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Monday, February 22, 2010

So You Want to Start a Business?

Many of us have had countless ideas about starting a business. I have also had the experience of being a banker and having people knock on my door for a loan to get their idea up and running. Having been on both sides of the fence, so to speak, I understand the perspectives of the entrepreneur trying to sell his or her idea and the banker looking for holes in the idea so as to protect the bank’s investment.

Remember, most people who start a business and make it successful are not any smarter than you or I. It is often said that success is the dividend of hard work, and in the case of starting and growing a business, I believe that to be true. Yes, there can be some luck involved, but in the end it is taking forward your idea based on an understanding of what will make your business a success and the effort you put in to making it a success.

Everyone has had a good idea from time to time, but it has not gotten beyond their imagination or a brief mention to family or friends. My experience in dealing with entrepreneurs is that they have generally had more than one or two ideas that they have acted on. If you look at the basic evolution of a business, it generally starts as being conceived by someone who then follows up with researching the idea and convincing themselves and others that it is a viable idea. Finally, they achieve their idea through the business plan that they develop and use as their guide to managing the business. In other words, we can look at the evolution of an idea as conceive it, believe it, and achieve it.

Let us take the idea of a coffee shop, say a Tim Horton’s. You noticed on your recent trip to Nanaimo, when you stopped by a Tim Horton’s, that cars were lined up waiting at the drive-thru and people were waiting inside to be served. You think…what a great idea if I were to open a Tim Horton’s in Bella Bella! You have conceived your idea; now you want to take your idea to the next step…to believe it is possible.

It is natural to become emotionally attached to your idea, but you must become a critic as well in order to convince yourself and others that it is possible. You will have to convince others, too, because you will need financing or other forms of assistance to convince the Tim Horton’s corporation that you can run a successful franchise here – construct the restaurant, hire the workers, and get it up and running. To do this, you must research your idea and find answers to numerous questions such as, do you have a location where you can build your restaurant? Can you get the workers needed? Can you get enough customers to generate the revenue required to pay back your loan, pay your employees, buy your supplies, pay your utilities, and pay yourself? Remember, you must sell a lot of coffee and donuts to make that happen! 

Once you have convinced yourself that the business can be successful, then you will have to put more structure to the research you did by preparing a business plan. You need a business plan to move forward. Don’t fret if you know little about a business plan, because you can get help in putting your business plan together. The important point is that you have done the research necessary to convince yourself and others that you can attract enough customers and sell enough coffee and donuts to make a profit after all expenses are paid. The business plan is basically a map that lays out your route to success. As the famous ballplayer Yogi Bera once said, “If you don’t know where you are going, you will end up somewhere else.” The business plan will outline a strategy to attract and keep your customers and lay out a budget which basically identifies where your revenue will come from and the costs associated with operating your business. 

Now, armed with your business plan, approach a bank.

Article by Jim Richardson, CEO of the Heiltsuk Economic Development Corporation (Bella Bella, BC)

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