In the previous column, it was explained in gentle but firm language when not to start a new business. I sincerely hope that anyone who planned to do so, and whose data did not meet the criteria presented, withdrew their hand from the idea.
But let's assume that we have overcome the obstacles. We have an idea, and we have examined the activities of competitors (if any) - we can seemingly get started.
So that's it, no.
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It is very important to stop and consider a few more points:
• Equity. The amount needed for investment and "running" the business. If a few years ago, during the economic boom, banks would give us loans/financing for 100% of the amount required for investment, today all financing bodies (including non-banking funds) require equity of up to 50% of the required capital. Therefore, if you do not have an initial amount from savings or liquid funds, it is a shame to get started.
• Business plan. There is no doubt that it is better to hire an experienced business consultant, but if you have decided that you want to save money on this item, at least fill in the following details: Carefully examine how much it will cost to start the business, how long it will take until the turnover of the business begins to "cover" itself. If, according to your forecast, it will take 3 months to reach the break-even point (where income equals expenses), take this amount and add it to the initial amount of starting the business.
• Decide what the "good news" is that your business is going to give to customers (differentiation in the "Bela"z). The 10 most successful and largest companies in the world have one thing in common: "Their vision is - to do good to customers (!). Not price, not service, not uniqueness in the product. Just to do good to the customer. There are businesses that bring good news in terms of price - they will always be cheap "at any price". This is definitely good news, but be sure to follow it all the way... There are businesses that bring special good news in the field of service, along the lines of "We have a "dual" service, both from the importer and from us. This is definitely good news, but here too, be sure to continue with it.
• Choose a bank branch that will accompany you (whether you need financing or not!). Choosing the right bank for the move will have a significant impact on the continued existence and expansion of the business.
• Caution: A bank branch that is close to the location of your business and/or your home (or the one where you manage your personal account) is not necessarily the best bank for your business. Even a bank that presents itself as being designed for businesses is not necessarily suitable for your business. Here's an example: I was contacted by a famous singer who immigrated to Israel, opened an account at a bank close to his home (in Jerusalem), and after less than six months he reached a limited situation. What happened? Very simple. The bank did not know the singer's cash flow.
A singer has a different flow, not a "normal" one. There is a wedding season, there is a celebration season, there are events such as Simchat Beit Hashoeva, Independence Day, and so on - then they earn, as is known, for an entire year - but throughout the rest of the year, they have almost no income. The singer was unlucky that he opened the account during the "dry" season. The bank manager saw that a month passed, and another month passed and the guy didn't put anything in, only took it out. After a few months, he ran out of patience, and he "turned off the tap." This specific branch was unfamiliar with the behavior of singers.
• Physically arrive at the branch you want to examine. Present your business or at least the business plan, check whether the staff and/or the branch manager are familiar with the specific industry in which you are going to work. If so, there is a chance that your requests throughout the year will be answered positively or at least with understanding. Clothing importers know this well; they have a "boom" of expenses at the beginning of the season with almost no income, and then throughout the year there are trickles of income. A bank manager who is unfamiliar with the conduct of the clothing industry will raise an eyebrow and refuse to give a high credit at the beginning of the season for stocking up. And believe me, there is no shortage of examples.
Question of France
And as promised in my first column,
Another example of a request that came via email. We will analyze and clarify for the benefit of other readers:
A business with a store in Bnei Brak is considering opening a branch in Jerusalem. On the face of it, why not? Technically, he only needs to double the number of employees, recruit workers, and rent more space.
Well, it turns out not.
In Bnei Brak, it is located on the main street - where it enjoys a continuous flow of customers. The location he is interested in in Jerusalem is located in a relatively well-known commercial center, which operates around holiday evenings and vacations.
These days, he will have a very high expected turnover, but a careful examination revealed that he will have quite a few expenses on advertising and the like, just to reach the same income that he is familiar with and accustomed to from the branch in Bnei Brak.
Location, did we say?
Sometimes a business is built on location, and sometimes the business makes the location flourish (in professional jargon this is called an "anchor" business, like a luxury chain in a mall, for example). This doesn't mean that if you don't have a suitable location, there's no point in starting a business - it just means that proper preparation can prevent disaster and/or at least the heartache of shattered expectations.
Great luck to you, and thank you for all the responses on the website and by email.
As usual,
You are welcome to send questions, requests, comments and clarifications to my email:
Interesting and insightful questions will be published and answered in the next column, God willing, this coming Thursday.
your,
Micah Sholem.
The writer is the CEO of the consulting firm M&S, which specializes in business consulting, raising business credit, building and improving sales departments, valuations, and recovery plans. He is also the founder of the 'School of Business Management - Startup'.
