Author Archives: Dean Young

How to start a business from scratch

You want to start a business but you don’t even know where to begin? Here are some tips to learn how to start a business from scratch. Like all things a little complex in life, it seems complicated, but if you reduce it to a series of small decisions and arm yourself with perseverance, you will see how each step can be overcome without too much difficulty.

1º- What needs of the client do I want to cover?

Call it a business idea or a new business concept, the purpose is the same and you have to have it very clear from the beginning. A business, a company, has to provide value to its customers, covering needs in exchange for paying a price. If your idea does not respond to a real need, it is no good.

In this blog we have talked many times about the business idea, and how it can be valued. We always repeat that the essential thing is that you contribute an improvement, however small, on what already exists. You don’t need to invent a product like the iPad to succeed, just improving a little bit what already exists can be enough, but you have to make sure that there is a sufficient market for your project.

2º- How much is the client willing to pay for my product or service?

This point is very important. In the first place, because in many cases the client, although he values the contribution of your concept, is not willing to pay for it. On the other hand, if the client is willing to pay for something, it is normal that they do not want to pay as much as you would like. About pricing policy, I refer you to the article we wrote some time ago about selling expensive or cheap.

3º- How much does it cost me to produce?

Once you have a more concrete idea of the potential market and the price you could put on your services and products, one very important aspect remains: How much does it cost you to produce them? Obviously, if you create a company it is to make money, so it is essential that you estimate the variable costs and fixed costs of your project, to have a first idea of the profitability. If you see that it costs you much more than you could sell, in principle your idea has little future, but do not be discouraged, it is possible that approaching it otherwise can be profitable.

When you want to know how to start a company from scratch, you must first have clear priorities. Often, entrepreneurs sin of greatness, and want to start with a large and well located, several employees, new machinery, etc. Big plans make it very difficult for a project to be viable, because there is no doubt about it: the expenses will always be higher than you could have estimated and the income will be lower. It is better to start with humility and less expenses.

4º- Am I qualified for this business project?

One of the greatest causes of business failure is that the promoter of the project is not qualified to lead it. That is why it is important to ask yourself frankly if you really have the capacity to turn the idea into a success. One of the most important aspects is to know the sector where you are going to work. The enthusiasm and interest in your project, although necessary, is not enough.

Imagine that you have always worked in a bank and your dream is to set up a chain of pet shops, because you love pets. No matter how much you want to, if you do not have the knowledge of the sector or the contacts, it is not going to be impossible to succeed, but you are going to have a very, very difficult time. In this case it is better to partner with a person or persons who will give you the look you are missing.

5º- The Business Plan

Once you have more defined your idea and your first estimates make you think it is viable, the real work with the business plan begins. You have to study in detail the commercial and financial aspects of your project. Answer such important questions as: What are you selling? What is your clientele? What are your competitors? It is important to be very specific.

A small example:

Let’s imagine you’re going to set up a bookstore. The answers to these three questions cannot be: I sell books, to readers in the X district and my competitors are the Fnac and the Casa del Libro. Generalities are not valid. Another thing is that you answer that you sell the largest range of historical novels in Spain. Then you answer that you are addressing a mostly male audience between 25 and 45 years old. Finally, you should have analyzed that your competitors are partly the big bookstores, partly the online stores. All this with the nuance that you have identified a market niche where nobody offers such a wide variety. And you sell both in a physical shop in the centre of Madrid and on the Internet and in electronic format, etc.

6- The legal form

The next question, when you consider how to start a business from scratch, has to do with the legal form. Once you have your project well defined, you will have to decide how you are going to formalize it. In Spain there are two main options (although there are more): self-employed or limited company. To simplify, you can say that if you are going to start up on your own and the volume of profits you estimate will not exceed an annual salary of around 45,000 euros, the most practical thing to do is to choose to register as a self-employed person.

If you have more profits, other partners, a significant turnover, or the legal structure of the company itself is relevant to your image (in certain circles, suppliers and customers will only listen to you if you have a company), then it is better to choose to create a SL (limited company), which you can start with only 3,000 euros of capital.

