Harmel Rayat started his own business—a successful investment company, focusing primarily on commercial real estate—so he knows just how daunting it can be. He also knows that the businesses with the best odds of succeeding are those founded on careful planning. A business plan can mean the difference between a thriving enterprise and a company that crashes and burns after just a few short months.
Aspiring entrepreneurs know this, but they may not know exactly how to go about business planning. As a recent Nolo.com article suggests, business planning encompasses several different steps:
– Determining what type of business best suits the individual
– Using a break-even analysis to see if the idea is profitable
– Writing a formal business plan, including both a profit/loss forecast and a cash flow analysis
– Finding sources of start-up financing
– Setting up a marketing plan
That may sound simple enough on paper, but in practice, it is anything but simple. Harmel Rayat shares some of his top tips below, hoping to make this critical planning stage easier for first-time business starters.
Knowing Your Niche
Harmel Rayat says that one of the first decisions an entrepreneur makes is what kind of business he or she wants to run. “Obviously, this means deciding what niche you want to be involved with,” Rayat states. “You want to pick an industry that suits your interests and your temperament.”
Knowing what industry to choose is important, but that is not the only thing Rayat means when he says entrepreneurs need to think about what kind of company they intend to start. “There is also the matter of the business’ legal structuring,” he notes.
A Smarta.com article illuminates this point, highlighting the importance of choosing between sole trader or limited company status. “Which you choose will impact on the tax you pay and how much legal and financial responsibility is laid at your door,” the article says. “As a sole trader you take all the post-tax profits but you are also liable for all of your business’ financial dealings.”
Studying the Competition
Harmel Rayat also says entrepreneurs need to size up their competition, remembering that no business operates in a vacuum. “You need to know who else is doing what you are doing, and how well they are doing it,” he suggests. “Know how competitor companies have stumbled, and try to learn from their mistakes. Look for ways in which they are underserving their clients, and try to fill that void.”
Some markets may be totally dominated by just one big company. If that is the case, entrepreneurs will have to work to establish themselves as viable alternatives. “If one company is dominant, try to do what they do better—and focus where it matters the most – on service,” says Rayat.
From there, Harmel Rayat says entrepreneurs who go to the trouble of formulating financial plans sometimes neglect one key, crucial component—themselves. “You need to think about how you’re going to pay yourself, or else the business is obviously not going to be sustainable,” he says.
The Smarta.com article speaks to this point. “With the best intentions of [funneling] profits straight back into the business, you’re going to have to eat, drink and put a roof over your head,” it notes. “Cut back on the luxuries but figure out what you do need to live on and include it in your outgoings. The bank or any investors would much rather see this than you going back cap-in-hand six months after you told them your business plan made sense.”
A good company needs a strong marketing plan behind it—and the marketing process begins as soon as you sit down to think of a name for your company. This is important, Rayat says, because rebranding can be expensive.
Rayat recommends business names that are easy to remember, to spell, and to say out loud. “It needs to be something that is conducive to word-of-mouth buzz and to online searching,” he says. “It goes without saying that you also need a corresponding online domain.”
Incidentally, Smarta.com goes on to say that business owners need not launch their companies at all if they are not going to do something to promote them. “No point having an amazing business idea if nobody knows about it – so how will you get your name out there?” the article asks. “Without a big marketing budget, start small and focus on building relationships. Use social media and network hard to start building a reputation with not just potential customers, but also local journalists, suppliers, fellow retailers, local business organizations.”
Harmel Rayat concludes by noting that launching a new business is something that takes much forethought—but that forethought lays a foundation for true sustainability.