most businesses. Few know how to really manage that design and promotion process, and having to redo the website and shopping system when the business starts to boom means disaster. The web site "is the company" to the world. It is a billboard, the company face, its personality and its business card---all rolled into one. The web site tells financiers whether you can manage and compete, as it does the public. There is a lot to learn about doing all that right. Study up on it.

If you are planning a "web based business", then you better put three times as much emphasis on really understanding. Ignore what you hear from amateurs. Study what established standards-setting professionals have to say.

If your products and company are new and in fast-growth mode, DO NOT get too fancy on the web site or any other data project. Make it clear, clean, informative with rapid messages. Make it reliable. Use proven software and technology. Don't get into complex systems design or customization. A new growth business can NOT take crucial time from more important tasks than web design. Turn that mostly over to reputable professionals and listen to what they tell you and ask for. When they say get a certain type of graphics artist, do it. Heed the warnings and use the techniques of experts.

4) RESEARCH: A good marketing plan depends on research and planning that goes into a strategy. Although not as important as the product, management and strategy, RESEARCH actually comes FIRST chronologically. Don't even think about a business until you have some reactions from prospects, and know what it is about your product (features) appeal to them most.

A) Research the Product's Demand, Features
Before you EVER go into business, always test the product's demand on strangers in the target market. Your opinion and friends encouragement is substitute for market testing. Test the product and appeals on the prospects likely to buy it. This can be done by demos, samples, focus groups, online questionnaires, online Ad testing,and other market research tests.

If this is a new product in a crowded field like clothing, food, utility cost savings or home gadget, test the reactions and willingness to try it and buy it. And DON'T expect people to change their normal buying habits. They will buy mainly where they buy similar items-- the grocery store for food, the building supply for home improvement products, etc..

It is breaking into those "channels of distribution" that is most difficult. You typically have to buy shelf space in many store, to the tune of thousands of dollars. Part of research and testing can be whether buyers will buy via other channels, such as radio or internet direct.

You can have a great product, but if it is not marketed well in a great marketing strategy, it may not take off, or sales growth will be very slow. Part of making the product sell involves research on competition, features and particular buyer segments, their needs and benefits to target with "appeals". Certain appeals trigger much bigger responses than others.
Testing finds which appeals work and which features to emphasize.

Testing of what customers really prefer is done by testing Headlines and ad content on Bing and Google. What used to take months by mail now takes only weeks using the internet. Web marketing consultants can explain how to test ads and headlines to select topics for content of a web site AND improve Marketing strategy.

It is better to test all this online, even if your main selling tools will be brochures. Those can incorporate what is learned from testing Ad Copy using Bing or Google Adwords.

Ask knowledgeable experienced strangers and test your likely ads, appeals, ad copy and do actual product tests. Get real feedback from people not influenced by anything. Real research doesn't put pressure on people, like the product owner watching for a reaction, or being on camera. One reason network marketing works for a few products-- is peer pressure. Others and friends touting something as great influences some to "go along" when their enthusiasm really is not high.

Having real strangers react to your product without influence is the most enlightening thing you can do to be sure it will sell, and what improvements or packaging might help it sell. This means at least 20-50 people tested, not 4 or 5.

B) Research Competition and Study Theirs and Your Own Strengths and Weaknesses:

5) Use the SWOT Analysis Technique, and focus on your main Strengths and main Weaknesses. Often capital is the main weakness, and lack of management experience. Have a plan to overcome those and shift the strategy to not rely on either one so much.

The point of strategies is to compare your strengths and weaknesses, of both your product and business-- to the competition. So you can't get #3 right above until you do this #4 correctly. Don't underestimate the value of this Research and Strategy process. This will make an enormous difference in margins and success of the product(s).

To supplement weak management, talk to experts that you can find at Universities and the Chamber of Commerce, retired executives. Perhaps hire a couple of good consultants to critique your plans and your progress. Be sure to get someone seasoned who has been successful at running a business. Avoid fresh out of college MBA's. Listen more to experts in the industry or field. Try to hire one to consult briefly.

Weak finances are hard to overcome and deserve priority. There is little substitute for a heads-on persistent effort to save, sell at good margins, get costs down(internal financing) AND raising money from outside the company, which can take any number of forms, including family, friends, enthusiastic customers, suppliers, getting sizable contracts and then selling the contract, sweat and cash equity investors, angel investors, loans, and so on. See our page on Small Business Financing.

6) Finances: Maintain margins; Never run out of money -- it's fatal.

On the subject of Weaknesses, Money is crucial. Remember, a number one rule to survive in business, besides selling at good margins--- is NEVER RUN OUT OF MONEY. Cash Flow problems are the death of many a company that actually had good prospects but could not make over a hump. Momentum in business is the {(Mass of the Cash X The Speed of Sales at Good Margins)- Exceptional Cost Humps} > 0. Which still means: Never run out of money.

The solution to this problem is best solved by savings and profits from sales. Unfortunately, most people don't save up the kinds of money needed to run even a small business for the first two or three years until it makes good profits enough to grow on while spinning off enough to pay all bills and your living expenses.

