Starting a business can be a motivating idea especially for first time entrepreneurs or employed individuals who are tired of the 8am-5pm job. It’s encouraging to start a business when you think about the freedom of not working 8-9 hours a day in a confined office, not having to report to a boss, and the possibility of endless profit.
Starting a business is a good decision, however, it can also be stressful, challenging and not as simple as it looks like.
I’ve personally started many business endeavors in the past couple of years. Some succeeded some didn’t. Aside from that, I’m also managing and catering to the internal business process of various clients. And with that experience, I’ve seen many businesses thrives while others closes down. I know for a fact that many will start a business but only very few will last.
I’m writing this article to share with the aspiring entrepreneurs, even existing ones, what are the things to consider before jumping in to the world of business.
1. Nature of the business
The first you need to think about is what will you offer. What are you going to sell in your business? In general, you can choose to provide the following: service, merchandising or manufacturing.
- Service – it can either be selling time and expertise, such as professionals, event organizers, IT, marketing, etc.; or it can also be restaurants, food kiosks, transportation, salon, spa, etc.
- Merchandising – also referred to as retail, wholesale, trading or distribution. Buy-and-sell of goods. Examples are grocery and department stores, retail outlets, online resellers, etc.
- Manufacturing – combining raw materials, labor and use of equipment, then turn it into a saleable product. Example are manufacturers of cars, gadgets, clothing, bags, daily essentials, etc.
2. Target Customer
Having a service or product to sell is not gonna make you profitable if you do not have customers who will buy it.
If you plan to start a business and you know what to sell, before you begin, study if there is a market for it. Identify who your customers are. Remember the saying, a product or service for everybody is a product or service for nobody.
3. Location
In many business events I’ve attended, I always hear this advice “location is everything”. “Location, location, location”.
Make sure you identify or look for the best location for your business. Your business must be seen by your target customer or at least near them.
4. Formation
Once you’ve identified what to sell, who to sell it to and where to sell it, now think about how you’ll form the business. You can choose on sole proprietorship, partnership or corporation.
- Single proprietorship – you’re the sole owner of the business.
- Partnership – you can divide the business with another person(s) which you will call partners. You need at least two people to form partnership.
- Corporation – you can register as One-Person Corporation (OPC) or divide the business with two (2) or more individual.
5. Capital
Capital is the amount or value you need to put in the business to get it started and operating. It can be cash or non-cash. To know how much capital you need, list down all the possible spending you need to make to start and operate, such as assets to purchase, renovation, lease payments, operating expenses etc.
6. Asset Requirements
When starting a business, plan the assets that you’ll need to operate. This may include the following example: computers, equipment, furniture, vehicle, etc. List down not only the item but also the quantity and price.
7. Lease, Renovation and Improvements
Next item to consider is if you will rent out a space. When renting, normally lessors require advance rent and security deposits which is equal to three (3) to six (months) of monthly rent. Also, rental space are usually bare and requires renovation and improvements. Consider these costs in your business plan.
8. Suppliers
Identity potential suppliers needed to produce the service or goods you will sell. Consider their price, location, reliability and operating hours.
9. Operating Expenses
Identify and list down all the expenses or spendings you need to operate the business such as salary, rent, office supplies, utilities, etc. Consider the monthly costs in your business plan. This step is also important in your capital requirement because normally you have to keep at least six (6) months to one (1) year of monthly spendings as capital.
10. Hire People or Outsource
In my experience, people management is one of the toughest job of business owners. This may be the reason why outsourcing is in demand. If you plan to start a business, include in your consideration if you will hire people or just outsource it. If you decide to hire, consider the salary and other government regulations you need to comply with such as DOLE, SSS, PHILHEALTH and Pag-ibig. If you consider to outsource, consider the expertise and reliability of the company you will outsource to.
11. Registration
After considering all the capital and expense requirement, before you start operating, make sure you have the registrations needed to legalize your business. At a minimum, you must have DTI or SEC, Barangay, Mayor and BIR. If you employees register to SSS, PHIC and HDMF.
12. Bank account for the business
Consider opening a bank account separate for your business. This is to simplify your record keeping and avoid mixing your personal to your business especially if you are a single proprietor. When choosing a bank, it must be accessible and available.
13. Marketing
Rarely a business sell without a good marketing plan. Marketing is one of the key factor why businesses succeeds, and why it fails. Choose the right marketing platform for your business.
14. Government Compliance
Another important item to consider, but often neglected, is the government reporting you need to comply with every month, quarterly and annually. I’ve seen many business succeeds but later on faced with government penalties due to neglect on this important item. Government Compliances include at minimum filing and payment of taxes, SSS/Philhealth/Pag-ibig contributions. As well as yearly payment of Barangay and Mayor’s permit.
15. Accounting and Financial Analysis
Last but not the least, when you start a business, ensure you have a reliable accounting and financial reporting process in place. Accounting is the language of business. To know what’s really happening in your business, you must have a reliable accounting and financial reporting system.
I hope this article has given you some insights on the fundamental items you needed to consider when starting and running a business. Feel free to share your experience and insight in the comment box below.
