The dream of opening a business is a fantasy that many people regularly have. For those who make that dream a reality, however, it often brings with it a new set of facts that are far different than what the entrepreneur envisioned. When I created a business plan for a day spa that was actually accepted and approved for financing by a bank, I thought I was on easy street. I selected a location, renovated it, hired people, and advertised. What I didn’t realize was that opening the business turned out to be the “easyâ€ part. As with most new business owners, I had many surprises that first year. If you are considering opening a business, here are a few of the common “surprisesâ€ that await you:
1. You didn’t ask for enough money. Unless you’re independently wealthy, most startups have to raise or borrow money in order to open the doors of the business. Most people have an aversion to being a “borrower.â€ As a result, they always underestimate how much money is needed to adequately fund the business. And that can pose great hardship in the long run. When I went to the bank to get my loan, I estimated that my build out would cost amount X. By the time I opened, construction costs nearly doubled that of my original estimate. While the bank approved the additional funds, I was playing financial catch-up for a long time.
Lesson Learned: Ask for more than you think you’ll need. It’s very difficult to ask for more money once you are in the hole.
2. Your “passionâ€ feels different from operating a business. One thing that entrepreneurs always underestimate is the amount of time it takes to operate the business versus create the product or service. Mark my words, if you start a business because you love “baking cakes” or you “love animalsâ€ you will be in for a big surprise. Your time has to be spent effectively between providing the goods and services and performing all of the managerial functions that go into running a business, such as doing payroll or advertising your business.
3. Building a brand is a slow process. In your business plan, a successful product is built into the equation. With every page you turn, you have presumed that customers will not only enjoy your product but enthusiastically spread the word to others–quickly. In reality, however, building a brand takes time and consistency. You have to perform that service over and over again to build a reputation for excellence, one customer at a time. Word-of-mouth and feedback is a slow process. Most entrepreneurs underestimate the amount of time that brand building requires.
4. Good assistance is hard to find. Selecting good team members is difficult at each phase of your business; however, the first year can be a brutal and eye-opening experience. The issue is that you are in the process of bringing all the components of a business together for the first time. You are not sure how they fit together in reality. An important step that new owners need to take the time on is training staff. And when you are opening a business, one thing that is in short supply is time. Training takes time and focus, however, oftentimes; the owner just throws a new candidate into the mix.
Lesson Learned: Team members are an important part of building your brand–take your time and invest in adequate training for the team.
5. Your projections were…off. Because of all the above points, it is always a surprise to entrepreneurs when their projections, even the most conservative ones, are off. It takes time to build up a brand and that time is rarely consistent with what you put in your business plan. Hopefully, you have enough money in reserve to pay for expenses when the revenue does not come as quickly as you anticipated. When opening a new business, preparation and managed expectations are key. Also having an adequate financial reserve are critical tools to expecting, and responding to, the unexpected.
Nicole Cober, Esq. is the Principal Managing Partner at Cober Johnson & Romney, a law firm focusing on trademarks, brand licensing and small business consulting. She is a former small biz owner of the award winning chain, Soul…Day Spa and Salon. She is also a Legal Consultant for Washington D.C.’s NewsChannel 8 and author of soon-to-be released book CEO of My Soul: The Dos and Don’ts of Small Biz. Follow her on Twitter @CoberJohnson and like her on Facebook @facebook.com/CoberJohnson. Visit her website at www.coberjohnson.com.