7º- Financing

The business plan will determine how much investment you will need, and how much money you will need to cover the more than certain losses of the first months (sometimes years). So, either you already have this money (congratulations, you can start your project), or like most entrepreneurs, you will have to find it. There are several sources of funding, from your own savings, money from friends and family, public grants, bank loans or equity from venture capital funds or business angels.

8º- The partners

Another very important aspect is to know if you go alone or with partners. This depends on your personal skills, your preferences and your needs. As we explained before, if you lack knowledge (financial, commercial, sectorial), it can be very useful to have a partner. But your management style is also very important. If you prefer to work alone and want to control everything, it may be better to go it alone, although working alone is not easy.

If you choose to partner, you will have to avoid the mistakes we made in a previous article.

9º- The location

If we’re talking about starting a business from scratch, we’ll have to find a location for your base of operations. Where you are going to locate your business is always important. It is clear that if it is a business location, you will have to look for the most suitable area, and never forget that you have to go where the customers are, not expect customers to go where you are, because for this type of business location is essential.

Even if you don’t have a shop, there are other aspects to take into account. You will always have to receive customers or suppliers, so being in a town 50 miles away from civilization is probably not a great idea. Similarly, if you choose to trade online, you have to find a location that allows you to optimize your logistics.

Searching for a location is not always easy, but in the end, everything is achieved.

10º- The employees

The employees are your most important partners. They are the ones who have to offer your customers the best products with the best quality of service. You have to keep them happy to work with you while demanding the best from them. Maybe the first thing you have to explain to them is that you are not going to pay their salary, that the customer is in charge of this, as Henry Ford said.

When choosing them, think about what is best for your company in the long term. You may have no money at first and want to hire unskilled staff for little money, but in the long run if your employees are not better than you it hurts. Always look for the best people for the job. If they are not very experienced, go for young people with potential.

Human resources is possibly one of the most complex aspects in the management of a company, because you have to mix objective economic aspects with personal emotions and preferences. But you learn a lot and quickly.

11º- The suppliers

Entrepreneurship means learning how to buy. If you do not take care of this fundamental aspect, you will not be able to offer the best services at the best price. Always negotiate and look for several budgets for all relevant purchases. Try to build long-term relationships of trust with your suppliers, because on more than one occasion they can get you out of a tight spot (for example when you urgently need a product for your most important customer).

12º- Looking for and satisfying customers

You have almost everything to get started, but you lack the most important thing: a customer to buy your products or services. And don’t be fooled, even if you have a highly visible shop on the busiest pedestrian street in town, you’ll have to go and find your customers.  Convincing your potential customers to buy your product or service is one of the most important moments in starting a business from scratch. You will have to advertise, phone to propose your services or send your commercials to tour the city door to door.

This plan can be useful if you want to become an entrepreneur

Creating a business can be easier if you follow these steps:

Ideas are going around in entrepreneurs’ minds, but they don’t always lead to action, which is what is really important. To transform these concepts into action, it is a good option to create a plan that allows you to fulfill them.

We tell you how you can divide some tasks more easily and meet objectives of your venture to be successful.

Create a business plan

The key to a successful venture is to have a good start, so it is important to keep things simple and low cost. This is not only about money, but also about time being well spent.

To make it easy, make a concrete business plan that takes no more than one page. Do not fall into the trap of making a very big and solid one, because what you really need is investment or financing that can be achieved by testing ideas or defining these concepts:

  • What will be the end result of your business?
  • Unlike a vision, your mission should explain why your business exists.
  • Objectives: What are you going to do, what are your goals, what will lead you to the fulfillment of your mission and vision?
  • Outline of basic strategies. How are you going to achieve the objectives you have just set?
  • Simple action plan. Write down the smaller task-oriented actions required to achieve your stated objectives.

Define a budget

When creating the budget, you have to be realistic with the figures, taking into account that it is a business that is just starting up and this way you will be able to know how much to spend or save to get started.

One of the recommendations is to save an additional 20% for unforeseen expenses, this will help you keep the business afloat. This is known as the burn rate and is the amount of cash you are spending month to month. Knowing this figure is important to know how long you can stay in business and what you will get in real profit.

The key to this step is to set up your business taking into account the profitability of the first 30 to 90 days and having the budget reserve to survive if things go slower than you expected.

