Open a business: Where to start and the mistakes to avoid?
The decision to open a business remains a decision that for many generates anxiety and fear, for others it is a source of hope and fulfillment of a dream. In any case, it remains a path that must be designed and above all addressed with the right priorities.
In fact, sometimes the lack of knowledge of what to do, or an excessive emotionalize, leads to proceed by trial, hearsay, advice often collected by those who have never done business, etc.
The consequence of this confusion is expressed in wrong decisions, gross errors, loss of time and money.
Open a business: Errors to avoid and incorrect priorities
Error 1) First VAT number
Opening the VAT number is certainly a fundamental step to deal with your accountant, however more and more the choice of the right tax regime and corporate structure depends on the type of project, the numbers involved, from the fact that there are collaborators or not, from the volume of turnover and purchases, from the necessary investments, and from their type, etc.
So before rushing to open the VAT number you need to make a series of considerations typically related to your business. With clarity on the business opening plan, the accountant will be able to help the future entrepreneur set up the project fiscally.
What happens too often, however, is that, faced with an underlying clarity on the opening a business plan, its developments, time and resources involved, expected results, the tax considerations, made with the trader, become prominent on business considerations.
Errors at this stage can still be remedied, but for sure it will be necessary to spend additional money to correct the wrong tax setting.
Error 2) Debts immediately
For the same reasons, even if the consequences may be even more serious, it is to think that the priority is to “find money”.
It is a fairly widespread belief, unfortunately.
Even in this case, however, there are many considerations to be made before going into debt:
- Is it really necessary? Is it really necessary in that measure? Are there any alternative choices that can allow us to open a business without investing any further? Today, thanks to the Sharing Economy or the Lean Start Up, it is possible to think differently about the project’s setting and, perhaps, not to cancel but substantially reduce the investment required.
- Is it possible to replace investments for missing skills with the enlargement of the team? It often happens that the necessary investments are simply required by the lack of key competences in the team that will take care of the new project.
- Is it possible to rethink the project in different phases so that phase A allows funding for phase B, and so on? In this way we immediately confront the market, greatly reducing the risk of the project.
These are just examples, not always applicable to all projects, but for direct experience in the field while helping people to open a business project or new profession, very often they are questions that have not been examined with depth, and the result is that the initial request for resources is considerably reduced, thus allowing to reduce the risk of the project and really allowing to find the necessary resources.
Error 3) Starting from the Product and not from the Customer
Mostly marketing error. Often those who start a project as an entrepreneur or professional tend to be very focused on their product or service. I do … We do … I offer … We produce …
In reality the real protagonist of the project, and who will really decide the success is only and only one: the customer.
And when I talk about Client, I do not speak of all, but I speak of a perfectly profiled customer, of whom I know everything: his fears, his needs, his desires, his problems, etc.
Too often instead the aspiring entrepreneur or professional is very prepared on the product or service and very little preparation on the definition of the target customer.
Error 4) Look for the brilliant or unique idea in the world
Joke of course but many aspiring entrepreneurs or professionals remain for years in the phase of continuous research of the brilliant idea.
The starting idea is certainly an important ingredient in the launch phase of a new activity, but the genius is not only in the idea, but also for example, in finding those elements of strength compared to competitors, when, for example, the product or service already exists on the market.
The damage is not that there are competitors, the real damage is when I have not thought about the reasons why the potential customer should buy my products or services compared to those of competitors. Or worse when the only answer I found is the lowest price.
Besides the idea it will then be important to have made reflections on the basic motivations of the future entrepreneur or professional and his team, deepened the business model at the base of the project, and as explained in the examples above, having defined the basic choices of its strategy of marketing.
Many good business ideas have been the result of painful failures because the only good thing was the idea, but everything else was missing.
Error 5) First fixed costs
Linked to the above, especially when the aspiring entrepreneur or professional tends to exceed 40/50 years, there is the theme of the basic choices underlying the project. Above all the fifty-year-olds, especially if they have gone through work experience in large companies in their professional life, have investment schemes that made sense in that world, but which are largely outdated today. For example, investments and Marketing strategies largely outdated by new strategies, with much more affordable costs and more measurable results, have in mind investments in fixed costs that can easily be avoided today.
So today it is possible, and widely recommended, to set up businesses trying to minimize investment without giving up on results such as contacts generated by marketing, or the use of certain spaces or structures.
For example, thanks to modern web marketing systems it is possible to generate profiled contacts without major investments such as the classic advertising campaign, or thanks to the outsourcing of logistics or other services (e.g. eCommerce platforms or marketplaces), it is possible to avoid certain investments and be immediately on the market.
In short, before thinking about the fixed costs, and therefore the necessary money, it is important to have set up the project with a modern approach to the business.
Open a business: Where to start and the right priorities?
And so including mistakes to avoid and wrong priorities, what are the issues to be addressed first of all and with what priorities to open a business?
We try to clarify in a simple and schematic way …
1 # Designing your Mission and Vision, starting from the motivations behind the project (Mission) and from where you want to go (Vision). These reflections are the basis for understanding and being aware of the basis on which the project is based. Weak motivations produce weak projects, confusion about where you want to go, too. These two aspects are much more important than the money available.
2 # Choose your Business Model. Having a business idea is a good starting point, but then we need to understand how to do business with that idea, with which customers, with which products or services, with which unique proposal compared to competitors, with which resources (human, knowledge, time and financial), with which team and collaborators, with which suppliers, etc.
3 # Define your own Marketing Strategy. Who is the Target Customer? Why should you buy from us? How will we find potential customers? What tools? With what resources? With which expected results?
4 # Define the numbers: Investments, Revenue, Expenses and Expected Margins, forecast Revenue and Exit, and provide the necessary liquidity and the timing of the project. Here we talk about the Investment Plan, the Income Statement, the Financial Plan, etc.
5 # At this point, the Accountant, in the light of the above, will be very effective in defining the corporate and tax setting.
6 # Maybe, in light of what has emerged, it will be clear even if a passage from a lawyer is needed to define contracts, guarantees, protections, etc.
7 # The Bank or the investor will have all the elements to decide if your project deserves the right trust.
8 # And then, the Communication Agency will be very effective in transforming the Business and Marketing Strategy into an effective Communication Plan.
And so on.
It looks like a complex path to open a business, in reality it only takes one step at a time, with clarity, determination and without skipping the steps.