Small Business Secret #1 – Build Your Business with The End In Mind

Small Business is the toughest industry to break into. If you were a betting man, you would never in a million years want to go into a small business when the odds for success in small business are so bad, that 70% of all small business fail in the first year. Let me be blunt, if you want to succeed in small business, only listen to those people who have built a small business in an industry they no nothing about and succeeded. These are the people who seriously know how to build a small business.

I just happen to be one of those people – I am not a business coach – I offer no consulting on small business, just let me share with you my secret to building 4 small businesses from a three thousand dollar credit card.

The first secret when building a small business is this, have the end in mind. When I first started in small business, I was like most business people, I was a technician (bit more than that, but this is how the E-myth would describe me) in the IT industry with the belief I could build a better computer training company than those around me. One thing I can tell you about this industry, stay out of it. It is tough and there is no money in it, well that’s not quite true, but there are far easier businesses to make serious money. In fact I married my wife and I decided I wanted to experiment on whether all business was as hard as the training industry or was it just computer training.

My wife and I, after much coaxing agreed to setup a car cleaning and detailing business, we new nothing about the business and were simply doing it as an experiment. Two years on, we have a successful thriving business and we are about to Franchise and expand the business to over 10 cities in Australia.

The key to building a successful small business is to have the end in mind and to know when you are going to exit the business. Most people when they start a small business simply believe they are going to have a business to make money, come home and do it better than their boss. If you are going to go into business for this reason, quit now, because your life is doomed.

There is more to business than simply doing the technical work and this is what most new small business operators do not realize. When you are first thinking about starting a small business, imagine how it will look when you are finished. For example, what image will you have, what logo’s will you have, what marketing material will you be using, where will you be operating from, how many stores will you have, how many people will be working for you, what sort of profit will you be making and more so, how will you know that the business is complete.

For example, let us say you wanted to start up a dog washing business. You saw in a market that there was a massive need for dog washing. How are you going to satisfy the market? How are you going to build your business? How are you going to clean the dogs? Are you going to build the business like other? When will you know that the business is finished?

These are all the questions you must ask yourself. In fact, if you don’t ask yourself then you will find that your business may grow but without any focus. It will go so far and then become a huge noose around your neck. By knowing what the end will be, you then have a clear goal of what you want to achieve and you can then build the business based on that vision.

Let me give you a really good example of this methodology. If you get a chance watch the movie, Concierge with Micheal J Fox. Micheal plays a concierge that has a vision of building a hotel. He first builds a model of the hotel and then sells the idea to a developer. As he says in the movie he knows every aspect of the hotel he has built.

You as a small business owner must do exactly the same thing. Before you rush out and start your small business, you must know exactly what you are building know every aspect of it and how to build it. You must know every job, every role, every procedure and how it will work within your business.

By creating your business in this way, you will learn very quickly what will work and what will not.

Most people who want to start a small business will say that they don’t have enough money. If you have a clearly articulated vision and you can prove that your vision works, then there will always be someone out there prepared to back you. It may take a while to find someone to support you, but there are people out there who will. Just remember it took Walt Disney, 500 plus knock backs for Disneyland before he found that one group of people that would back him.

If you truly want your vision to work, then you must be prepared to be relentless in your pursuit of success. Remember the first secret in small business success, is to build and develop your business with the end in mind.

Small Business Secret #2 – Build Your Business Knowing How You Will Exit the Business

Creating a small business from nothing is easy to do anyone can do it, by simply filling out a few forms at a government office and then you have your small business. Making it successful is the hard part but also knowing how to get out of your business is as important to your business as owning it. Way to many people startup small businesses but then have no idea how they are going to exit it and in the end the way they build their business in many many cases results in them not getting the windfall they had hoped for.

Let me be really honest with you, if you build your business correctly and make it successful, you can make millions, but you can cost yourself money in not knowing how you will dispose of it and building it in away in which selling is not easy.

Now, I hear it now, but are not all businesses built the same way?

Well in fact no and if you structure your business in the wrong way, it can affect your ability to offload your business.

So what are the ways business owners can exit their business?

Let me list them straight off -

1. Sell to another small business owner

2. Sell off Franchises and Areas to Master Franchisors

3. Sell your business to an Equity Group

4. Sell Shares in your company to other people

5. Publicly List Your Company Shares

The first secret to building a Successful Small Business is to know how your business will look when you are finished. Now based on what your vision of your business is will depend on which of the 5 options you will take.

For example, my team and I are developing a new business that we have decided in three years will be publicly listed. The way in which we are designing this business is very different to how we are growing and building our other businesses. For example, our car cleaning business has been designed specifically to be franchised which has meant we have essentially built each area as its own small business that is profitable for a single operator and will bring them in a good weekly wage and small profit on their investment.

