Costco business center: Running your own successful business means more independence and financial freedom, and it can be incredibly rewarding! If it’s your first time starting a business, or if you’re just wanting to take your existing business to the next level, you might be wondering where to start. Don’t worry—this article will walk you through everything you need to know to set your business up for success, from the initial planning stages to improving your sales and maximizing profits.
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1. Research your competition.
Don’t ignore your competition. Do as much research as you can about your competition. Don’t copy them, but don’t be afraid to learn from them either.
- When determining pricing, you need to know exactly what your competitors are charging.
- You want to identify a unique selling proposition that you can weave into your brand. What is the one factor that sets your product apart from the competition? It could be something simple like “great service.” Some airlines, for example, strip down service because their unique selling proposition is to have the cheapest possible fare. Others take pride in offering you hot cookies from the oven and the plushest seats. Both are unique selling propositions to differentiate from competition.
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2. Define your customer base.
Analyze your product from the perspective of the target customer and what he or she needs and wants, not what you like. Understand who your customer base will be specifically – geographically, demographically.
- Analyze who has already bought from you if you’ve sold the product before. Otherwise, consider who would be most likely to buy your product.
- Figure out your revenue model. This will help you define your target market. For example, if your revenue model is to sell your product entirely online, this will help you narrow the customer base to those most likely to purchase online products.
- Determine the customer base of your competition. However, don’t necessarily go after the exact same base. Is there a niche market they are missing?
- Narrow your customer base by demographics (like age, gender and ethnicity), geography, income level, and personality.
3. Study trends.
Do your homework so you can identify new products or trends. You don’t want to sell something that already has waning popularity. Some trends involve how people communicate. Steve Jobs at Apple was a genius at this; he revolutionized how people download and listen to music, for example.
- Look for trends that are more general than your own specific business but could affect it in the long run. For example, social media was a new way people communicate and affected most businesses. Visit local colleges and talk to students about what they are interested in.
- Spend 20 minutes a day reading about your field. Read magazines, newspapers, online, books – just read something about your field. This will educate you, and it will help you spot trends.
- Start a business that builds on your own key talents. For example, if you have a background in art, don’t try to sell engineering equipment. If you have a background in writing, look for growth markets like social media where you can use your talents.
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4. Create a business plan.
In a business plan, you detail every aspect of your business, from a line-item budget to your company’s plan for obtaining customers and its marketing.
- Periodically revisit your business plan because it is where you will outline your company’s strategies.
- Measure everything. You have to keep detailed track of everything in your company, from how much the utilities cost, to labor time, to sales leads. Use spreadsheets to organize your information.
- The core step of any business plan is a break-even analysis. This means you want to study such things as your cash flow. You estimate expenses and revenue, and include such things as overhead and sales revenue. Then you calculate your break-even point. How much money will you need to bring in as profit each month to break even?
- If your break-even point is too high, you might need to make changes in pricing or staff.
5. Figure out your core values.
Write these down. They are the set of principles your company is organized around, and they should never be for sale. They are the essence of your company and what it stands for.
- Write a company vision or mission statement. Make this a collaborative effort. Build your company’s core values around your personal values, but also around the personal values of key people who work for your company.
- Be prepared to compromise on small things for the good of your company. But never compromise on the big things, like your core values.
6. Innovation is everything.
A business must be prepared to not stagnate. You have to be able to spot trends, and adapt, while still staying true to your core product. We all can think of companies that went too far with innovation. Think New Coke. However, Coke Zero was a product that innovated the traditional brand by embracing new health trends.
- Eighty percent of products today are different from what existed even five years ago.
- Your product should be able to survive being copied.
- Because if it’s good, someone will probably try to copy it. The way you survive imitators is to be constantly innovating your own product.
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7. Lower costs.
You need to be creative about costs and find ways to keep them down. It’s an obvious mathematical equation. If you lower expenses, you’ll end up with more profit.
- Renegotiate all contracts with your business annually. You don’t want to lock into too many multi-year contracts. You want to be able to create bidding wars or have conversations with suppliers about changing costs and performance.
- Buy overstocked products. You can get them very cheaply and test out new product lines that way.
- Monitor and study all office costs, such as printing and phone bills. Find energy-efficient ways to lower utility costs, such as controlling thermostat levels.
- Be tough. Study all of your costs and brainstorm ways to lower them. Do you need all of the employees you have, for example? Are you spending money on marketing techniques that bring in no customers? Could you get cheaper rent elsewhere?
- Track your expenses. You want to make sure you aren’t too optimistic in your projections. It’s always safer to spend less than you expected. If you don’t have a clear understanding of what you’re spending, you won’t be able to reduce costs.
8. Determine your profit margin.
To determine your profit margin, figure out how much money you earned per transaction. If the sale price was $100 and your profit was $25, then your profit margin is 25 percent. You can use online calculators to calculate profit margin.
- In a profit margin formula, the gross profit represents the difference between the cost of the product and the selling price (which is revenue you bring in).
- Try to slowly build up some cash reserves so you can make it through lean times when your profit margin isn’t what you expect.
- You should have enough money to cover operating expenses for several months when you first open your business. Expect to not turn a profit right away.
