How to successfully start a business

Get your new business up and running with these initial key steps from small business expert Melinda Emerson.

Melinda Emerson, known to many as SmallBizLady, is one of America's leading small business experts and is a paid contributor for Wells Fargo.

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Published: March 28, 2013

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DOUG CASE:

You may have a great idea for a new business, but getting that idea off the ground means focusing on the details.  And if you haven’t started a business before, it can be tough to know what steps you need to take before you can open your doors.

Hi.  I’m Doug Case, Well Fargo Small Business Segment Manager.  Joining me is Melinda Emerson, the Small Biz Lady and owner of Quintessence Multimedia.  Today we’re discussing a few key steps every new business owner should take to get their operation off the ground.  Thanks for joining me today, Melinda.

MELINDA EMERSON:         

Thanks for having me, Doug.

CASE:

I remember when I started my own business many years ago, which was a marketing advertising agency, there were so many things that needed to be done.  Writing a business plan is clearly one of the first key steps, along with forming an advisory team, including a lawyer, accountant and a banker. 

I know you spoke about some of these steps in your video “Making Your Business Plan a Reality.”  Today I was hoping we could focus on some of the more operational issues.  For example, how important is it to find the right location for your business?  What advice do you have for business owners looking for the best place to set up shop?

EMERSON:   

Well, really, it depends on what type of business you’re starting.  Obviously if you’re a local retailer, the first thing you want to do is look at that business plan, look at your target market analysis.  You want to make sure you’re opening up your business in what I call a target-rich environment. 

Then you’ve got to look at things like, you know, where you’re going to set up.  Are you going to be around complementary businesses to yours?  For example, if you’re opening up a pet store, well, how about locating your business near a veterinarian office or a groomer?  These are ways that you’ll be able to bring great foot traffic into your business. 

If you’re working with a commercial real estate agent, you also want to make sure that you ask for the history of the location that you’re moving into.  You want to know, in the last ten years, how many businesses have been in that location, what types of businesses they were, and how long they were there.  You want to make sure you’re going into a space that doesn’t have a bad reputation or a history of just a quick turnover of location. 

And finally, you’ve got to look at the neighborhood.  You’ve got to make sure that the location you’re looking at matches the brand for your business.  Is the parking lot big enough?  Is it well lit?  Are you going to feel safe for you and your employees or your customers to go in and out of your business using that parking lot?  All of these things are key when you’re looking at a location for your business.

CASE:

Very important.  And what if you’re launching a service or a non-retail business?

EMERSON:   

Well, your location needs are going to be different if you’re a professional service business, or, let’s say, a manufacturer.  So obviously service businesses are really just looking for real estate space.  The thing you’ve got to think about when you’re looking for professional office space is how long you’re going to be there.  Typically, a commercial lease is three to five years, so you don’t want to move into an office where you’re using 90% of the space.  You probably want to leave yourself 40% of the space you’re leasing to grow.

CASE:

That makes sense, yeah.

EMERSON:   

The other thing you want to consider, if you are going into a manufacturing space, you’ve got to make sure that the space can do all the things you need to do.  Does it have a loading dock so that you can get materials in and out?  Is it gonna be large enough for you to have your manufacturing machines, your employees, as well as space to store your finished product before it gets shipped out?  You don’t want to have your business become a bottleneck ‘cause you don’t have any space to store the things that you’re manufacturing. 

Finally, you always want to take into consideration who your neighbors are.  If you’re opening up a Yoga studio, you probably don’t want to locate next to a woodworking shop.  You want to make sure that your location fits all of your needs and the needs of your customers. 

You also may not even need a physical location.  I believe in being a spare room tycoon.  Your kitchen table and your back bedroom might be perfect for where you need to open up your business.  In the virtual world now, it really doesn’t matter where your business is located, it just matters that you meet your customers’ needs when they’re looking for you.

CASE:

Those are some very important tips to consider when sizing up potential locations.  But what are some of the logistical issues you need to think through before moving in?