Choose the legal entity

To carry out the acts of commerce that are subject to commercial law, you must choose the commercial company that best suits the type of business you want to create.

Create your website

In these times where digital has come to impact all areas of our lives, businesses are one of the most benefited because they can improve the visibility of their product or service. That’s why it’s key that you get a domain name URL so that you can later monetize it by linking to online purchases.

Try to spread your offer cheaply and creatively

Since you have a sufficient base, you can start trying some sales.

If you have a service-based business, immediately connect with your local chamber of commerce and ask what resources are available to talk, present or share information about your business. If you have a product-based business, test the viability of your offering at local trade meetings, farmers’ markets, or other community events to find out what the public really thinks (and whether they would buy) of your products.

Drive traffic to your website through simple Facebook ads on limited budgets or set up a basic Google AdWords account.

You can follow these steps on your own with little money. It’s a great way to test the viability of your small business before spending all your time and money on an unproven idea!

 

Ten tips for successful investing

Before deciding to put money into any financial product, the saver should bear in mind ten aspects that will help him not to make a mistake. “An investor needs to do very few things right if he avoids big mistakes. Thus, it is not necessary to do extraordinary things to obtain extraordinary results”. This is one of the famous messages of the American guru Warren Buffett.

Before putting the savings to work, it is advisable for the investor to sit down and analyze the steps to be taken. Here are ten tips to consider:

  1. Don’t invest in what you don’t understand. This is one of the recommendations that the CNMV gives to all Spanish investors. Nowadays, savers have a wide range of products at their disposal: shares, investment funds, derivatives, fixed income, etc… But not all of them will be suitable for your investment profile. Therefore, it is important to understand both the characteristics of the product (expected return, risk, time horizon, liquidity) and the market in which it is traded. If it is the stock market, you should never invest in a company without understanding its accounts, according to Fidelity guru and fund manager Peter Lynch. The biggest losses in shares come from companies with a weak balance sheet,” says the expert.

 

  1. Get to know your investor profile. Once you have understood the product you are interested in, you must make sure that it fits the type of investor you are. With the entry of MiFID II, entities have focused on the correct marketing of financial products. With the entry of MiFID II, entities have focused on the correct marketing of financial products. As a general rule, if a person is not willing to lose a lot of money and wants to take little risk, they should be considered conservative. In this case he should be willing to accept a low return, as risk and return are usually directly related: the higher the expected return, the higher the risk taken. Find out what his profile is by clicking here.

 

  1. Contrast official information. Savers should know that they have at their disposal all the detailed information on the characteristics of a product on the CNMV website. In this place you will be able to see from the relevant figures of each listed company, as well as the detailed data of the investment entities and the products that are marketed (funds or sicav). In the case of the stock market, Buffett usually says that the right thing to do is not to take the annual results too seriously. Instead, it is best to focus on 4 or 5-year averages that give a more realistic picture of a company.

 

  1. Don’t play all the capital to one card. Even the riskiest investors tend to play all the capital to one card. To reduce risk, it is right to diversify your investment with asset classes. And if you only invest in the stock market, it is advisable to have companies from different sectors and profiles in your portfolio that can help you to avoid market volatility.

 

  1. Invest only the money you do not need in the short term. One of the maxims that the saver should comply with is that you should only invest the capital that you do not need in the short term, and that no matter how conservative a product may seem, there is always a risk. Therefore, the individual must always be prepared to lose part of the investment and that this does not create a serious problem.

 

  1. Adapt your investments to the time frame of your objectives. There are products that operate at several months (bills) to one year (deposits) or several months (investment funds). On the other hand, the stock market does not have a defined time horizon beyond that which the investor wants to give it. According to the experts, the best thing is to combine assets with different time periods in the portfolio to reduce volatility.

 

  1. Don’t go after yesterday’s success. Another maxim that savers should not forget is that past performance does not guarantee future performance. In other words, historical returns do not have to be repeated, so you must always be ready to face losses. Nobody knows what the markets will do and how they will affect products, even the most successful ones of the last decade.

 

  1. Know the characteristics of the channel you use to invest. If the saver wants to contract a product or place an order in the stock market via the Internet, he must take into account the conditions of the contract. One of the drawbacks of these agreements is that no one will be able to solve your doubts live. In the case of the Exchange, it is essential that the investor remembers that the speed of data transmission affects the order transmission phase but not the execution phase. Therefore, when you see on your screen that the order has been “accepted” or “generated”, follow the market closely and be interested in its effective introduction into the market.

