Small Business Startup Strategy

A Must read tips and advice before starting your small business

Starting a small business? Here are some tips and info I can share.

I will be frank, many small businesses fails. But with a few info to share, it could make yours a failure to success. Some information on this page might help you avoid some start up failure and pit falls most small business owners encounter, a mistake beyond recovery. We start at;


Location

There are 3 important things on a business. 1. location 2. location 3. location, that concept did not come from me but you will learn that the hard way later on, even if you have a bad business shop or expensive pricing schemes, but your location is situated perfectly on large foot traffic area with less competition and reasonable rental price, people will go to your shop. If you failed to land a good location then you fail the moment you step on the beach. When people start a business, the mistake they always do is they think first of what kind of business they will put up, probably if they are an IT student, they will put a an Internet Cafe, then find a spot even its a mediocre spot. There is nothing wrong doing business on something you know or your passion, but make sure you put it in a good location, or don't start at all because you will learn that the hard way later on. Getting a good location requires mapping and timing. What kind of business do you cater at? residential? industrial? commercial? education? Is it situated where there is lots of people passing by? (also called as foot traffic). How about foot traffic at night? or during holidays? 200 foot traffic per day is OK but the more the better, don't put a shop where its 200 foot traffic below. You draw a map, mapping that all out, you don't just look for an empty rental space blindly and rely on luck or arrogance.

Then timing, a lot of good location are already taken, hmm sounds familiar. But with proper timing, some will close shop and you must be ready to snatch it when it happens because it won't be available the time it closes down. When looking for location, don't just ask the empty rental space, also ask the already taken shop if they will be closing down in months time so you can follow up that space.

But.. but.. Yes I know you can cover up a bad location with your skills and ingenuity, but the same effort you put up if you just place it on a good location with your skill and ingenuity = increase chance of success.

How about rental rates? It depend on how large the space is and where it is situated, like for example you will start an Internet Cafe, P12,000 per month rental rate and you can only put up 10 computer on that space and foot traffic is low about 150 people passerby per day, its too expensive, that rental space should only cost P2,000 per month for it to be feasible or to be called a good location. When you say location, it does not mean it is just situated on a good area, price of rental rates is also a part of it because even if you live on low foot traffic area, but you are not paying rental fee like your house then that is part of a location, it now depends on what market you are catering for it to be called good or bad, if you are catering to online market, then there is no point getting an expensive space for rent not unless you need a physical shop aside from you house.

Competition? Avoid business that can easily be copied because if it is, expect a competition will start up just besides you or on another corner, so if that is the case mostly, avoid location that other businessman can easily copy your business, like if you see too many empty rental spaces, that is the place you should avoid, and don't ever tell people asking you that if your business is doing good, because chances are, they will start one the same business as you, worst just beside the empty rental space unit near you.

There is also a Strategy I device for myself, I called it Location Fencing, you just find a good location with good foot traffic, then when its available you lease it immediately then just think of what kind of business you will put up on it later. Also you can talk to shop owners in a good location if they plan to close shop in some point of time so you can get ahead of the line before the line existed. For me the chance of success is higher of a bad business in a good location than a good business in a bad location.


Capitalization

Another mistake of first time small business owner is disbursing his capital, example is if he has a P500,000 capitalization cash to spend to start up his small business, he will write that down and break down all the expenses for equipment and others and spend all that P500,000 right from the start, but it should not be, because you must only spend half of it, start small, so you will still have some capital left once you learn to adjust your business from the customer and market. Example is if you will start an Internet Cafe, you will spend all that capital money for good computer performance, until you experience the problem, its not about good computer performance but its about numbers, how many computers can you field in an hour and you should have invested in more good network system and internet connection than on high end computers, after you realized that, you no longer have the capital to fix or adjust to that mistake.

Which will give you more money an hour, 10 high end computers or 15 mediocre computers with good network connection and fast stable internet? Now you know, depending on your market. Another is if you need to move shop on a different location when you are still early in the game, because you need to look on a greener grass to survive and you realize this place is not your target market, the good news is you know the problem, the bad news is you don't have the capital to move out, you are stuck in there like you step on a quicksand. You learn from your mistake, and its a mistake beyond recovery.


Systems and Consistency

No, its not a computer, a system is a process, like how human able to reproduce and survive. It just run automatically, it should be the same on your small business, even if you will attend a birthday party, you don't need to close your shop and leave your customers disappointed. This will make sure you have consistency, if your customer is carving for your burger, then they must be sure they will not be disappointed because you attend a party or something, and even if you are not there, that same burger you used to make is the same they will eat made by your employees because they are following a system made by you for you to be consistent and earn customers loyalty. If you engage into small business, indeed you will be your own boss, but that does not mean you will also be your own employee, your own job and your own world, you will need to hire people to do all the work for you, your job is to think. If you are riding a boat, you don't paddle and steer all on your own, you hire people to paddle for you and your job is to steer the boat's direction. If you are against that principle might as well forget being in a small business and become a self employed doctor or lawyer. Because if you are going to steer and paddle all in one, chances are you are all stressed out and your boat is heading into the waterfalls and its too late before you know it.


How do you Consider a Small Business to be a Success?

1. Personal Success, many people I know failed on small business and close their shops, but they learn, they look for other sources of income like working abroad and found their success. If they force themselves to be stuck on that struggling small business of theirs then they won't have the realization of greener grass out there. I am one of them, If I did not failed in one of my first small business shop, then I would have not explored investing in the stock market where I found something where I am good at. I even manage to recover my capital loss because of it.

2. Genuine Family Business. If it survive 20 years and still providing you good income for you and your family daily needs. You remember that old hardware store, pawn shop or retail shop when you where a kid? Then after all these years its still there, that kid back then is now running the shop and the whole family has finished college, move out and has lives on their own. But this kind of small business is rare and take years to built, and you will notice they all have one in common, they had good location, like its just a regular house then the center of commercial has moved just in front of them, there is also luck involve in here, because no matter how hard working you are, its not gonna work alone on a business because you also have to think hard so luck will work on your side. Aside from that, it could have taken decades for you to have developed a tradition of business, like that on China Towns, which they're family has been doing business for centuries. So don't expect you belong on that category.

3. Branch Out. If your shop has managed to have 3 or more branches. Then that means you are doing a very good business. Small business tends to explode and expand or shrink and die, If you are not expanding, then you are dying, there is no in between like a stable small business kinda like a job, the only way for that is if you have that Genuine Family Business. You are doing good System wise and Location wise.

4. Incorporation. This is the ultimate destination for a small business, many successful Corporation you hear out there started as a small business and grew, like that popular Fast food chain the B and the M. How did they do it? read and buy business books, invest in your knowledge. You have to work out your working small business first before moving into a corporate category, no shortcuts.

Juan Tamad Sayings:

Who am I to advise you about business? I am not advising just sharing my experience, I no longer have small business, but I do have incorporator shares on a small fast food corporation and an IT corporation we incorporated. And I love investing because you just sit there and earn money, small business is not my forte, maybe you might find your success on it so go for it, you will never know and find out not unless you are on the other side of the fence, either you become a success or failure, one thing is for sure, you will learn something which is very valuable.