How to start a business – Simple step by step tips
The biggest challenges we have when trying to transition to entrepreneurship is the lack of adequate capital and inability to identify what business to start. It doesn’t always have to be a new product, it can as well be an improvement to existing ones. We didn’t know how much we needed smartphones till they existed or how much we needed disposable diapers till they existed and look at what they’ve done to our lives? Don’t also be too worried about your passion, look around and see what business you can start, but don’t stop searching and on the way you’ll discover it (your passion). Once you start making a few sales here and there it boosts your drive.
WHAT PROBLEM ARE YOU TRYING TO SOLVE? Think about why you want to start a business. What problem are you solving in the society? 1) Do you want to provide better quality products? 2) Are you looking to supply affordable products? 3) Maybe you just want to get a source of livelihood? (You are part of the society) These are a few examples of possible reasons to start a business and yours could be one, or a combination of many.
TARGET MARKET Identifying your target market is key. This could be based on gender, age, demography, income class etc (you have to be very clear about it whether it’s low, middle or high income class). In fact, I believe this is the most important segment because it takes into account the purchasing power of your customer, which, you have to consider when pricing.
CAPITAL If you don’t have the capital needed for a huge investment start small. Buy one item, market it and make the first sale. Repeat the process as you re-invest your proceeds (As illustrated in figure 2). Gradually you’ll increase your stock and consequently your sales. Do that for 4 weeks. Analyse your sales, pay yourself a salary and put the rest back to the business for the next month.
PRICING This can be quite tricky. The main thing you should look at is the cost of sale of your product. Simply how much it will cost to acquire or produce your product. Then add a gross profit margin ( Refers to the Selling Price – Cost of Sale multiply by 100). Depending on various factors like target market and the type of goods, you can set a margin of your choice. I recommend 30%. If you’re buying products to resell, cost of sale comprises of the cost of buying the item, maybe transport costs to your location and packaging costs. In case you are producing the items, you’ll have the cost of material used, labor costs etc. Let’s have an example. Suppose you only have 1000 shillings and you identify a product that costs 100 shillings a piece. Below is how you can price it using a profit margin of 30%.
Don’t look at the 33 shillings profit and get discouraged. Businesses need patience to grow. It’s estimated that the average business can take up to 3 years or more to be profitable. How you ask? Let’s continue with our example below.
You can see that quantity sold and revenue earned increase gradually if you remain consistent and disciplined. It’s important to take your business seriously and treat it as such. Wait for end of the month to get a salary as you would when employed. With 3432 shillings at the end of the month there’s growth from an initial capital of 1000 shillings. At this point take a portion for yourself (e.g 1000 shillings) and use the balance to buy stock for the first week of the following month. Figures from the last week show there is potential to sell a minimum of 24 units per week so use that as your minimum weekly target sales for the next month and repeat as done in the first. With time your sales increase and so will your revenue.
MARKETING Even if you’ve never done this before it gets easier with time. There are so many avenues these days thanks to technology. Use social media and post at least twice a day in all the platforms you’re in. Don’t expect orders to trickle in immediately but don’t let that stop you. I’ve heard people say they got their first order from these platforms after a year, so be patient and manage your expectations. Spread the word to your family, friends and even those contacts on your phone you hardly talk to. Also walk into offices and other premises that fall under your target market and leave your contact information as you create a good rapport. Set your target sales and aim to push further every time you meet those targets. Focus on increasing volume of sales and adding different products to increase your scope of market.
BOOKKEEPING The term makes it sound complicated but it’s very simple. There are some complex systems out there but those are for businesses with complex organizational structures. Record everything related to the business. You need to know your total costs, revenue and monitor the flow of goods so that you know when to restock to ensure you keep up with demand. Keep a daily record of all sales, sales costs and all other related expenses. If you have access to a computer make use of spreadsheets or mobile phones that support spreadsheets. There is also the alternative of manually writing everything down but each should have it’s own book (Sales, Sales Costs, Expenses). Always make sure you have a back up of this information, could be a cloud account or email yourself that information. For manual records you can make scans or take pictures with your phone and back up. It’s always best to do a weekly summary so that your analysis at the end of the month is less stressful. Below are samples to guide you.
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