9. Don’t rely too much on loans.
It can be risky to start your business entirely on loans that you expect to pay back with future profits.
- Invest as much of your own money in your business as you possibly can.
- Consider seeking a partner or investor who can share some of the risks.
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10. Choose people who fit your company’s culture.
It goes without saying, but hiring dependable employees is probably the most important thing you will do. Understand and be able to define your company culture, so you can hire people who will work well within it.
- Carefully check references of all applicants. When you start your company, you should spend a lot of time recruiting the right talent. Look for team players.
- Look for commitment. You want employees who will stick around. High turnover is not good for any company.
11. Perform a job analysis.
Before hiring an employee, you want to sketch out every aspect of the job. What duties will be performed? What skills are needed? What outcomes are you seeking?
- Then, you should write a short job description that briefly incorporates all those points and that you can use to attract the right workers. Be clear up front about expectations for things such as hours and duties. Determine up front which skills you consider must haves and which are optional.
- Although CEOs can’t micromanage everything, hiring is one aspect that they should be closely involved in.
- Some companies hire independent contractors. This means that the employee is not full-time or on staff. Make sure you follow all IRS rules for independent contractors.
12. Make your employees feel valued.
Most of us have experienced a negative work environment. Poor work climate is a drain on productivity and that’s bad for your bottom line. Making your employees feel like they matter will help your business succeed.
- Be flexible about such things as family issues or emergencies. It will go a long way if you understand when an employee really needs time off.
- Pay employees decently. If they feel terribly poorly compensated, they will be unhappy, and it will start to show. Make the compensation plan clear up front, but make it fair.
- Surprising your employees with small things, like a gift for secretary’s day or an unexpected day off, really matters. They’ll work harder for you.
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13. Don’t overlook the importance of sales leads.
Leads are the number of people who have contacted your business or were contacted by your business in the past year.
- Conversion rate means the number of sales leads who actually buy something. Creating product videos can increase your sales leads.
- You also want to keep track of how many transactions each purchasing customer makes in a given year, as well as the average sale price.
- To increase sales leads, develop a strong social media plan that takes advantage of different sites, such as Pinterest and LinkedIn. Engage with people on social media.
- Focus more of your money on generating sales leads than on building your brand. Visit trade shows to develop more customer contacts.
14. Location matters.
The best location for your business depends on what you are selling, but choosing location carefully can make or break a business.
- If your company relies on traffic – people coming into your doors – find a location in a busy thoroughfare. If your company relies on online or telephone sales, save money by not choosing a prime location.
- Research the location. Study the demographics of the area, including income level, and make sure they fit your customer base. Analyze traffic patterns to make sure you will get enough traffic at that location, if that’s important to your business.
- Pay careful attention to signage. You want it to look professional and, remember, it’s basically a free ad. Some communities will have zoning rules pertaining to signage, so contact your city, village, or town hall.
15. Focus on great service.
Customer service is crucial to building repeat customers and improving word of mouth. We all have been at a restaurant where something went wrong and the manager paid for our drink or meal. Such small gestures can go a long way.
- Taking the time to talk directly to customers, even if you are the owner, is very important. They will remember it.
- Consider using customer surveys to have a better understanding of how customers are perceiving your service. Reward employees who do well. Use surveys to pinpoint strengths and weaknesses.
- Offer discounts to valued customers. Make it clear to them that you appreciate their loyalty. Engage with customers on social media.
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16. Have an advertising plan.
A business can’t succeed without some method of getting the word out to customers.
- Consider the power of social media advertising. Through a professional social media page, like Facebook, you can create ads that are relatively cheap but can be targeted to people using demographics, geography, and their stated interests.
- Look into traditional advertising, in newspapers, radio and television. It all depends on your customer base. For example, if you are trying to reach older customers, newspapers might be a better approach than Facebook.
- Consider guerrilla marketing. Offbeat marketing approaches can get the public’s attention and word out about your business fast.
- Make sure you have a professional company website, and hire someone to do your search engine optimization so you come up fast on Google.
17. Become a thought leader.
Share your expertise with the community and customers. Seek out positive exposure through traditional media or your own media platforms. If people see you as an expert, they will be more likely to turn to you.
- Some local television stations have morning talk shows where you can buy time to come on and talk about your product with their hosts.
- You might want to write a blog that you update on your company website. You could also consider creating video tutorials.
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18. More tips
Use written contracts. If it’s not in writing, it didn’t happen.
Be smart. Think up the pros and cons before doing anything drastic with your business. One wrong move could be fatal for your enterprise.
Create a daily to-do list. Organization is key when running a successful business.
Start first with what’s different before you can get to what’s better. So why is your service different from others? Why are people going to want to go for this service for these differences?
Also, don’t try to appeal to everybody, that’s probably the biggest mistake.
If try to appeal to everybody, you’re going to appeal to less people ironically, because you just blend in with the rest of the market, with your competitors.
Starting with a niche, niching down a little bit, and then getting more specific about what your offer is works really well in the beginning.
As you get bigger and better, you have more eyes on you, and it’s okay to start getting more generalized and appealing to a wider audience.
But in the beginning, you want to focus on a smaller audience and not try to please everybody.