Steps You Need to Take When Starting a Business

Every month, Mr. John E. Dustin, CEO of J.E.D. Insurance & Financial Services Agency, Inc., in Foxboro, Massachusetts, highlights significant issues that are relevant to business owners. Whether it’s cybersecurity, the benefits of having a line of credit with your bank, or offering strategies to sustain your business in a tough economy, each month he shares important advice others will benefit from. This month’s article is no different, but the comments will specifically benefit those considering leaving their jobs, or other entrepreneurs, who are seriously considering starting their own business.

Producing a solid idea is the first thing when contemplating starting your own business, but why? “It seems like there are a lot of startups coming from people having been rightsized from the workforce or just burned out. They come up with an idea. They're trying to develop a business. It might be a hobby, but it seems like now there are a lot of people trying to transform ideas into reality.” What has prompted this latest trend? Without hesitation, John answers, “I think it's a function of the economy and social events the past three or four years.”

One of the big reasons, he explains, is that employees don’t want to commute. For example, if you’re a lawyer contributing to overhead cost of that space and no one is using it, some lawyers who are sought-out experts in their chosen practice area might decide to take their business-generating efforts to serve their own bottom-line objectives.

There is one glaring caution, though, John highlights. “I think there are many career-type professions that, when you're in school, they teach you the technical, of course. But they don't teach you that if you want to move up the ladder, you're going to need sales skills. Whether it's accounting, law, even medicine now, if you can't develop business in any profession, it's hard to move up.” You need business acumen. This is an important skill that cannot be minimized. True, business development activity and tactics might be easier for the more outgoing, affable, and empathetic professional for whom sales come naturally, especially if face-to-face networking is something they look forward to. For the more reserved individual, this is a critical point that could be uncomfortable and the very thing that hinders significant business growth. Soley relying on making haphazard connections via LinkedIn won’t be enough.

So, how does a would-be business owner validate their idea? Market research. There’s no getting around it. “You have to make sure that your product or plan serves a genuine need,” John admonishes. “What's the competition in the area? Do you have the requisite skills to do what you're planning on doing?” To validate your idea, he recommends that it’s always good to put a team of trusted mentors of professional services together. Ask them for honest feedback about your idea. Ask what they think of the concept. Is it relevant? Is there a demand?

Once you’ve jumped past that hurdle of establishing the initial idea, the second thing John focuses on is drafting a quality business plan. The operative word being “quality.” He says, “I look at a ton of business plans. With the advent of artificial intelligence, people use AI to come up with a business plan that is beautiful and glossy but lacks substance and real objectives. Nothing relevant, nothing achievable. In a detailed plan, it lacks two, can’t-miss subjects: sales and financial projections. For sales, questions that go unanswered include: Where they are getting the customers from and who's doing the rain making? What's the distribution channel? What's your geographical area? Are you going to use independent distributors or direct sales? Will you cold call? How will you network?

For financial projections, considerations need to spell out how they plan to carry over what's in the embedded product or plan they buy. “Sometimes I’ll see a business plan and it’s clear that no thought has been given to how they plan to break even. They don’t think about how much they really have to sell. And what happens if there’s a downturn?” John highlights.

The third thing to consider—and this was the subject of last month’s blog—is securing funding. Do you involve a family member’s money? What about a bank line of credit or a bank loan? Do you borrow against an asset? “It’s necessary to review the ramifications of each,” John advises. “If you know you're going to grow very quickly, borrowing $50,000 from a family member might not be a good idea. Instead, you might want to establish a bank relationship and get a line of credit that can be paid off or get factoring.” What’s crucial in the business plan is to dictate what your needs are, both short- and long-term, and be thoughtful about where you borrow.

Under the auspices of financial projections and planning comes risk management. John says this frequently comes up with insurance and there are many factors to consider. “For instance, should you incorporate? Maybe you don’t want to pay money to the Secretary of State, but what is your exposure? If you get sued, are you going to be able to defend it? What if they take your personal assets? You can file an S-Corp and LLC with one member. There's a myriad of things you can do. You still need insurance, but the extra veil of protection is a good thing to have for your suppliers, vendors, customers, and employees,” he states.

Now, once you are out in the market, how are you going to build your brand? Social media is a valuable tool, but it’s tricky if you don’t know exactly how to use it to your advantage. As was mentioned earlier regarding sales, networking is a great way to develop your brand and have others think of you and your business, if you make the most of networking opportunities and are clear about your messaging. “I like to network,” enthuses John. “Some people spend hundreds of dollars wanting to be the top person on a Google search. Other people still prefer direct mailing.”

The next thing to be mindful of is logistics. To illustrate the difference between services and products, the former just needs to meet people. The latter has more tangible considerations. A manufacturing company has to identify if there’s going to be a supply chain issue with getting their raw materials or their machinery. “If you're a distribution company or a manufacturing company or a sales rep, you need to know, can I get the product? Is it going to cost me more than I was anticipating? Is it available?” John asks. This is essential to inquire about, since some industries still haven’t completely recovered from supply chain issues brought about by the pandemic.

If you are confident that you’ve covered the aforementioned bases, then it might be time for a soft launch! “Go out and try to attract people, and see what bumps are going to hit,” he says.

From all this, though, he reminds new business owners to stick to the strategy in the business plan…. but everything needs to be somewhat flexible. “We all need to be chameleons and adapt to ever-changing rules. That applies to everything: employees, technology, market demands, etc.,” reminds John.

The last thing he recommends when starting a business, is to monitor any plan you put together. If you’ve put a plan together and it’s failing miserably, don’t wait so long that it can’t be improved or innovated. Take corrective action as soon as possible. John says that monitoring or amending is part of any risk management strategy to meet current situations.

“To me, if you're going to go into business, you've got to be persistent. You've got to be consistent. You've got to be somewhat disciplined. And you've got to be able to sell unless you're going to have a sales force right away. Each of those is key,” John summarizes.

To conclude on a more “soft skill” note, John says that the other thing you’ve got to have is empathy for the customer. If you don't have empathy for the customer, you might as well not start. - Copywritten by Boston Edits, LLC.

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