Because timing is often crucial also, to compete and stay ahead of well-financed competition, this weakness must be addressed early and often. Read our page on Small Business Financing for ideas. If yon are lucky and smart enough to get the right people to help, loans or investments can work.

Look into Crowd Funding but be careful. It is a good way to not raise much money but let out your trade secrets and ideas, so no real investor will want to actually invest. Raising money in a Crowd Funding is difficult and competitive and WORK, requiring about 6 months total. Some of the efforts are the same you should do for raising interest in your business and products, so that's not all wasted.

Whatever you do on borrowing or equity sales (stock), be careful of the laws on securities. Talk to a lawyer and disclose every risk you can think of, and make no absolute promises of profits, especially if without participation, work or helping manage.

Be aware of expected returns on investments, and of possible control given up in some contracts if you fail to perform "milestones". Watch out for Liens, especially blanket liens. If you are manufacturing, equipment financing can really be great. If you start doing well, a manufacturer might even help you or loan you more money to grow.

7) Emphasis on Positioning, Unique Selling Proposition, Differentiation, Focus, Competitive Advantage and Distribution: These fundamental principles of good marketing must be completely and thoroughly analyzed, planned, developed and executed in the most coherent careful manner. If you don't understand these thoroughly, study up on them. These are key parts of strategy discovered by research and analysis of the existing industry and sub-industry, all of its players, their strengths, weaknesses and where you company fits to attack those weaknesses and gaps using your company's best strengths.

Such concepts as emphasizing differentiation or focus are important. These all determine image, pricing, presentation and channels of distribution, as well as how you approach those channels, what are your main slogans and headlines, company personality and trade dress. A good marketing strategy determines all of this in cycles of refinement and improvement until honed to perfection, with a back up plan as well.

8) Emphasis on Targeting Prospect Segments in Marketing: If you have a great marketing strategy, it will detail target prospects and show you know them distinctly and intimately, where they go, how they think, how segments of your audience have different needs, interests, motivations and other behaviors. Targeting is crucial to actually sell, giving the target confidence that you really understand their needs and particular interests, to be met by some feature of your product.

The best example of targeting is selling running shoes and runners' watches in a Runners Magazine. Better targeting even might be an age group and sex within that runners' market. Also types of running. Where would you find these types of runners? At marathons, or jogging and walking for exercise,etc.. That's the way you need to think. Your costs of advertising and promotion go way down when you target properly. Ideally your product lends itself to that. If not, look at redesigning or repackaging your product to meet certain target segments. At least know your features that appeal to segments.

The trick is to not only match your features to prospects' key motivators, but also be sure there is enough motive for them to buy, and enough volume of the segment to justify even trying to sell to them. After all, you need both margins and volume, not selling to a handful of people. Your target should have some disposable income or a serious need for your product or improvement in their life.

9) Territory Targeting and Exclusivity: Don't be tempted to take on too broad an area or be too unfocused in a rollout of your product and company.
Smart use of territory focus and targeting is one of the best ways to avoid competition toward your goal of virtual monopoly or at least some pricing power and market/niche dominance. If selling a great licensed product, seek exclusive territory in which to sell.

If it is your product and it could be national or international, fight the urge to roll out big all over. Business is war. Battles are not won by inexperienced under funded management by targeting huge territories, but instead one small battle at a time in preparation for the larger battle. A newby in the market without big staff, big advertising and big finances is like going to war with a BB-gun or 0.22.

Most newbies get this backwards. They think that a "little percentage of a big market" is the answer. That ignores that such advertising and promotion are expensive and difficult, puts you head-to-head with rich powerful businesses, so can never break through the clutter than proper promotion and advertising do, by PERSISTENCE and REPETITION. You can not be persistent "all over the map." Pick your fighting grounds and plan your battles to be sure your resources and promotion push above the minimum threshold to break though the huge "clutter" of huge competition for prospects ears.

If yours is to be mostly an internet business, this all applies doubly. There is nothing more unproductive and costly than a wasted national advertising effort when you are getting started. And if you have a cool/hot new product, you can not wait around for organic search engine ranking. It won't happen for 4 years, even if you work at it every day. So you have to BUY ranking with Bing or Adwords. That means you can not afford to compete against most competition when you are new and small. Local businesses actually have an advantage here.

Google allows you to target zip codes, cities and radii around addresses. If you study those properly (not easy - get professional help to get started), you can find where and when your competition is weak or not advertising. Regardless whether there is much competition, you still need to focus adequate persistent promotion in proper territory by territory roll outs.

10) Rollout: Like territory exclusiveness, normally likewise break down the main territories into even more local roll-out areas. Don't be tempted to take on too much, too broad an area or be too unfocused in a rollout of your product and company.
Rolling out a product is a bit of a science in itself. The central obstacle is breaking the threshold of clutter and awareness to reach the target audience.

Another advantage of such narrowness is that you get to refine your methods and advertising as you progress, before you spend a ton of money. Also people in smaller focused areas begin word of mouth advertising for you. That is only possible if you can be persistent in front of their faces. It takes a while to build momentum.

