People running successful enterprises come in all shapes and sizes, from all backgrounds, all ages, with skills, passions, and capabilities in any field one can imagine. Anyone can run their won business and be successful given a basic determination to do and sustain the act of doing for a period of time.
Here are some pointers for those considering starting their own new enterprise, or for helping others to do the same.
First and foremost, you must be aware of your strengths and the direction you want to take. Then use all the knowledge you have and realise how your natural capabilities can be used to best effect in defining and providing your own services or running your own enterprise.
1. What’s your product or service?
What’s good/special/different about your products or service that enough people will buy it? And importantly is this something that you have a real passion for? All successful enterprises are built on doing something the owner has passion for.
2. What does it cost to make/buy in/provide the product or service?
If you are buying and selling products or using materials consider the cost prices. If the main resource is your own time then attach a cost to your labour that reflects your available time for the work and the wage you need to draw. Divide your required annual wage by the number of work hours available to you, and this is your notional hourly labour cost.
3. What price will the product/service sell for?
Ideally small businesses need a healthy profit margin or mark-up – doubling the cost is good if the market will accept it. A mark-up of less than 50% is cause for concern unless you are selling products in relatively high volumes or values.
Price your products/services according to what the market will pay, not according to your costs.
Take into account your competitors and what they charge and their relative quality.
Consider the tax involved in the sale
4. Who will buy the product/service?
It is important for you to Identify your customers and market. Test your assumptions: this is a critical part of the proposition and generally benefits from more thought and research to confirm that a big enough market exists for your idea. Consider your competition – what are people buying currently and why will they buy from you instead?
5. How much/many do you need to sell in a year? And how many customers do you need?
This is a vital part of the proposition to confirm that the gross profit (the difference between costs of bought in products/labour and sales revenues) covers your/their financial needs (including a living wage and other fixed costs of running the enterprise. Again remember the affect of GST on your selling prices if applicable.
6. How will people know about the service/product?
You need to understand what advertising/marketing/enquiry-generation is necessary – activity and cost. There is usually a cost for generating new customers, especially in the early stages of a new enterprise. Once the business is established, say after six months to a year, ‘word-of-mouth’ referrals are for some businesses all that is required to produce new customers – especially those based in a local community, but virtually any new enterprise requires marketing at its launch.
7. Does all this add up, and better still provide a cash surplus at the end of a year?
if so then it’s probably a good business model.
Hope this helps…