Tips for setting up a business

The business plan acts as a user manual. Step by step you are assembling your project, i.d. your own company. You will be intensely involved with the business idea, analyse the market, determine the existing customer potential, create a marketing strategy, evolve an advertisement plan, check the existing competition, deal with organizational processes and demonstrate how suitable you are as an entrepreneur. The technical and business data are represented in the financial part of the business plan. Are the results, the business volume adequate for ensuring a decent livelihood, and build on it in the future?

Tip: A well-founded concept does not come into existence overnight. Do take time to think it through.

Precise landing is not possible without a precise goal

“If the captain does not know where he is going, then every wind looks like the right one” said Seneca. Being successful as an independent professional and making a name for oneself in the market means setting distinct goals. What is it that you want to achieve personally through this independence? Higher profits, market leadership, reputation as a specialist or covering niche areas? “Covering my costs” does not constitute an entrepreneurial goal. Put down in writing where you would like to be one, three and five years from now.

Strategy for navigation

How do you propose to achieve your goals? Without a strategic direction, your intent runs the risk of going round in circles. The hub and pivot is a refined marketing strategy: Product, customer, target group, price, advertisement and PR. Check the defined strategy regularly and adapt it to the market conditions.

Focus on your strengths

What is the main offer you are making, what are the additional offers? Your core business is usually what you enjoy doing most. That is, what kind of orders do you most enjoy executing? Are there languages, countries or industrial sectors for which you are “specially wired”, to use a colloquial expression? Are there any niches in which you can operate?

Tip: The more precisely you are able to formulate your offer, the easier it is to communicate to potential customers, build up your market presence, set yourself apart from the competitors.

Find your favourite customers

You will know your customer environment for your business idea from your professional experience so far. Yet, who are your favourite customers? What is your target group? Some categories for this are the sector or domain, size, number of employees, branches, location and turnover.

Tip: With a clearly defined target group or audience, you can concentrate intensively on their needs, get familiar with the predominant particularities and get qualified there as a specialist.

The customer wants benefits

In what way does the customer benefit from your company? One definite advantage is your availability in time. The customer will book your services to cope with peak orders, for special requirements, can count on precisely calculated costs and is under no obligation to get bound. You ensure the binding or loyalty factor sets in through good quality.

Not at any price

The market price is only an initial starting point for designing your pricing. You should not under any circumstances quote below this. As far as possible, stay away from discount wars. Always keep your own costs in mind. And if these are not covered, even the most interesting project can end up as a fiasco. Specialists or those who cater to niche segments command higher prices. Quality and reliability are also price indicators.

Professional presence in the market

A professional market presence reflects quality. Enlist the help of specialists such as graphic designers or web designers for the design. This is certainly a question of cost, at first glance, but it tends to pay off over long term. A good graphic designer will ask you to explain your business idea to him until he can distil it into a graphic representation. At first, business cards, a good internet site and a logo that embodies your company will suffice. You can design your own letterheads quickly and easily on the PC.

Tip: If you do not have the financial wherewithal, then use neutral paper of good quality and a clear, uncluttered font without graphic elements.

Being in the public eye

You turn into a public person who has specialised in one product. As a specialist, make a name for yourself through lecture presentations, articles or guest lectures. Where you decide to publish depends on where your chances of reaching your target public are best. The widest reach is through the internet. Combine this with publications in technical journals. Here you will have the advantage of reaching out to readers and appearing online at the same time. Many technical journals have an internet page carrying references to the published articles.

Use the multiplier effect

Take part in events where your target group is likely to linger, such as at trade fairs or specialists' conferences. In this way, you will be able to reach many potential customers with a single action, and with very little effort.

“Those who refrain from advertising for the sake of saving costs are like people who stop their clocks to save time”, said Henry Ford. Beating the drums is very much one of the tricks of the trade. Plan your advertising actions strategically. Combine different possible ways of advertising. Create an advertisement plan including the time, effort and costs. Check regularly which actions have been most successful, and set aside a fixed advertisement budget in your profitability calculations.

Tip: All advertisements bring benefits only if there is a follow up or post-processing. Therefore, budget enough time not only for the action itself, but for the follow-up activities as well.

Look for differentiators

“Competition enlivens business, its absence, even more so”, says Götz W. Werner, founder of the retail chain dm Drogeriemarkt. If there were to be no competition at all, you would have to cater to all the customers. Surely, an impossible undertaking. Far more important, on the other hand, is what sets you apart from the competitors. In the absence of objective, technical differences, the differentiators are quality, reliability and your personality.

