Faced with the realities of an over-saturated job market many graduates find themselves “under-employed” or forced to accept jobs offering little opportunity for advancement. In response to this climate you might be considering starting your own business. Before you embark on your new venture you should be aware, start up’s are more likely to fail than they are to succeed; however, if you can keep your investment to a minimum (i.e. do not invest more than you have the ability to loose), even if the business fails you will walk away with an interesting story and some great experience to highlight on your resume.
Getting started is often the most difficult part of any project, but if you know some basic business theory you may be able to figure out how to get your business off the ground.
#1: All Good Business Decisions Require Thorough Analysis
Millions of people have great ideas but it takes a solid strategy to make those ideas come to life. Organize your thoughts by exploring market opportunities, calculating the costs of your business, and developing a plan to reach customers and deliver your services.
A good way to evaluate the market is through a SWOT (strengths, weaknesses, opportunities, threats) analysis. A SWOT analysis creates a snap shot of how your product or service fits into the current business landscape. Strengths and weaknesses are inherent qualities of the product/service you intend to provide, a strength could be “user friendly” while a weakness might be “expensive to produce.” Opportunities and threats refer to external factors in the market that may help or hinder your chances of success. An opportunity could be “low competition” while a threat might be “heavy government restrictions.”
Another important exercise is calculating your return on investment (ROI). Figure out how much it will cost to get your business up and running (“fixed cost”), and how much it will cost to produce one unit of the product or service (“variable cost”). Next determine how much you will make by providing the product or service (“revenue”). Once you have this information you can calculate your ROI. ROI is calculated using the following equation:
Gain from Investment (Revenue) – Cost of Investment (Fixed plus Variable Costs) /
Cost of investment (fixed and variable costs)
IF YOUR ROI IS NEGATIVE YOU NEED TO FIGURE OUT HOW TO REDUCE YOUR COSTS OR INCREASE YOUR REVENUE!! A negative ROI means you will lose money by operating the business.
SWOT and ROI analysis’ are rudimentary assessments of your business plan; you should conduct additional analysis before putting your plan into action. If you don’t have a background in business it may be worthwhile to consider taking some classes or enroll in an MBA program to learn how to use more sophisticated business tools.
#2: One Paragraph Should Summarize Your Businesses Purpose
Running your own business is a complex task, but you should be able to explain “who” your business serves, “what” your business does, and “why” your business is unique in a few sentences. If you can’t do this you may not fully understand your business’ purpose.
One exercise that can be really helpful for defining your business vision in simple terms is creating a value proposition. Constructing a simple statement about a complex entity is a task, luckily there is a standard format for value propositions so creating one is kind of like playing mad libs.
A value proposition follows the following format:
For the (target market) who wants (what problem does your product/service solve for your customer) (your company name) is a (what type of business is this) that (what will your product or service do for your customer). Unlike (Competitor 1) and (Competitor 2) (Your Company Name) (distinguishing characteristic).
Here is an example of a value proposition for the website GradSchools.com:
For the ambitious adult who wants a fulfilling career, GradSchools.com is a website that connects prospective students to the resources they need to enroll in a graduate program. Unlike Website A and Website B, GradSchools.com has spent years developing trusted partnerships with reputable academic institutions.
Creating a value proposition helps you figure out many defining characteristics of your business model. This exercise will help you determine:
- Your target market
- The value of your product or service
- The industry you are competing in
- Your primary competitors
- Your competitive advantage
#3: Every Choice You Make Should Somehow Support Your Mission
Every choice you make about your business should support the goals of your mission. Each choice you make, large or small, should align with the strategic direction established for your business.
Strategic decisions define who your company is and where it is going. An example of a strategic decision is “ABC Inc. will expand their product offering in 2015.” Notice this decision does not mention how the ABC Company will actually expand their product line, it simply indicates the direction the company is going.
“How will we do this,” is answered on the tactical level. Tactical decisions define detailed objectives that need to be met in order to accomplish top level goals. If the strategic decision is for ABC Company to expand its product line then tactical decisions supporting this goal might include “ABC Inc. will introduce blue DooDaad’s to our preferred partners in the first quarter, we reduce production of our existing product (Red Wogmogs) in order to increase production of the blue DooDaad. “
Finally, operational decisions are all about details, operational decisions are the tasks that must be accomplished in order to accomplish tactical and strategic goals. Operational decisions in this example would be “we will produce red wogmogs on Tuesdays, Wednesdays, and Fridays and blue DooDaads on Monday’s and Thursdays, we will need to order new equipment in order to facilitate the mass production of blue DooDaads, and we will need to hire 5 technicians to meet this new demand”
Whenever you feel bogged down in a task or unsure of what your next move should be reviewing your strategic goals and tactical objectives may help you determine the best course of action.
Running your own business is both a science and an art. Be fearless and aggressive in your pursuit of success. Take calculated risks and focus on continuous improvement. With a strong strategy, confidence, and the will to succeed you have a chance of seeing your vision become a reality.
Mandy Fricke is a community builder for Gradschools.com online masters programs. In her free time she enjoys biking, traveling, and reading in coffee shops.
Image Credit: Shutterstock.com
