The key to starting a successful business
The number one reason why many small businesses falter is lack of cash flow, closely followed by inadequate or ill-timed financing.
You may have a great idea for a small enterprise, but without a comprehensive business plan and some serious money to get started, it can be tough to get out of the gate — let alone stay around for the long haul.
Consider the case of Holy Crap, the artisan cereal made on British Columba's Sunshine Coast by HapiFoods Group. In 2010, owners Corin and Brian Mullins appeared on reality show "Dragons' Den" and asked for an investment in their gluten-free vegan breakfast product.
Demand for the cereal skyrocketed after the owner of the Boston Pizza restaurant chain offered them $120,000 for a 20 per cent stake in their company mere moments after tasting the product.
The next week, the Sechelt, B.C.-based health food company sold more than $1 million in Holy Crap online. Since then, the company has continued to grow steadily, with their expanded cereal line featured in numerous retail locations across the country.
An overnight success? Not in the least. Truth is, the couple had been working the local farmer's market circuit for awhile, often funding their efforts with a line of credit from the Sunshine Coast Credit Union.
Things have gone so well for the one-time mom-and-pop business that they now have 16 employees and recently moved into a bigger factory.
Their advice to all small business owners: "Stay focused, know your product and customers, know your market, keep your books in order and, in our case, have multiple suppliers."
If you're starting out, it's all about deciding whether you're looking to survive or thrive, says Cerina Wheatland, a business coach and seminar leader with Vancouver-based Small Business BC.
The biggest reason for the failure of most small businesses is that they're undercapitalized, she maintains.
Because business owners are focused on the opportunities, they can get lulled into a false perception of how quickly things are likely to come together. That's why it's so important to determine how much money you'll actually need to start and run your business, Wheatland says.
To be successful, you need to:
Identify all business costs. Go through every section of your business plan and identify all costs. Request specific quotes from suppliers or use industry benchmarks. Talk to industry experts, associations, suppliers, or complementary businesses for input.
For HapiFoods, that's meant nurturing a fluid, largely local, supply chain for its organic chia, buckwheat, hulled hemp hearts, cranberries and other fruits.
Assess your pricing strategy. Ensure that your suggested prices cover your costs (both fixed and variable) and provide a reasonable margin. Your prices need to be competitive, but you don't want to compete solely on price because that strategy is not sustainable.
"It's much easier to lower your prices than to raise them," Wheatland says.
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