When starting a business, you need technical skill and loads of enthusiasm, but these are just not enough to create a lasting business. You need more than these to guarantee that your business will last and be prosperous.
Detailed Investigation before Starting a Business
When starting a business, you need technical skill and loads of enthusiasm, but these are just not enough to create a lasting business. You need more than these to guarantee that your business will last and be prosperous. The light bulb idea is just the starting point for the business, no matter how seemingly exciting it may sound. You will never get to understand what the business entails until you have carried out your research and done your home work to determine all the cost the business will incur even before you open for business.
It is very important to have an idea of what your forecast revenue would be for the next six months of doing business. This way, it will be easier to calculate how much you would need to borrow if you need financing. You can also use this to determine the source of the loan, as well as if the loan should include interest and principal. The financial forecasts can also help determine if the money should come from bank overdraft or line of credit. This is one of the most challenging phases of business, but it is also one of the most important phases.
Furthermore, it is essential to know your break-even point and to also establish your pricing. You equally must decide on how many sales that must be made each day to leave profit after running cost. You can easily find out if the risk will pay off by preparing the profit and loss projections. If the sales per day do not measure up to the running expenses, then it is pointless to give your time to the business. There are some very important steps you need to take before you start off any business. Check below for hints on what to do.
- What are your start-up expenses?
The first step to take is to find out what your start-up cost is. Some of the factors to consider while calculating your startup cost are accounting fees, money for stationeries, brochures, logo design, and so on. You will also have to consider money for construction and website design. Money for internet connection and computer are also very important considerations. What about equipment, fittings, and furniture? They are also very important considerations. Never forget also, the legal fees involved in leasing a commercial property. The money will also be required for paying tenancy bond. The first month of rent also needs to be paid in advance, and it should be included as part of the start-up expenses.
- List of your needs
Before the business can start, it is very important to plan all the services need to start the business. The seven key categories of cost or needs to be considered in your list are highlighted below:
- Equipment & capital costs
- Staff cost
- Administration costs
- Technology costs
- Professional cost
- Cost of sales
All the costs that are needed to keep the business running until it becomes self-supportive must be included in your list.
- What is your forecast revenue?
You need first to establish your price before you forecast your sale. While doing this, make sure you put into consideration what your competitors are also offering as price; this will give you an idea of how to make your price competitive. Make sure you are realistic while making a list. Make it a point to estimate how many items or service you can easily sell each day while doing this. This can tell you about your worst and best case cash flow scenarios. You may need the help of professionals while forecasting your revenue.
- What are your projected operating and start-up costs?
After the above issues are settled, then you should review your startup costs and revenue projections. Make sure all the assumptions you made are sound make sure you do not overestimate sales or underestimate costs; if you do, you may run out of funds very fast, leading to a situation in which your revenue is exhausted earlier than expected. Getting loans from banks, when your business is on the brink of running out of cash, will not be easy since banks take a long time to make loans available. You can go ahead with the business if all the items discussed above go as planned.