Starting your own business can be exciting and rewarding. However, when you're starting up a company in a competitive arena, you should be prepared for some obstacles along the way.
"It's a dynamic market with many opportunities, but with factors such as the fluctuating dollar or unexpected events that have an impact on the economy, it can also prove to have some challenges. To make it in business, you have to be ready with a focused plan that provides direction and enables you to foresee and ride through tougher times," says BDC area manager Phil Gaudreault.
"Entrepreneurs also have to think beyond the numbers and dollars. You have to be mentally prepared for the job of running a business. Your previous management experience may not always fully prepare you to be at the helm of a successful business."
Explore well-known territory
The most successful businesses are run by people who know their industries. "It's best not to charter unknown territory when you're starting up. Even if you haven't operated a business in your field, it's definitely helpful to have some insight into the industry first." Industry experience enables you to avoid mistakes that newcomers inevitably make in areas such as product distribution, marketing or HR strategies. "You've already learned the ins and outs of the industry. You can also rely on your network's know-how." For entrepreneurs who attempt to tackle a totally new business, Gaudreault recommends that they arm themselves with information first. "There are countless information sources out there for startups that are free," he says.
Get the coaching you need
"Start with building a network of professionals such as bankers, lawyers, accountants and experienced consultants who can help you out. You can't do it all yourself," he stresses. Many people looking to launch a new venture may lack basic skills such as doing a proper cash flow projection or handling accounts receivable. "The rule is that if you can't do or learn it yourself, get somebody in who can," he says. BDC Consulting offers management coaching that helps entrepreneurs deal with rapid growth, new markets, exports and startups. Essentially, BDC coaches can help business startups review their strengths and weaknesses and identify strategies to fill gaps. It's also wise to get an external point of view on key areas such as finance, sales, marketing, operations and human resources.
Prepare a well-structured and realistic business plan
"You can have great ideas but your business has to have a clear structure before you get if off the ground," says Gaudreault. Begin with getting a clear business plan on paper, which will help you assess your potential, confirm your commitment to becoming an entrepreneur and win the confidence of bankers and investors. Many entrepreneurs think a good business plan is a voluminous document. However, in reality, as long as the plan is precise, clear and sound, a banker will consider reviewing it. "You need to have the right mix of narrative that sells your company and financial figures that back your story," he believes. "I think one of the key factors to success here is to be totally realistic about your projections. You're better off to show less optimistic scenarios, demonstrate how you'll perform and consider the various risks that you may face," he emphasizes.
Form a strategic alliance
Strategic alliances help entrepreneurs diminish their vulnerability when they first start businesses. "You share your gains and your losses," says Gaudreault. Business owners can consider teaming up with other companies that can help them enter new markets with new products and services, get better prices through bulk purchasing or accelerate research and development by sharing costs and resources. For example, a furniture design company could partner with a manufacturer for the production of its designs. "Focus on what you do best and rely on other companies to offer complementary services," says Gauldreault.
Establish clear HR strategies
Recruiting and retaining the right people is a challenge for startups as they may lack the financial resources to pay high salaries. Add to that the departure of baby boomers and the lag in education, which has created a shortage of qualified candidates. "Many businesses fail because they can't get a team in place fast enough to tackle the market or they lose their people to competitors," he says. A startup should focus on ways to market the company in order to attract the right people and build presence in the public eye through focused advertising, job fairs, industry association activity and community involvement. To retain employees, business owners should make sure that their benefits are competitive and that they can offer employees an environment where they can grow personally and professionally. For example, a business could offer initial employees shares as a motivator to grow with the company.
Capitalize your business fully
Getting financing for a startup is already a challenging task since you have to prove your worth and good credit to bankers. But many entrepreneurs also tend to "under finance" because they have poorly assessed their entire range of needs, says Gaudreault. "You have to look at everything from the cost of equipment and hiring to how you'll finance gaps between sending out your bills and actually getting paid," he says. Depending on a client's specific situation and ability to meet financing criteria, BDC offers startups long-term financing as well as benefits such as progressive or seasonal payment terms and deferred capital payment.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.