Tip: Competitors are not only rivals. There are ways of entering into partnerships, which in turn can pay off as a new competitive advantage over the existing, individual competitors.

Concentrating on the core

Concentrate on your core business. For everything else, employ technical experts in the respective field.

Networking skill

Networks and contacts form the support systems and support you in private and business matters. Besides this, they also contribute to your personal development. Business networks widen your horizons; private networks support you morally and mentally.

Against loneliness

As an alternative to the home office, setting up an office community with other independent entrepreneurs can be considered. Whether these are from the same field or otherwise: the benefits are in the friendly exchange between colleagues and equals. This is also a way to escape the loneliness of a workplace at home.

Important financial aspects

• Keep in mind that the cost of private livelihood go up by at least the social security contributions such as medical insurance, healthcare insurance and pension insurance.
• Turnover is not profit. Furthermore, it gets reduced by an amount equal to the income taxes paid.
• The home workplace also entails costs, even if it is just the advertisement budget.
• Create a turnover plan spanning several years. Take seasonal fluctuations into account.
• Reckon with a realistic order volume. Depending on the situation, there could be a gap of several months between the advertisement action and the concrete order.
• Separate personal and business related aspects, including bank accounts.

Liquidity at all times

Liquidity also includes a financial buffer that helps you tide over the start up time and weak turnover periods. Financial reserves are also necessary for the initial investments, for which of course no immediate returns can be expected.

Be resilient

“Business comes from taking on things, not from letting things run down”, is one of the basic tenets of entrepreneurship. Some of the important entrepreneurial qualities include the ability to be proactive and motivate oneself time and again, to reach for the stars. This is followed by continuity, discipline and resilience.

How high is your need for security or risk appetite? Being independent means taking a certain amount of financial uncertainty in your stride. There is no plan yet that can guarantee that expectations will also be fulfilled.

The dual load of work and family takes on other dimensions. Normally, a workday that is dictated externally ceases to exist. The boundaries between professional and personal life get blurred. Especially in the case of single parents, this can prove to be a challenge. Often, the balance between children and business can only be achieved through the help of third parties.

How good are you at managing your time, in view of the various responsibilities and volume of work? This ranges from “working round the clock” to zero. A new approach to time management is essential.

Discipline in the home office also includes the style of dressing. Formal clothing is appropriate, instead of tracksuits. This makes it easier to be business like.

Expand your knowledge. Even if the area of business and financial management does not interest you, it is now part of your business toolkit. Business administration, bookkeeping, taxes, laws and marketing should no longer be strange words to you now.

Responsibility is a key word that goes hand in hand with being independent. Taking responsibility for one’s actions and the ensuing consequences is part and parcel of a successful entrepreneur.

The mentality of a skipjacks helps you get back up on your feet. There is no use any more for aristocratic reserve. Maintain your contacts, go out and strengthen your communicative skills.

Pay your taxes

Provided you posses the necessary qualifications, such as a qualification as a graduate engineer, the tax office can recognize you as an independent professional. However, this recognition is not without its grey areas and could lead to arguments with the tax office. This status, which is typically awarded to the so-called „catalogue professions“, brings with it some concessions. Thus, the freelancer can save on commercial taxes and mandatory contributions to the Inland Chamber of Commerce (IHK) and does not need to maintain double-entry bookkeeping. However, it is mandatory for the freelancer to pay income taxes and turnover taxes. To prevent these taxes from going neglected in the midst of day-to-day business, park these in a separate accounts, so that you can pay them off whenever they fall due.

Insure members of your family and staff

If you are employing others, you will be a mandatory member in the professional union under which you are covered. Freelances are under obligation to take out a pension insurance. Exemption is possible if employees hired are liable to pay social security contributions. This does not include the employment of staff on the 400 Euro basis (in Germany).

Health insurance is mandatory. Whether private or statutory insurance is better will depend on the individual case. In case you have children or are planning on a family in the future, statutory health insurance is better.

Business start-ups as a result of unemployment

Basically, a person can become an independent professional on a regular/sideline basis. If a company is started due to unemployment and a start-up allowance is availed of, the company can only be set up as regular business. Regular business is defined with at least 20 hours of work per week.

Summary

No one is a born entrepreneur: it is a role that one grows into. Some people are better suited for this than others. Being one’s own boss has its advantages and disadvantages: it can be fun, or a total burden. Hence, take time to make this decision on setting up your own business, and once you do it, give it your 100 percent.