 

  1. Monitoring and discipline. All investments require constant monitoring, especially those related to the stock market. If someone decides to buy shares, he or she must be aware of the price they reach at all times, set a goal for themselves and act with discipline. That is, if you buy a stock, you should be clear about how much you are willing to lose and sell when you reach a certain level. Greed is the great enemy of the investor, hence the saying: “let the last euro be won by another”.

 

  1. Counseling. Generally speaking, investment products and market operations are becoming increasingly complex and require a great deal of attention, so every saver must assess whether it is advisable to resort to professional advice to manage their portfolio. If a person decides to take on an expert, he or she should be responsible for determining your investment profile and making several proposals so that you have different options to choose from.

What defines an innovative company?

Have you ever had an innovative idea? Do you have the means to carry it out? Do you enjoy the competitive advantages of your company? Are you one of them? These are some of the questions we must ask ourselves when we undertake an innovation project.

One of the tools for maintaining business competitiveness is innovation, which is presented in different ways, as a change that allows a task to be carried out more efficiently, such as creating a new product/service, or as a change in relations with the environment.

The image that has become popular of innovative companies suggests playful, professional, creative places, multidisciplinary work teams, operational flexibility, flexible working hours, etc. Such characteristics seem to be common in companies such as Google, Twitter, Facebook and other companies in the IT sector.

In this industry, innovation is an explicitly defined process, led by specialized managers and evaluated in terms of effectiveness and efficiency.

The innovative company designs policies, strategies and actions that allow the identification of activities to generate sustainable competitive advantages.

Some characteristics of Innovative Organizations (I.O.) are:

  1. Innovation in the selection process: It is clear that if companies want innovative ideas from their employees, they must seek the potential for innovation from the recruitment process. The most suitable and valuable people are chosen for the innovation projects, the most representative leaders are chosen, who are experts of the organization in the area to be improved. For example, Richard Branson has made innovation one of the six key characteristics that are evaluated when looking for new employees. To be hired at Virgin, you must demonstrate a passion for new ideas, you must make your creativity apparent and show a history of different thinking.
  2. Commitment to continuous innovation: Necessary in this type of organization, even though some only commit to disruptive innovation, that which only occurs in a certain period and with a certain purpose. It is vital to carry out improvement actions that involve the whole company. Apple, is for the fourth consecutive year the most innovative company in the world, from the Macintosh they have not stopped, through the iPod, iPhone, iPad, and many intermediate products. This company has been strongly marked by giving a different solution, and mainly, integrating all its products in a really effective way. Google is not far behind either. It has known how to adapt and create products that can be integrated with incredible ease. From the creation of the most used search engine in the world, through Gmail, Android, to a whole range of advertising for all types of companies called Google AdSense.
  3. Application of new technologies: A key feature is the portfolio of innovation projects. Such portfolios are essential in these companies and are subject to analysis and evaluation in the formal processes of strategic planning for technological creations. Dropbox, for example, has new tools such as Saver, Chooser and Datastore, which make it possible to exploit the potential of the cloud and maximize the synchronization of different devices. On the other hand, Nike created an application to access an index of materials that classifies them according to their impact on the environment. Thus, it was possible to reduce the use of hazardous substances in the manufacture of products such as clothing and footwear.
  4. Close relationship between managers and employees: By creating organizational processes that reflect their personal behaviors, they have incorporated their innovative DNA into their organizations. Few people know that after he was expelled from Apple in 1985, Steve Jobs was active in Pixar, which financed and produced the famous movie Toy Story. This was the first film developed entirely on a computer. To this day we are still impressed with his titles, but they would certainly never have been the same without the innovation factor, imposed by Steve Jobs and the rest of the company.

