The 21st century has brought change to virtually every aspect of modern society. And while change can certainly be hard, it creates a wealth of opportunity for the creative entrepreneur. New needs, pains, and problems are emerging all the time. The entrepreneur who braves the risks and provides solutions to the problems has the potential to create a prosperous business.
In thinking about how to start a small business, you must carefully examine this changing landscape and identify a problem you think you can solve with a product or service. Here are four of the essential steps you should consider as you make your plans.
Step One – Generating Ideas for a Small Business
How do you come up with ideas for a small business? How can you capitalize on the emerging needs and issues brought about by changing times? You must become an expert observer of problems.
People have problems when their needs are not being met, creating an experience of “pain.” Conversely, when people have what they need, they experience a “gain.” Your job is to find ideas for a small business that will minimize pain and maximize gain. Consider how some of these frustrating problems have been solved by others to spark your own imagination:
- Health problems – flavored bottled water, animal face masks, noise-canceling headphones, a bicycle for every budget and the repair shops to go with them
- Future problems – Tesla cars and solar chargers for when the hydrocarbons run out
- Evolving needs – cloud storage as our information collections expand exponentially
- Making tasks less unpleasant – clumping kitty litter, leaf blowers, pressure cleaners
- Valuable upgrades – recycled toilet paper, boutique beers, colored running shoes
- Fear-based needs – cosmetics, vitamins and alt medicine, body augmentation
Try keeping a journal or list of problems and pains you see emerging as times change. What gains will people experience if they overcome these obstacles? What features of your product or service will ease their pains and provide desired gains? Once you have a short-list of ideas, test them out on a few likely customers and go with the one that generates the most enthusiasm.
Step Two – Write a Business Plan
Once you have an idea you’re excited about, you may wonder how to write a business plan. Trust me, if you need to raise capital, your bank will want to see a plan. Here is the most effective way to do it.
A Swiss business consultant named Alexander Osterwalder devised a template that is available for free and is used by independent entrepreneurs and large businesses worldwide. In fact, Nestle developed its Nespresso pod coffee system using this very template.
Known as the Business Model Canvas, the template contains everything you will need to know to write a business plan on one page. It can be your checklist as you gather information and your scoreboard as you track the progress of your enterprise.
This is what it looks like:
Let’s look at how to use it in logical steps, starting with the customers you will sell to.
- Customer Segments: Who can you create value for? Whom are you helping to solve a problem? Describe them with a broad brush at first.
- Value Propositions: What problems will you solve and how? How will you uniquely help? How will you fix pain or create gain for your customers – create value for them?
- Channels: How will you deliver your product or service to your customers? How do they want to be reached, where, and by whom?
- Customer Relationships: How do you plan to establish and maintain these?
- Revenue Streams: What will customers be willing to pay, and what kinds of revenue will you generate?
- Key Resources: What equipment, assets, or other resources will you need to produce your product or service?
- Key Activity: What unique activities will you perform that create value for your customers? Ask yourself what absolutely cannot be outsourced.
- Key Partners: What you can efficiently outsource? Who will be your partners, suppliers, those that can help you?
- Cost Structure: What will you spend to deliver your value proposition? What costs are involved in creating and delivering your product?
That’s it – this will capture everything you need to plan and develop your business. I suggest you get a whiteboard and lay out your business plan canvas on that. Then, with the aid of an erasable marker, you can make modifications as you test different approaches.
Step Three – How to Name a Business
If you consult the internet, everyone, even the government, has an opinion on this topic. I will attempt to sort the wheat from the chaff and give you seven of the most important considerations for how to name a business. This is not a trivial subject since, in this age of social media, the wrong name can limit your business in ways you can hardly imagine.
- First, pick a name that resonates broadly with the products or services you are operating. “Bake Wise” indicates a bakery with a broad range, for example, or “Nuts and Bolts” for a hardware store.
- Second, pick something that sounds memorable. Say it aloud and consider whether it could become the next “Band-Aid.” Alliteration is good. Things like the “Junk Joint” or “Diane’s Delicious Diner” stick in people’s minds.
- Third, avoid web slang like Togs 4 U, Mindr, or DineL8. They’re difficult to spell and won’t show up in any kind of search.
- Fourth, also avoid initials like IBM or 3M or GM. These giants have been around for a long time, so they don’t need to be searchable like a new business does.
- Fifth, don’t limit your growth by being too specific. “Soupworld” lessens your ability to enlarge your menu, just as a specific geography like “Berkeley Bags” limits your expansion elsewhere.
- Sixth, a mashup is fine as long as it is not too gimmicky. Netflix and Evernote seem to have worked.
- Seventh, you can look to mythology for inspiration, but don’t make it too obscure. Nike, Hermes, and Mars are well known examples.
Once you have a name that ticks all the boxes, you may want to register it as a trademark for complete protection and global domination.
Step Four – Insurance for Small Businesses
Finally, consider how you can manage some of the risks associated with starting a small business. It may seem like overkill if you’re hardly out the door, but trust me, at a minimum you will need liability insurance for your small business, or you could get hurt. Even a hot dog cart could scald a customer or a catering event where you could start an accidental fire can cost you big bucks. If you have premises, consider building and contents insurance, which can often be bundled with liability.
How else must you manage your risks? The tactics will differ, of course, depending on the kind of business you run, and some coverage will be mandatory, so check with a relevant professional association. Some small businesses also use business interruption, management liability, cyber liability, and even tax audit insurance. Talk with your financial partner or your bank to find out what insurance you absolutely need. They will understand that your budget is tight but also what the minimum needs are to protect your interests.
And if you get stuck, give us a call. We were a new business once ourselves, and we work with thousands of businesses across the Bay Area. Fremont Bank has an outstanding team of bankers, loan officers, and investment specialists who are passionate about their respective crafts and love to help.