Are you planning to start a new business, either as a commercial business as part of your Indigenous corporation or as a social enterprise, or even as your private Indigenous-owned small business?
A for-profit commercial business, even a social enterprise where you reach out to external “customers” in an enterprise that generates benefit for your members, is quite different from a community-controlled organisation that provides services to members.
There are significant considerations such as the appropriate and separate legal structure that you would need that would separate the risks of an enterprise from the assets of your organisation. Even if you want to start a private business for yourself or your family, structuring is an important consideration so that you protect your family from the risks of the business. You need to take the proper advice about how to manage these risks.
This article is about the steps you should take to ensure that your idea for the enterprise or business is feasible, and how to set it up so that it has every chance of success.
Take these 5 steps as you start your considerations and planning.
First, make sure that you understand what it takes to be in business for yourself, and assess your own strengths and weaknesses so that you can be prepared, and prepare.
This step is all about taking an honest assessment of the physical and psychological resources of your organisation in taking this big step. Are you ready for it?
Consider questions like these:
- Does your CEO or the Board have the necessary experience to oversight a business?
- In all probability, you will have to hire a business manager – what are your capabilities in working with this person, providing oversight across their work, and ensuring that they stay on track?
- Do you fully understand the risks involved in running (and possibly in the failure of) a business?
- Do you appreciate how much time will need to be devoted to managing and providing oversight on the business, at least in the early years?
- Is everyone in the organisation supportive, and will work as necessary to help when it needs help?
- Do you have reserves of funds to set it up, and carry it through lean times?
Second, analyse the industry that you want to be in, and your own business idea, to make sure that you are fully aware about competition, regulation, and barriers to entry, as well as the opportunities and the niches you could take advantage of.
Take some time over this and consider what the chances of success your business idea will have. If a large enough investment, consider getting an expert to prepare a feasibility study.
You need to consider the characteristics of the industry. Are there any barriers to entry? For example, some industries have barriers to a new entrant in the form of licenses or other physical restrictions. Does your chosen industry have any such barriers? Other relevant characteristics of an industry might be large-scale factors or other disruptive factors. For example, anyone wanting to start a taxi business had better be aware of what is happening in the ride-share or Uber market.
You need to check the competition for your business idea. A regional town with a large number of tourism operators may not be the best place to open another tourism business unless you have a significant point of difference from the others. What are your competitors like? Are they well capitalised and can, therefore, undercut you? Are they efficient or inefficient? Do they market well and what will you do that makes your business different?
Third, before you even start, before any lawyers or incorporation, design your business model.
A business model is a model of how your business works from producing your offering to the relationships it needs to have, to the marketing and the internal administration.
This usually comprises of:
- Your customers – who are they? What problem do they want what you sell to solve? What segments can they be organised into and what are the differences in what they seek?
- Customer relationships – how do you contact them and maintain relationships? How do you satisfy their needs on an ongoing basis?
- Channels – how do you deliver what you deliver? What are the (multiple) touchpoints you have with your customer?
- Value proposition – what sets you out as different from the competition? How does this benefit the customer?
- Key activities – what are the key activities in your business? What are the main services or products? Is production or marketing or sales key activities? What about financing and record-keeping?
- Key resources – what do you have that are key resources for your business? Is it the know-how and the intellectual property? Is it the authenticity of an Indigenous business?
- Key partners – who are the key partners? What do they contribute and what do they need in return, if anything? How do they assist?
- Revenue streams – what are the main revenue streams? What are the characteristics of those revenue streams in terms of stability, cash flow timing and so on?
- Cost structures – what are the significant costs? How are your costs structured – fixed costs versus variable costs? How much does it take to do what you do? What is your break-even point?
As you can see many of the business model components are connected to each other. How you decide to model your customer relationships, for example, may dictate what channels you choose.
Fourth, start planning. Plan the legal structure, your budget, your business plan. Be prepared.
Remember, businesses don’t plan to fail, they just fail to plan. Statistics always show that up to 80% of businesses fail within the first 5 years. Avoid that statistic by weighting everything you can in your favour, and one of the most reliable ways to do this is to prepare a detailed business plan and stick to it.
At this stage, you should also look at your legal structure, especially how the legal structure can protect your non-business assets. Remember, if the business went into liquidation, and you are not structured correctly, all the non-business assets previously built up in your organisation could be at risk of being sold off to pay creditors.
Then finally, the fifth step is to remember all the boring details – registrations, contracts, licenses and so on.
This is where you should get professional advice, if you haven’t already, because the smallest slip-up could put the business at risk.
If your Indigenous organisation is thinking of starting a new business or social enterprise, please recognise that it is a new and different experience from running the community-controlled service-providing organisation.
Go through these 5 steps so that you can be best prepared.
If you need help in assessing your business idea, preparing a feasibility study, or writing a business plan for the success of your business, please contact me by email at email@example.com or call our office on 08 9242 2085.
If you are an individual who would like to know more about how to start a business, my video training How To Start Your Own Business, is available as an online course from my mainstream business training website Teik Oh Dot Com. Through a series of instructional videos, I drill down each of the 5 steps so that you work with me in real time and take each step at a time. The course also includes:-
- A worksheet on assessing your personal readiness
- A bonus video on You, Your Business, Your Purpose, Your Effort – the four foundations of your business success
- A worksheet to help you test the feasibility of your idea
- Planning worksheets including Contents of a Business Plan and a One Day Business Plan Worksheet
- An implementation checklist
- A checklist to help you choose an accountant
- A checklist to help you choose a lawyer
- A checklist to help you choose a web guy
- A bonus worksheet on how to write Position Descriptions and Organise Your Team
If you want to start a business but are getting really confused about all the conflicting advice you are given, join me on this course and you will get organised! Click here or search for https://teikoh.mykajabi.com/store/r9LPHc6V to find out more.