The Four Questions you Should Ask Before you Start a Brick & Mortar Business
You’ve likely heard the statistics before, when it comes to the success of small businesses just two-thirds of business survive two years in business. Half of all businesses will survive five years, and one-third will survive 10. As a general rule, the longer a company has been in business, the more likely it is to survive. The first several years after starting a small business are definitely the toughest.
According to the Small Business Administration there are many reasons by businesses fail but one of the primary reasons is that businesses are started for the wrong reasons. Before you take the leap and sign a lease it’s critical that you have a well thought out business plan and have really addressed some key questions to ensure you are starting a small business that makes sense.
QUESTION 1 : WHY DO YOU WANT TO START YOUR OWN BUSINESS?
I know, I know this sounds like such a basic question but is likely THE most important. Is it because you want to be your own boss? or is it because you want to have more time to spend with your family? or is it because you believe that you can make more money by going out on your own?
From the start is is so important to have realistic expectations.
For example, and this is from personal experience, you will always need someone to staff your brick and mortar business. Someone to provide customer service, accept deliveries, meet with wholesalers and do the work of the business. If your hours are 8am-6pm everyday are you going to staff the business all of those hours? If you goal is to be able to spend more time with your family and you are a one person business it’s likely you’ll now be spending less time with your family. (Just a side note - you might be thinking, well, I am going to have employees so I don’t have to be at my business full time - employees cost money and mean increased responsibility, and that’s a whole other blog post).
Being your own boss sounds super sexy but that also means that everything is on YOU. If you have employees and someone doesn’t show up for work one day, guess what, you’ll either have to close your business or work those hours yourself. You have to ensure sales and customers keep buying and that your cash flow keeps you afloat. You have to ensure taxes are paid, permits are obtained and that you have workman’s compensation insurance. All of these things, are not fun.
I know, I’ve painted a grim picture but there are some VERY good reasons to start your business. If you are extremely passionate about a product or service that you can provide and by starting a business you are fulfilling a part of you on a personal or spiritual level, then you should start a business. If you can provide a product or service that fulfills a true need for your community, then you should start a business.
Bottom line there are many great reasons to start a business and many reasons not to start a business so get very clear on your “why”. If you can’t articulate your “why” just yet, keep working on it. It is okay to take your time on this. Talk it through with the most important people in your life but also try to get some feedback from other small business owners in your community.
QUESTION 2: WHO IS MY IDEAL CLIENT OR CUSTOMER?
If there is just one thing I want you to remember from this section is that not everyone is your client or customer. AND that is completely okay. No product or service is right for everyone. Leveraging this truth is the key to creating a base of customers or clients that know you, love you and want to buy from you.
If you are selling a product or service it’s critical to identify who the person is that you will be selling your products to. Use your imagination to create a very specific person in your mind of WHO is your ideal client/customer, this is called your Ideal Client Avatar.
It’s important to get really specific when it comes to describing your ideal customer or client. Ask yourself very specific questions, are your ideal clients men or women? How old are they? Are they married, single, have children? What are their past times or hobbies? Where do they like to shop? What is your ideal clients annual income? What are some of their core life beliefs? What other brands do they love?
When you can create an image of your client or customer you can begin to speak to them on a level as if you know them. Knowing them means you can better communicate with them. As Marie Forleo likes to say, “If you’re talking to everybody, you’re talking to nobody.”
QUESTION 3: IS THERE A DEMAND OR NEED FOR MY PRODUCT OR SERVICE?
To have a successful business there needs to be a real or perceived need for the product or service you are offering. The true business “sweet spot” is when there is high demand for your product or service and you can meet a true need that benefits your customers.
First and foremost get very clear on what you are selling and what problem it will solve for your customers. People are looking for solutions to their problems and they want to buy products or services that will make their lives better in some way. If the customer can’t connect or fill a need with what you’re selling, they won’t buy it.
As you’re thinking through what products you’ll offer ask some of these key questions about the products -
Does this product clearly show how it will help or satisfy a need? Is the product interesting or unique? What makes it different or stand out from other products? Does the product help you to do something faster or more efficiently?
If you’re unsure if your product or service will sell you can also ask for some feedback from potential customers. Also, consider if the product or service that you’d like to sell is available in your area or available online. Not so much to worry about competition but to measure the need. By knowing what is currently available it can help you to ensure that you position your product to be a higher quality or value.
QUESTION 4: HOW MUCH DO I NEED TO SELL OR HOW MANY CLIENTS DO I NEED TO BE PROFITABLE?
Before you start your business you’ll want to have a clear financial plan that estimates your business expenses and calculates the income needed to be profitable in your business. A clear picture from the beginning will help you to plan your finances and calculate needed cash flow.
You want to create a business that is actually profitable. I know, seems obvious but sometimes it’s the biggest challenge for small business owners. Nothing kills your passion or motivation more than a business that has a low profit margin. Your profit margin is the amount by which revenue from sales exceeds costs in a business. If you have a working idea of how many sales you will need to have or how many clients you need to serve to be profitable it will allow you to create a marketing plan to meet that goal.
Sales - Expenses = Profit (or loss)