We have to see innovation as a continuous management process in which we find the next steps:

  • Signal Processing: Monitoring and searching the changing environment, detecting potential innovations, and producing change for survival. The idea is to process these signals, assimilate them and make the most of them, visualize them, extract the most significant ones and then shape these ideas into a Strategic Plan.
  • Strategy: Where are we now? Where do we want to go? How do we get there? Our innovation strategy must establish how to use knowledge to develop new products to create brand value.
  • Resource Allocation: Indicate which resources will have to be allocated in this change process. It is vital to make the most efficient and correct use of these, managing to develop new competitive advantages.
  • Implementation: Develop schemes and structures. It involves management activities, project planning, technology configuration and organization. This is where the real hard work of change is done and where we must manage the critical aspects of it.
  • Learning and re-innovation: What will be the next step? Are we achieving the established objectives? In this phase we have to assess whether we have been successful or not. We must learn from our experience, both from successes and failures. It is time to learn, but also to unlearn those things we have done wrong in order to understand where we are going and what the change and the right path is.

Keys to choosing a franchise when investing

Do you want to start a franchise business and do not know what the keys are to choose a franchise? Don’t worry because, if you want to invest in franchises, in this article you will find all the keys to choose the type of franchise that fits your needs.

What is a franchise?

A franchise is the concession of the exploitation rights of an activity or commercial name to another person who is not the promoter. This concession is resolved with the payment of an amount of money provided by the license to start the activity.

It is a marketing system based on collaboration between the legal and financial independent company. That is to say, the franchiser and his franchisees. In this way, the franchiser grants rights to the franchisee so that he can exploit the economic activity of the company for his own benefit.

In order to choose a franchise you must know that the most remarkable advantage of starting a business under a franchise regime is that your business activity starts with a name and a social position within the market. This acts as a guarantee in the immediate future, since it reduces the risk of closure during the first months.

Franchised entrepreneurs have an 80% business success rate during the first years. Franchises are usually the safe bet for those who want to invest in a business that is already in operation.

On the negative side, you have to take into account that no matter how much dedication you offer to the business, it will never be owned.

Do you want to invest in franchises?

If you want to invest in franchises, you should know that there are multiple types of franchises, but most of them are classified by the type of activity they are dedicated to. Let’s see which ones are the most common:

  • Activity criterion:

We can undertake a franchise of various sectors. For example, we can choose a franchise from the industrial sector, from the commercial sector, dedicated to the distribution of a product, service franchises or mixed franchises.

Of this type of activity, the franchises that have more rotation and demand are those of retail and restoration.

  • Location criterion:

This group is divided into two types. The first type comprises corner franchises. This type of activity is carried out in a specific space. The second type of franchise by location is the shop in shop. This is a type of corner that recreates the decoration and the atmosphere of the chain to which it belongs.

  • Franchiser-franchisee relationship criterion:

This criterion determines the participation of the franchiser. This treatment can be shareholder or main. In the first case, it will be specified if the franchiser can be a shareholder of the company and, in the second case, he assumes the role of the entrepreneur.

The operating result of a franchised business is positive, as it generates profits and employment.

  • Choosing a franchise: which one suits us best?

Once we have reached this point, we already know what type of franchise we are going to open and how we will manage it. But we still have another analysis to make, our own. What type of franchise is best for us? How can we choose a franchise that is right for us?

In the following points we will explain to you how the franchiser is suitable:

  • Used to following rules. Most franchisers establish management rules and you have to follow them. This also includes the management with the suppliers and the type of product sold in the store.
  • Labour efficiency. Security and speed in the decision-making process.
  • Business vision.
  • Having enough money to invest.
  • The type of successful franchise is one that adapts to the needs of the consumer and offers at all times what is demanded.

Our franchise: the keys to success

The keys to the success of a franchise are also measured by the business experience of its promoter. Experience tells us that the preparation and previous study of all the steps to be followed augurs well for a good start. The success of choosing a franchise depends 20% on the knowledge of the sector and 80% on the business skills of the franchisee.

We must prepare market studies and feasibility plans to make a business x-ray of what it will mean to open a franchise.

We must also have enough knowledge about the sector in which we will operate.

As if it were a criterion, the location of the business also plays a very important role in its success. Choosing good premises, well located and well communicated, will help the optimum operation of the franchise.

Choosing a franchise: the brand is important

Choosing the right brand will also help the smooth running of the franchise. You have to take into account what type of company you are franchising and what your target audience is. This is the moment to discard companies with products or services of temporary fashion.