In designing our publicly listed company we have to treat it in a different way so that it is designed to meet the needs of serious investors like institutional buyers. Now by know way am I saying I am an expert in this area but some companies are more suited for public listing than others.

For example if you are building your company for a listing on any of the worlds stock exchanges, investors are looking at three core areas -

1. Good Solid Business Growth (double digit growth)

2. Solid growing profits (double digit profit growth)

3. High Potential for Share Value Growth

If your business does not have those elements then you could be punished in a big way on the stock market with a low share price and in many cases you can loose more money than you make. A few years ago I bought into a small diamond mining company because of this one reason. The share price of the company had been savaged by the bigger players and in those players driving the share price to on 1 cents a share, simply because its potential for high share value growth and profit return per share was simply not there. What happened in the end was that the Publicly Listed Company was bought out by an equity group and was changed to a privately owned company. I actually bought the shares for less than 1 cent a share and the cool part for me was that I made a couple of 100% profit on those shares, but those people who invested when the company was publicly listed lost a large amount of their investment. This really drove home to me that you need to be careful about what you do when you want to get out of the business. In this case, publicly listing the private company cost the owners and shareholders more, than if they had of stayed private.

In the end the company which had an initial listing of 10 million dollars sold for a couple of million dollars. The original shareholders lost an investment of over 8 million dollars. The owners would have been better off keeping the company private and selling it to another mining company or a publicly list company. The reason I know this to be true is because the private equity group did that just 18 months later and I know they doubled their money.

On the other end of the scale, do not just sell your business to anyone. When you build a small business, one of the things that will happen is that you will build a very close relationship with your clients and many of them will become friends. Make sure that when you decide to exit the business, that you talk to your existing customers prior to exiting because getting the wrong person into your business can hurt them as well, both financially and personally.

There is no right or wrong answer to what you should do when it comes to exiting out of your business, but always have a clear strategy on how you are going to exit and build your business towards that exit strategy. If you are partnering with someone else to build your business, make sure that when you create your partnership agreement that you both have a clear understanding of how and when you are going to exit the business.

I have seen so many small businesses destroyed by partnerships that are fine for the first couple of years but then the partners fall out and because one partner wants to exit now, it puts such a clear strain on the business that the business collapses.

One of the clear things I have learned about business is that you must have a vision of what you want for your business and work back from that vision and develop your timeline for success.

Do You Know How to Start a Successful Business?

You probably already know the dismal statistics about how many new businesses fail within the first year. Do not let those statistics discourage you if you really are an entrepreneur and want to start your own business. Poor planning is one of the reasons for failure, but you can make up your mind to plan your business every step of the way.

When you first start thinking about your business, talk to other business owners and gather ideas and advice you can use for your business. Try to learn from every experience you have and every person you meet. Take advantage of these resources and start writing down your ideas.

Once you have a targeted idea for your business, your next job is to do the research to be sure that your great idea will thrive in your market. This gives you time to fine-tune your plan before you start spending money on the business. The U.S. Small Business Administration website is a great resource with free information for small businesses. Among other things, the U. S. Small Business Administration says that you should be able to answer all of the following questions before you spend money to start a new business:

o Is my idea practical and does it fill a need?

o Who is my competition?

o What can my business offer that other companies cannot?

o Why will your potential customers purchase products or services from you?

o How will you reach your potential customers?

o How much money do you need?

o How will you get the money you need to start your business?

o When will you be able to pay yourself a salary?

After you answer these questions and decide that you can proceed with your business, the next step is to develop a business plan. Many small business owners overlook this very essential step, but you should not. This is where you closely examine your start-up costs, business model, overhead, and the other fine details of running a business.

You can find sample business plans and free advice on the U.S. Small Business Administration website, and SCORE volunteers will write your plan for you. There are many resources that will help you prepare your business plan. The most important information in your business plan is:

1. Business structure–Will you incorporate or form an LLC?

2. Budget–Estimate your earnings and expenses by categories such as advertising, marketing, insurance, taxes, rent, tech support, Website, phone service, janitorial services, and any other expenses that you anticipate.

3. Start-up costs–You should have all of your start-up plus the rule of thumb is that you must have your living expenses for at least a year.

There are many books in the library with great information about starting your business, and you should take advantage of any help that is available. Remember, a business owner must work hard and be committed to the business if it is going to succeed. You can rely on your knowledge and experience and stay focused on your goals..

Jo Ann Joy, Esq., MBA, CEO

The future of your business starts here!

You may contact Jo Ann by phone at (602) 663-7007, by fax at (602) 324-7582, by email at [email protected] Business Solutions.net, and by mail at 2313 East Ocotillo Rd., Phoenix, AZ 85016. I have many published articles, and I will send any article to you free of charge. Most consultations are free.

For information about other important legal, tax, and business topics, free copies of articles, or EBooks, please visit our website at www.IndigoBusinessSolutions.net

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