Starting a small business
When starting a business in New Zealand you will need to follow steps which are universal to entrepreneurs globally, but us Kiwis do also have some specific steps which need to be followed.
Steps for evaluating yourself as a business owner
Why do you want to start your business? For example, having flexibility and freedom as a priority is a very different goal to wanting to earn extra money. Once you have your reason, dive a bit deeper with questions like:
- What skills do you have?
- Where does your passion lie?
- Where is your area of expertise?
- How much can you afford to spend?
- What sort of lifestyle do you want to have?
You want to create a solid foundation to start developing a realistic business idea.
There are some clear indicators that you probably shouldn’t start a business:
- You’re not self -motivated (Probably the most important factor)
- You get overwhelmed under pressure
- You don’t want to do the research
- You’re running away from your current circumstances
- You want to be in total control
Come up with your business idea
The first and most important step for starting your business is coming up with your business idea. Without this you’re a non-starter. There are infinite possibilities, and you don’t necessarily need to be limited to areas which you are already familiar with, or products you are already bias towards.
Whether you’re trying to sell a product or a service, you want to ensure your product will have repeat customers. It is much easier to entice returning customers, than trying to continuously hunt through a limited pool of new customers.
Some areas you can brainstorm are:
- Is there a better / faster / more efficient approach to a current business?
- Take a fresh look at an industry you’ve never been part of. A new perspective could revolutionize an industry stuck in its ways.
- Fix a problem. Has something always bugged you? Maybe there’s a profitable solution.
You can also look into joining networking groups for other budding entrepreneurs. There will be plenty of brainstorming going on, and you may even find a potential partner to start your new business venture with.
Once you’ve found your unique selling point, you’re ready to progress.
Do your market research
You will want to see how many competitors are in the market, and if there aren’t any potential reasons there aren’t.
You don’t want to rely purely on secondary research. While you can usually find plenty of information online, you still want to get firsthand information regarding your idea. Set up surveys both online and via phone calls. Gather a broad, random net. Don’t only survey people you know.
Get feedback from a business mentor
The old saying still stands: Two heads are better than one. When starting your business reach out to potential mentors who you can bounce ideas off of, and get objective feedback from. This should be an experienced business person with expertise in new ventures and have an understanding of the steps needed to validate a business idea or get a new business off the ground. If you don’t have someone in your direct network, ask friend and family if they know anyone, alternatively there are local organisations such as Businessmentors.org.nz who can facilitate introductions.
Make sure your finances and cashflow in order
Do you have the money to start your business, or like a lot of entrepreneurs you may have to discuss finance options with your local bank. The major banks will all have specialists to help you through the process, and will offer business specific packages such as the ANZ Business Start-up Package
You will want to setup a financial model. Establish an educated guess as to what your ongoing expenses will be. Be sure to include every possible expense. There will always be unexpected costs such as:
- Shipping costs
- Increase in rent and utilities
- Higher stock prices when you can’t purchase in bulk
- Outsourcing expertise
- Employee benefits or perks
- Product loss and damages
Have a plan for how you will keep track of your finances - how will you accept payment for your product or services? If you plan on allowing debtors you will also want a robust system for managing them.
You will also want to setup business insurance to ensure you are covered for the worst.
Create your brand and following as early as possible
You will have a much stronger launch if you have a following of people ready and waiting for your product.
Create a logo which will help people identify with your brand and product, as well as a basic brand identity. What colours plan to you use, fonts, language style. You will want everything to be consistent across all mediums.
Make your business official
There are a number of practical steps you will need to complete to start your business. The Ministry of Business, Innovation and Employment is an excellent resource to help you through the following steps:
- Choosing a business structure - The most common are sole trader, partnership or company. Each structure offers various benefits and considerations.
- Get a New Zealand Business Number
- Secure your business name
- Look into regulations
- Register your company
- Register for GST
- Register you trademark
Build a strong team
Not many businesses can run as a one man band. You’ll want to surround yourself with good people, who are able to perform. The main characteristics you will end up considering will be:
- Financial partnership – You may have come up with the concept, but you may need additional financial support. In this instance you may consider forming a partnership. If you do go down the road of revoking part of your power, you’re going to want them to have more money than you do!
- Similar values – Any business will struggle to function cohesively if your employees don’t share your values. This is never truer than for a small business starting out. When starting out your team need to share and believe in your vision and how you want to achieve it.
- Leadership – Initially you will primarily be the leader. The person most engaged with the business, and ensuring your team are engaged and productive. When choosing your initial team, aim to find people who will be similarly engaged, and as their specific teams expand will be able to step into step into a leadership role.
- Strong Sellers – When it boils down to it, you need to sell your product/service to keep your business alive. Find people who are able to build a lead pipeline, nurture it, and be strong closers when the time is right.
- Common sense – You’ve likely heard the terms “Book Smarts” and “Street Smarts”. Unless you’re hiring for a profession which specifically requires a degree, put more influence on the latter. Having a degree doesn’t necessarily qualify someone for the actual job, and someone with common sense and who is a hard worker will be far more valuable than someone with a fancy degree who lacks ambition.
Once your team is in place be sure to set up some official training. Your staff must know exactly what you expect, and how you expect it to be achieved.
Choose your suppliers / vendors
When you're searching for suppliers, you'll have to choose carefully. These companies will be critical to the workings of your business, so it's vital to find businesses you can trust. Once again, do your research. Ask potential suppliers about their experience in your industry, and their track record with existing clients.
Managing stock and stock levels
When managing your stock, consider quantities, sales and storage. If you have slow-moving stock, consider holding lower quantities of items to prioritise cashflow.
You will need a place to store your items. Consider your options:
- Storing items in your home - Many budding entrepreneurs start out keeping their stock in their homes. This might work in the short term, but you will quickly find that it becomes inefficient, and you will soon outgrow the space.
- Lease a warehouse – This commercial route can be daunting for new businesses. Most commercial leases require a long term commitment, and will often initially simply be more space than you will need initially
- Self Storage - A flexible solution for your business is renting a storage unit at a secure self storage facility. This way you are not locked into any long-term commitments, and you will be able to grow your space with your business. At Kiwi Self Storage we offer units all the way from 6m3 to 140m3
What to should consider when buying stock:
- Shelf life
- Ideal quantities, including minimum acceptable stock levels
- Ordering schedule
- Lead time on stock deliveries from suppliers
- If your stock needs are predictable, whether you can set a fixed quantity or interval for reordering stock
- What terms of payment you can negotiate with your suppliers
- What payment terms you set to manage debtors
As a small business you can likely get away with a manual stock management system. This could be as simple as:
- A stock book to record the items you have bought and sold
- A reorder system based on your stock book
- Labels or codes for each item in your stock, including information about the value of each item, when you received it and its location.
As you expand you will want to move to a more advanced computer-based system.
When it comes to stock levels, you need to ensure you are keeping up with demand. Nothing frustrates customers more than not being able to order a product when they need it.
Starting your business is the first step. Once you’re up and running you will want to step it up a notch and grow as much as possible.
To help your business grow you can:
- Learn about your customers
- Make customer service a priority
- Build on your relationship with current customers to establish brand loyalty through touch points such as social media and newsletters.
- Attend industry events including networking functions and trade shows
- Ensure you focus on professional development for your team
- Evolve your product by taking on feedback from customers
- Learn from your mistakes, and continuously refine your strategy
Now, as Walt Disney once said: “The way to get started is to quit talking and begin doing.”