3 Business Startup Essentials

If you’ve ever started a business or been involved in a business startup, you know the excitement it can produce. That excitement is a good thing as it helps energize those involved and promotes enthusiasm that is critical to the early life of a business. On the other hand, that same excitement can cloud peoples’ thinking and cause critical mistakes. In order to remove that risk and still keep the positives, there are some steps or business startup essentials that will help immensely.

Recognize a Reality

As much as we may like to think we do, we really have quite limited ability to visualize how our plans will unfold. Consider Proverbs 16:9, “The mind of man plans his way, But the LORD directs his steps.” Now I don’t know if you are Biblically literate or not, but even if you are not, this proverb at a minimum tells you that you simply don’t know everything that will happen. That means you will encounter the unexpected and sometimes quite frequently. That said, one startup essential is to remain flexible. A rigid mindset that will not allow you some leeway is a trap. For example, let’s say you are starting a service business that is targeting small retailers. What happens if you realize that the demand for your company’s services turns out not to be sufficient in this group? Do you give up, stay the course even though all the feedback says you are on the wrong track, or do you consider pursuing other markets as well? I’m not so interested in what your final decision is, but I am interested in whether you approached your startup with a flexible mindset that allows you to quickly make adjustments. The reality is that despite our best planning, we are not infallible and surprises will certainly confront us.

Capital Requirements Are Usually Underestimated

I’ve seen some very complex financial forecasts that predicted capital requirements on a highly detailed level. Guess what? They almost never are that close, particularly in a new or relatively new business. It always seems things cost more than anticipated or something unexpected arises. Perhaps you thought the initial inventory supply would be sufficient but discovered customer demand was much higher or that your product mix estimate was incorrect. The question is, “Will you have the financial capacity to survive these unanticipated results?” My suggestion is to plan on having much more capital available than you expect to need. The reason I say that is because of what we know as Murphy’s Law, “Anything that can go wrong, will go wrong.” Obviously that is not literally true, but the point is we will be confronted with problems we may have thought highly unlikely, even if we had considered them plausible. That we struggle to accurately estimate capital requirements is another business startup essential to recognize.

Have a Business Plan Framework

In some earlier postings, The Business Plan – Hold On to the Napkin, The Flexible Business Plan and Business Plan Framework I discussed how keeping things simple helped make your business more nimble. Remember that the fundamental concept for a business is likely to remain pretty consistent, but the details of execution can fluctuate on a daily basis. This is why I am a big proponent of maintaining a simple business plan framework that helps you maintain your focus while allowing for rapid changes. Not all would agree of course, but this is what I would call one of the most valuable but overlooked business startup essentials.

If you are in a startup mode, from the early planning phases to late startup, I encourage you to recognize that the unexpected will occur more than you think, your capital needs will almost assuredly be greater that you anticipate, and your execution will require you to be highly flexible to meet a changing business landscape.

AimCFO would love to help your startup or small business meet these challenges.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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