5 Things You Need Before You Even Think About Starting a Small Business

Here are the five essential things that I think you need.

What are five essential things you need to start a small business? originally appeared on Quora – the knowledge sharing network where compelling questions are answered by people with unique insights.

Answer by Peter Baskerville, 35 years in small and large businesses, on Quora:

The essential things you need to start a small business can be quite different from those that you need to build a startup. The difference between the two is described well here – What’s the difference between a startup and a small business?

In summary, a small business is an independently owned and operated business generally selling known products to known customers in local markets. It is primarily organized for profit, and does not set out to be dominant in its field. The small business owner’s intent is to be their own boss and so will seek to secure funding that does not dilute their control.

With this summary in mind, here are the five essential things that I think you need to start a small business. (Note: I’m viewing the five essential things that you need to be successful in a small business as a completely different question altogether): Here are my top 5:

  1. An already proven idea and business model: The simple yet effective advantage that a new small business exploits, is that no one as yet is operating a known, successful idea and business model in the targeted local market. (i.e. takeaway food store, Thai restaurant, convenience store, hair dresser, Newsagent).
  2. Relevant skills and experience: You will either need to have the relevant skills and experience yourself or you will need know where to go for help and have the necessary funds to engage people who have. (Legal issues, business operations, design/fittout, finance/budgeting, marketing, local market knowledge, assortment planning, pricing, tax).
  3. Adequate Funding: On this point, small businesses differ significantly from startups. Startups “pursue opportunities without regard to resources currently controlled” (HBS professor Howard Stevenson). A small business, on the other hand, must have sufficient resources in place before starting out. Adequate funding either through savings or bank loans secured against property reduces some risks for a small business and helps them be true to their founding mantra … ‘to be their own boss’. The quantum of adequate funding includes the amount needed to build the infrastructure of the business + funds to cover the expected losses as the business grows to break-even + contingency funds to cover unforeseen events.
  4. The Right Opportunity: Seeking out and finding the right opportunity that fits with the owner’s lifestyle choices that has an obvious service gap in a local market and is a suitable place from which the business can be established are critical components that limits many a small business from making a start.
  5. Courage: On this point the startup and small business founders share a common bond. Both founders know that everything worth doing in life requires courage, and even though the small business owner has tried to minimize their risks, they can’t eliminate them all. I have listened to thousands of people with the top 4 essential things in place who are still not making their dream a reality for lack of courage. So I include courage as one of my list of essential things needed to start a small business.

Source:  inc.com by Quora

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