Is Now A Good Time To Start A New Business?
Is Now A Good Time To Start A New Business?
An Interview with N. Michael Miller
Successful Businessman, Venture Capitalist and Published Author Answers Our Questions in the First of a Four Part Interview About Starting a New Business Now and Into the Early Part of 2011.
Business Talk Newsletter is conducting a four part interview with N. Michael Miller. Mr. Miller is a business owner, venture capitalist and published author. Mr. Miller can be contacted at StartYourBusinessHelp.com which advises new business owners with consulting, business plan preparation and other services.
This interview will consist of four parts:
(1) Start a new business now in this economy and the outlook for starting a business in early 2011 (in this Edition),
(2) Funding the startup of a new business (Oct 21st),
(3) Managing a new business and how to do it right (Oct 28th), and
(4) Understanding how to keep a new business financially healthy (Nov 4th).
Here is Part One of our Interview with N. Michael Miller.
BTN: Give us a quick summary of your background so our readers will understand where you are coming from.
NMM: Business owner, venture capitalist and author all come to mind in describing my background. If you wanted to know what really qualifies me in giving any new business owner advice about how to start a business, it would be that I have done it myself and worked with hundreds of people in helping them start new businesses. Additionally, I assist business owners in turning an existing business that is struggling into a profitable venture.
BTN: Our readers tend to be new business owners. The main question on every entrepreneur’s mind is this; is now a good time to start a new business?
NMM: Absolutely. There are some qualifying factors to that statement, but overall the business environment for startups is very good now and looking good going into the fourth quarter of 2010. The outlook for business startups in 2011 is even better, especially in the first two quarters of the year.
BTN: What are the critical factors that a new business owner should consider when starting a business right now?
NMM: I would say that a new business owner should consider four critical factors in starting a new business in the next few months.
1. The business startup has to be well planned.
2. The business must be well funded from the very beginning.
3. The business has to be well managed.
4. There has to be an absolute understanding of managing all areas in the operation of the business.
BTN: Well, let’s briefly take a look at each of those four critical factors and then spend some additional time on the first critical factor. What do you mean when you say that the business must be well planned?
NMM: There are two stages to business planning. The first is the initial planning stage. This is where the vision for the business becomes defined and focused. The second stage is the completion of a business plan. New business owners tend to do a bad job on the initial planning phase and completely skip the business plan. In my opinion, starting a business this way is a formula for failure.
BTN: So how does the new business owner avoid the formula for failure?
NMM: The first stage, the initial planning stage, takes experience and knowledge. If the new business owner has never planned for a business startup in the past, they must get some help. They should seek out someone like myself who is a business startup expert, an accountant or attorney that has new business startup experience, or they should seek out a partner to help them start the business.
The second stage, the business plan completion stage, is a complex task. If the new business owner has experience completing a business plan, then there are several business plan software applications out there that they can use. I have developed a business plan software solution called ProBP. If the new business owner has never done a business plan, then I would certainly advise them to hire someone to do the business plan for them.
BTN: So how does the new business owner avoid the formula for failure by having someone assist them with the initial planning and business plan completion stages?
NMM: The initial planning stage translates the dream to reality. This is the beginning of the overall plan of what the business will be, how the business will operate, who will manage the business, what products and/or services will be offered, how will the products and/or services be offered, etc. The vision for the business becomes truly focused on what ultimately will be developed.
The business plan stage takes this vision for the business and documents it. The business plan explains the business concept, management and operational plans. Then the business identifies the target market, describes the marketing plan to reach this target market, defines the expense and revenue picture in the financial plan and finally provides all of the details for the use of the business plan. Those uses will be for development of the business, the operation of the business and/or financing the business. It usually is a combination of these. The business plan is an excellent management tool to ensure that the business is on track with the plan and that the business will be making the profit that the owner and the investors/partners are anticipating.
The main point that I want to make is that although both of these stages are critical and complex, they can be managed and completed by competent people. The new business owner must not, ever, skip these stages.
BTN: You said that the second critical factor was that the business must be well funded from the very beginning. Can you explain to our readers what you meant by this statement?
NMM: From my own personal experience in funding my businesses and fifteen years in venture capital funding, the number one reason that businesses fail is not being properly funded from the start. Over the years, I have seen good potential businesses fail because the owner underestimated the amount of money needed to start the business and keep the business running until the business becomes profitable. The second part is the most important part. I have seen numerous business owners properly estimate the startup costs, but these business owners were too optimistic about the revenue stream and thought that the business would make a profit sooner that it actually occurred. As a result, they ran out of operational money. You can’t get the business going if the landlord locks you out or if you can’t pay your employees and bills.
