Small businesses exist because large companies have developed a method to meet the needs that do not reach everyone in a marketplace. In other words, small enterprises are small enterprises because large enterprises have not considered the pursuit of such marketplaces to be valuable. Large companies are looking for opportunities in established, mature markets. These would be markets that achieve lower margins but are also less volatile. As a result, the more dynamic and volatile markets remain for the smaller companies. This is part of why small businesses don’t last long, they compete in a constantly changing marketplace.
So what does that mean for you? It means that the opportunities that will exist for you and the company you want to open will be opportunities that require quality and tailored solutions quickly. This also means that a lot of work has to be done to gain market share for your niche. Leave any idea of providing a single product or service, you need to diversify your products/services, customers and possibly industries. To combat the ups and downs of the small marketplace, you need to diversify all aspects of your business.
Okay, now that you understand a little bit about the realities of the small business marketplace, the next thing is to look into how well your potential business matches with who you are. In the initial phase of a business, the founder is the business and the business is the founder. To provide the greatest value, the firm should be the embodiment of you and you should be the embodiment of the firm. The realization of a single opportunity should not be the only critical metric for starting a business. For example, a few years ago, I had the opportunity to open a frozen yogurt store in my city, modeled on a profitable model that worked well in other cities. I did my homework and found that for $40,000.00 I could have everything I needed to open the doors and sell yogurt. I decided against it for two reasons: 1. I live in a four-year area and didn’t want to have a feast or famine and 2. I’m not so crazy about yogurt. Well, the opportunity was there, and many of these stores have opened since, but I didn’t want to invest 80 hours a week in a frozen yogurt store.
So you have an idea that matches what you are and you have come to understand the nature of the small business market, how will you position your product or service? How will you meet the needs of the customer? The answer is somewhat set out above, but because of the nature of the small business market, you need to become a high quality, fast company. Small businesses have the advantage of operating in small, customized areas. Your competitive advantage will be your ability to meet the specific needs of your customers. As a small business, you don’t have a company that competes on price.
You are your business, and chances are good that you don’t have much capital behind you. This means that it is crucial to achieve a positive cash flow situation as quickly as possible. Cash is king and without it you have no business. The advantage is that the volume of quality work is low and the price is a peak value. That’s right, as a small business you compete in an arena with large margins. The mark on your products and services can and should be high. The market will let you know if you are too far out of range, but small businesses can expect a healthy profit margin. Individuals who don’t understand this are beginning to lower their prices in hopes of winning some sales, but what they don’t realize is they are thinning the market and putting themselves out of business. So, don’t be afraid to demand money for your work!
The last thing I will mention for those who want to start a small business is that a growth strategy is essential. You need to have an idea of where you’re going from, if you ever expect to form it as a business owner. By nature, small businesses should have