3 Essential Tips For Starting a Business

3 Essential Tips For Starting a Business
by Spencer Ray

Many things should be considered when starting a business. Explaining all the considerations is beyond the scope of this article. However, one vital component of a successful business is a good business plan that considers Market Potential, Competition, and Strategy.

Have a Plan

First and foremost, when starting a business you need a plan. It doesn’t necessarily need to be a full, written out business plan; however, you should jot down your ideas. Some items to consider are the company’s: Market Potential, Competition, and Strategy.

Market Potential

First, you need to consider whether or not you can make any money with your business. You may have a great idea, but maybe no one can realistically use it, or they don’t want it, or it costs too much. For example, a company called WebVan, decided they would allow people to order anything (bubble gum, t-shirts, pizza, books, groceries), really anything from their website and they would deliver it to your door. They spent hundreds of millions of dollars and opened nationwide. The company lasted less than a year. Why? Because the the market potential was small. The company creators did not account for the reality that they would spend more delivering a pack of gum than they would make from selling it!

Competition

Second, you must consider who you are competing against. If you have created a new and better macaroni and cheese dinner and you want to sell it in Wal-mart; then you have fierce competition. Kraft is a HUGE company and they will squash you before anyone ever tastes your delicious invention.

However, don’t let competition discourage you from developing a good idea. Just because there are lots of janitors, doesn’t mean that you can’t beat them out. The key to overcoming your competition is a good business strategy.

Strategy

Strategy really defines how you will be different from your competition. How will you appeal to your customers? Will you be a low price leader (like Wal-mart)? Will you have the perception of best quality (like Tiffany diamonds)? Will you provide the best service (like Nordstroms)? These are the three main strategies that companies use. There are lots of other strategies that you can utilize, but the key is developing a way that you will be different from your competition.

In conclusion, starting a business is a viable way to build your personal wealth. In starting a business, it is essential that you have a plan that considers the market potential, competition, and strategy.

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Spencer has a BA in Finance, an MBA, and is currently a Commercial Banker advising Business owners on Business and Personal financial issues.

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