Not many people are smart enough, or can even hire someone smart enough to do a big rollout and national or regional splash, and get it right the first time. Even fewer could be prepared to fulfill and manage the result if the product goes. It is smarter to do some practice runs at it, and refine your methods, like training troops for battle by exercises and eventually war.

11) Promotion - As above, focus it and Know What you are Doing.
Promotion is what real businesses do to survive and grow. You can't open a store or put up a website and wait. NOTHING will happen, guaranteed.

The answer is advertising and public relations events and other means to go get your targeted prospects to come to you. This is required for years to get going. Ignore this to your peril and likely failure. If your product is new and could be copied, you need to HURRY UP and promote strongly, targeted, focused.

You need to refine your strategy and your advertising and web content in "improvement cycles" of about 3 months. Consult with your professional web marketing and website designer to do this correctly. The internet is a HUGE opportunity to do most of your market analysis and strategy refinement early, and more easily than the old days. Use proven Direct Marketing methods.

Promotion also involves demonstrations, Youtube videos linking to your website. You need commentary from authorities linking to your website. You need publicity and to sponsor events related to your product. Perhaps compete or go to trade shows. Do special offers, trial packs or market tests choosing prospects who will talk about the product.

Also get the book Guerilla Marketing, and the book Marketing Magic to guide you.

12) Know all the basics of business. Understand the key success factors in business, and know the basics of business.
Know that only unique products in high demand and low competition are ever highly successful--most others are marginal and difficult. Understand that margins are everything-- don't discount if you can help it. Know that strategy is key. Next to that is Cash Flow, as above-- never running out of money. High margin ranges from about 60% to 300% mark-up by YOU, not your supplier.

13) Understand and have other Business Advantages such as better materials, better people, production efficiencies, special skills, special machinery (custom), innovative effective marketing, great quality control, excellent terms like financing and no down payment

This should all be incorporated in the business strategy, making best use of your resources focused around your products and customers to outperform your competitors.

14) Avoid having a lot of inventory, but have enough in case there is a production shut down.

15) Unless you are a minority and have friends in the SBA, probably don't bother trying to get a loan guarantee.
Other sources like county and state economic development corporations are easier. This is especially true if you will actually hire employees.

16) Under-promise and over-deliver: Plan and train your people to always add a margin of safety to time estimates, and exceed buyer and customers expectations.

17) Who you partner with and hire is extremely important. Take the time and get second interviews and second opinions on people. Get to know them before any big commitments. Use trial periods to get acquainted. Train and communicate well. Write down procedures and instructions. Have them use To-Do lists.

18) Manage the way you teach:
Write out goals. Go over with staff. Include them in the reasons why. Manage by walking around and talking to them. Find out what motivates them and recognize their efforts. Coach for improvement. Lead by example. Be extremely clear. Never chastise in front of others. Treat everyone equally/even-handedly. Don't show much emotion except enthusiasm.

19) Be careful to not sell a security without legal and securities advice. Selling any opportunity that does not require work and participation can only be sold by a securities dealer. Don't offer stock promising any "returns" with little or no work; To do so is likely illegal, especially if it alleges high profits and states percentages of return on an amount invested.

20) Do occasional reviews of the business as a whole, its strategies, operations, promotion, product quality, etc. --- taking into account the competition, strengths and weaknesses, threats and opportunities, its branding efforts, positioning, image, and pricing. All these must balance and seem reasonable to your careful observation. Go away and come back and look hard at it objectively with no vested interest. Look for credibility, user acceptance The most important

21) Think about your exist options and plan way ahead for them. Can you sell out or license your product to an approved buyer? Can you sell your business? Can you sell out to corporate investors or partners?.

Conclusions: There is a lot to know, and business is a long hard struggle and is risky and expensive.

In the early stages, not everything is going to be perfect. Inventory management may be off a bit. Accounting may be behind. Orders may sometimes pile up. Just focus mainly on following these steps above and getting good advice from experts.

READ, but don't just read... ACT. Read a Lot. Know your Stuff, but ACT. Then don't slow down and be prepared to Do the Dirty Work at work, non-stop for a couple of years or more. See those points on Inc. Magazine.

If you have read this far, you MIGHT have what it takes to run a business or introduce and license your product to a company or wealthy individual, and you will know what to look for in that company.

If you license your idea for about 2-5% of sales and a good down payment, be sure your license agreement demands PERFORMANCE. Be sure the buyer is CAPABLE of taking your idea to the level. Put Milestones in the agreement. Like quotas to sell, if they don't meet goals on time, they lose the license or go on probation. If miss 2 goals, they're out. If they aren't willing to do milestones, you might not have the buyer you want. You might have the next billion-dollar idea, but be justifiably intimidated by all this If you like the sound of that, or you have a great idea and want to be the Licensor or a minor corporate partner, get in contact with us to get it going.

We love business, and like to do it right. We do consulting reasonably or may take a stake as a small royalty for helping you. Or, we may want to license your idea or help some people join up into a real corporation to "do it right".

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Do your homework, your research, analysis and planning, know good business practices, especially marketing and strategy creation. Do it right persistently with an excellent product, and you will likely succeed where many fail. Don't get discouraged. The time and money invested up front will help you succeed when you do get under way.
Good luck!

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