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Small Business Primer - Part 1: What Business Are You In?
Defining Your Business
Perhaps the single greatest mistake a new entrepreneur can make when they start a business is to not have a place to go. "Without vision you will die" may seem rather extreme, but as any smart business owner will tell you, it’s entirely true.
Sure, you could perhaps survive in the short term, but at some point you’ll stand back and ask "now what?" This first article in our series is designed to prepare you for that moment, and to get you started on the right foot so you don’t step on too many toes.
Failing to Plan is Planning to Fail
Much of the information contained in these articles may seem dry, dreary and unexciting. After all, we aren’t talking about how to make millions or figure out how to win clients over. In essence we’re doing nothing more than creating a foundation -- something most people outside your business will never see, let alone care about.
However, with this solid foundation and some detailed planning, you’ll be set! When push comes to shove and you need to make snap decisions about the future of your business, the decisions and outlines you put together at this early stage will be what carry you through.
What is Your Business?
One of the first things you need to define right up front is what your business is going to be. Are you going to sell custom plumbing parts, be a plumber or consult on the plumbing mistakes of others?
There are some fundamental decisions you need to make before you even set out to define exactly what your business is and what you will sell. The companies that have lasted the longest (few companies have life spans longer than that of humans) have always been borne of knowledge and passion.
Passion
If you’re passionate about an idea, you’ll have the drive to carry it through to perfection (or as near as any of us can make it!). So, if you’re passionate about plumbing, it probably isn’t the greatest idea to start up a pineapple distribution company.
Knowledge
Your next consideration, after passion, is your area of expertise. If you know nothing about a given industry, but have passion, you either need to get knowledge and expertise, or consider exploring another market.
What Type of Business Do You Want?
The next step in your business definition phase is to define the type of business you want. There are four main types of business:
- those that create products,
- those that supply products,
- those that supply services and
- those that consult.
A product-based company will typically require factory/production facilities, a supply chain, a larger work force, etc.
A supply company will need products to supply, as well as customers to supply the products to. Often they’ll need to constantly seek out new areas of demand in order to stay ahead of the game.
A services company, like most Web companies, will be extremely vulnerable to market interest which, as we all know, can shrivel up rather quickly. These businesses must constantly be on the lookout for new markets and clients.
A consulting company is perhaps the easiest business model, because it involves no product creation cycle. There is simply knowledge, and the search for clients who require that knowledge.
What Will You Be?
Let’s look at an example. If I have a passion for programming, backed up by a considerable amount of knowledge, there are several routes I could pursue.
- I could program software for people to use (a product-based company)
- I could set up an online store to supply programming tools to others, along with witty and insightful reviews (a supply company)
- I could offer my hand to complete custom Web development for clients large and small, the world over (a services company)
- Or I could found Penguin Consulting, a company which specializes in pinpointing the mistakes of others without providing real solutions
For now, let’s assume I am starting up Penguin Consulting because Penguins are cool, pun (sadly) intended.