EMERSON:   

Well, first of all you want to make sure that the location you’re moving into is zoned appropriately for the type of business you’re gonna open.  For example, if you’re gonna be a bakery, you might not be zoned to be a bakery out of your house.  There are many states that actually prevent something like that. 

You also want to make sure that you have the appropriate city and state licenses to be in business.  And certainly if you’re opening a retail business, you want to make sure that you have the appropriate license and inspection to open for business.  And you’ve got to make sure that you had enough pad in your budget to accommodate a delay based on a license and inspections issue. 

I actually know of a coffee shop in my local area in Philadelphia.  They had an amazing location right on the edge of a college campus.  As they were setting up, people were actually knocking on the door to find out, “When are you opening?  We need a coffee shop in this neighborhood.”  However, when L&I came in and did an inspection, they found something that they wanted to have changed, and that business ended up not being able to open for seven months, which means—

CASE:

Oh, that’s tough.

EMERSON:   

—they had to pay rent for seven months when they weren’t making any revenue.  You want to make sure that you have budget to prepare in case something like this happens to you, because license and inspections is serious business.  They can help you open up, but they can also shut you down.

CASE:

Well, that makes a lot of sense.  And in addition to picking a location, choosing a business name is one of the most important decisions you can make when starting a business.  It’s critical that you pick a name that you can relate to, that people can relate to and will remember.  When you’re talking to business owners, what are some of the tips you share with them to help create a great business brand?

EMERSON:   

Well, first of all, the name of your business should be easy to say and spell.  Take it from me.  I learned this one the hard way.  The name of my company is Quintessence Multimedia.  I—

CASE:

That’s quite a name.  [Laughs.]

EMERSON:   

I spent the first three to four years saying and spelling the name of my company.  You also want to make sure that your name relates to what you actually do, that it relates to your product or service.  The first thing you want to do, though, once you’re starting to decide a name, is check and see if the website is available.  You must make sure that you have the correct URL for your business, or you’ve got to go back to the drawing board and come up with another name.  Otherwise you might have to settle for a long or confusing URL.

CASE:

Very important.

EMERSON:   

You also want to make sure that you hire a graphic designer to create a professional brand image for your business.  It speaks to a lot of the credibility of your small business.

CASE:

Well, branding is very important, for sure.  But now let’s talk about pricing.  Hitting the right price point is critical to the success of a small business, and of course it’s important to look at what the competition is charging.  But the pricing model of another business may not necessarily work for you.  So what are the factors to consider when you’re setting those initial prices?

EMERSON:   

That’s right, Doug.  You know, one of the most important things to look at first really is your competition, so that you know what the baseline is out there.  But you also want to figure out what it’s going to take for your business to remain profitable. 

A large portion of small businesses are really not profitable by any measure, so you want to make sure that you include a portion of certainly your direct costs—that would be your labor and your materials—but you also want to make sure that you have a percentage of your general and administrative costs in your pricing. 

So what is that?  That’s your marketing, that’s your legal, that’s your accounting.  That’s even your administrative support.  So you want to make sure that you have a percentage of those costs in your pricing so that you’re actually running a profitable business.  I tell people that once they know what it takes for them to be profitable, they should make sure that they have at least a 50 to 100% markup, depending on what they’re selling.

CASE:

Good advice.

EMERSON:   

Without a profit, you know, you might just be running an expensive hobby.

CASE:

[Laughs.]  And that’s not a good thing.

EMERSON:   

Not at all.

CASE:

Well, that’s great advice.  And I think the next step in the process is getting your word out about your business.  I know you provide a lot of marketing tips in the videos “Building a Customer Base” and “Creating an Online Marketing Strategy.”

EMERSON:   

That’s right, Doug.  I encourage viewers to check out those videos so that they can find out how to balance traditional marketing with the latest social media marketing techniques.

CASE:

Melinda, thank you so much for joining us here today.  You’ve really provided some great insights.

EMERSON:   

Thank you.  It’s been my pleasure, Doug.

CASE:

And thank you for joining us for this segment of the Wells Fargo Business Insight Series.  To learn more about how Wells Fargo business banking can help you, visit WellsFargo.com/biz.  In the meantime, we wish you continued success.

[End of recording.]

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