This comes right back to the two planning stages and the importance in these stages being done properly. These stages help to identify the startup costs and the financial plan clearly shows expenses and revenue paths to profitability. I have rarely seen new business owners in trouble when they do a good job with the two planning stages.
BTN: That is a strong statement. So what about the third critical factor? What do you mean when you say that the new business has to be well managed?
NMM: There are a couple of points here that I would like to make. A person must have experience in the business that they are starting. I see too often that individuals try to open a business where they have no experience. Sometimes having a partner with the experience overcomes this problem.
Later, I will go into detail about what I have seen successful new business owners do in the process of managing the new business. Your readers will want to mirror a lot of these habits.
BTN: What about the fourth critical factor, that there has to be an absolute understanding of managing all areas of the operation of the business?
NMM: The businesses that continually close their doors forever are the ones that teeter on the brink of financial ruin in the early months. There are many symptoms that identify this problem. We are going to address this in the final interview in detail, so your readers need to come back for that information.
BTN: For the rest of this part of the interview, let’s concentrate on the first critical factor for business success, the part about planning the business. Then we can address the other three critical factors later.
Drawing from the years you were in venture capital funding and as a business owner, describe in more detail the two planning stages.
NMM: Working in venture capital, I saw hundreds of new business owners. I enjoyed it because it allowed me to draw on their excitement for the startup venture. Most of time, these business ideas were all over the place in terms of the owner being able to describe what they plan to do. So the initial planning stage is taking the time to focus all of these wild ideas and crazy dreams into a workable vision for the business startup.
When I work with a client on this initial planning stage, I concentrate on what the client is really trying to accomplish and what the income goals are for the client. This helps me to start seeing the business as the client sees the business.
Then through a series of questions, I focus the client on the business operations, markets, management and the financial details. This all culminates with the completion of the business plan.
At the end of the planning stage, I want my client to go to the next step with their eyes open to what those next steps are, the risks, the challenges and rewards. I believe in holding the hands of my clients as they get their business ownership legs under them. To go into business with confidence, a new business owner must have the knowledge and experience on his or her side. I like to provide that to my clients.
BTN: Let’s talk specifically about starting a new business in this economy. Is it a good time to start a new business or should individuals wait until the economy improves?
NMM: Now is an excellent time to start a new business. I would have to say that the service industry and professional type businesses have an edge over a new retail business. But any well planned, well run business can start now and be successful.
BTN: What do you mean about the differences in starting service and professional businesses over retail?
NMM: Retail business operations have a tendency to be heavy on the expense side and daily operations are costly in comparison to other types of business ventures. For instance, there is a trend now for new business owners that are starting service related businesses to do so from their home which cuts out a tremendous about of expense.
BTN: What do you tell new business owners when they ask about starting a business in this economy?
NMM: I tell them that 90% of Americans are working and those are your target market. I know all of the doom and gloom stuff and I read the papers and see the news. But I know for a fact that businesses are making money and that unlimited opportunity exists. All a person has to do is focus that idea, plan the business out well and develop a good plan to start.
BTN: It sounds so easy to start a new business when you say it like that.
NMM: I don’t mean to say that it is easy at all. I am just saying from years of experience that you have to do four critical things right and the rest will fall into place.
A person still has to have a business where there is a demand for their product or service, there has to be a good target market and the business has to be an industry that is performing well overall. But once again, the business planning process identifies all of this before too much time and money is invested in the business startup.
BTN: It seems that you are a real advocate that new business owners should have help in starting a business. Why don’t you elaborate on this?
NMM: Starting a new business has a tremendous risk/reward consequence that should never be entered into lightly. The result of starting a new business can do many things. It can provide a person and their family with financial rewards not possible otherwise. It can become the source of pride, freedom and power to overcome most of life’s financial challenges. On the flip side, It can also devastate an individual’s financial picture. The long hours and the pressure to not fail can also jeopardize family relationships.
No one should go into the business startup process unless they are going in with their eyes wide open and with the knowledge of what needs to be done. There is a saying that goes “If you are the smartest person on the team, your team is in trouble”. This is true in starting a new business. I have witnessed those individuals that “know it all” jump head first into the business only to wind up broke and devastated when the business fails. The sad part is that most of those individuals never really understand the real reasons they failed.
By getting help in the very beginning and getting started right, the new business owner saves thousands of dollars in mistakes and waste. Expert help actually does not cost anything in the long run.
Be sure to watch for the October 21st issue of Business Talk Newsletter when our interview with Mr. Miller will continue with an in-depth discussion about funding a business the right way from the beginning of the venture.
Call today to find out for yourself how the services we offer can help you and your business can get started successfully. You can receive FREE COPIES of Mr. Miller's books How To Start Your Own Business and Stepping Your Way Through Venture Capital Funding just for calling and exploring the possibilities.