Ever since she was a small girl, Geraldine wanted to have her own business. As she grew up she gradually decided that, as she loved beautiful clothes, she would save up her money and open a boutique.
By the time she was 25, Geraldine had saved enough money to realize her dream. So she set about finding a vacant store, securing a long lease, buying fittings and fixtures and bringing in stock. By the time opening day came, Geraldine was tired, broke but happy. She had realized her dream; she had her own business.
One week after opening, reality had begun to set in. Geraldine had begun to realize that being business meant more than having a shop full of stock to sell. She realized she needed customers too.
She had excellent knowledge of fashions, fabrics and stuff like that, but she had no skills or knowledge for getting customers. She had no advertising or marketing skills and she had no customers, nor any idea how to get them.
But she also realized that she had upcoming bills to pay, store rent, telephone, utility bills, insurance and a host of others. But she had no money to pay them because she had no income.
Slowly she began to realize that a business’ greatest asset is not its stock, its real estate, its money in the bank, but its customers. She realized, very sadly, that without customers, there is no business.
This is the same story repeated many times over each week. It is the sorry truth that so many people go into business unprepared that 95% of new businesses will fail in 2 to 3 years. Only about 5% survive this time and only about 1% thrive.
Why is this?
To survive and thrive in business takes not only the skills and experience related to that particular business, it takes a multitude of other, general business skills. It takes training and experience. Enthusiasm, while important, is not enough. 100 years ago there was nobody to teach people how to fly an airplane. It was a case of jump in, start her up and “do the best you can, flying by the seat of your pants.” In business today, that’s not good enough.
You can get training and experience by working in your chosen field for a few years. Get paid to learn. Watch the boss make mistakes, and learn from them. Watch his successes and learn from those too. That way you don’t have to pay for the mistakes you might otherwise make. Learn the “secrets” too, if you can.
There’s an old saying, “Build a better mousetrap, and the world will beat a path to your door.” Not True! Even the finest mousetrap, motor car, and airplane, all have to be advertised, publicised, marketed and sold.
For Geraldine, it is now beginning to “gel.” She now knows that you need to advertise and market your business energetically, especially when it is new.
But what if you are like Geraldine? She has spent all her money on setting up her store and is now broke.
Shame on her!
You must always count all the costs before you start. Above all you must count the entire cost of setting up your business, that’s all of the establishment costs right up to opening day. That includes a generous allowance for advertising, promotion and marketing, as well as for personal living costs.
To give yourself a reasonable chance of success you must also factor in at least 6 months operating costs for the business and 6 to 12 months personal living expenses for yourself. Don’t expect to be taking home profits in the first few months.
If you calculate your business will require $8,000 a month total expenses including rent, wages for employees, power, phone, advertising etc., and you can get by on $500 a week personal expenses, then you will need around $60,000.00 in the bank or on hand on opening day. That’s the reality of starting a business.
When you buy a business, you usually pay a lot more than you would to set one up. That’s because you are (hopefully) buying an immediate income from an established and successful business. The seller is trading that immediate income for cash up front.
The alternative, if you cannot put up the needed resources, is the start your business part time, whereby the risks are lower, the overheads are lower and you have some income from a job as a backstop.
So what do you need to calculate?
You need to calculate the expenses of finding and renting a store (not the rent itself), the cost of fit out (furniture, shop fittings, equipment, floor coverings etc), stock to start, utilities connection and deposits, wages during set up (if any), advertising and promotion before launch.
Then you need to calculate all the ongoing expenses for a minimum of six months including store rental, wages, utilities, advertising and marketing and your own “take home” allowance for personal expenses.
That’s just for starters!
Now you need to investigate and decide on the best media for your advertising. And what a choice you have. There’s local newspapers, major city newspapers, national newspapers, magazines, Yellow Pages, billboards, home delivered fliers and catalogs, radio, TV, and direct mail.
Will you write your own ads, or have an agency do it? What offers will you make to attract customers, and how will you make them? Will you compete with others in your market on price; quality; service? What will it be about your business that makes you unique, puts you head and shoulders above the rest?
How much will you spend on advertising and marketing? Will it be a fixed monthly budget, or a percentage of turnover?
Will you use passive advertising, or active direct response marketing?
What about location? Will your business be better suited to a mall location or 5 miles out of town?
All these questions need to be asked, and answered, before you spend one dollar on setting up your business. If they are not, you run a strong risk of losing every dollar you spend on setting up the business. You need to draw up a complete business plan and a marketing plan, for sat least the first 12 months you’ll be in business.
And what happened to Geraldine? She invested less than $30 on a manual “The Retailers’ Bible” to help her get her business back on the road and, 5 years later, is a very happy and successful businesswoman.