If you want to be the next Gates or Zuckerberg, get busy
In the first of a three-part series on becoming your own boss, Louise McBride lists seven vital steps that wannabe tycoons must follow if they want to end up gracing the pages of future rich lists
IF you think a recession is the wrong time to set up a business, think again. In 1975, the United States was coming out of a severe recession -- yet Bill Gates and Paul Allen set up Microsoft that year. The last Irish recession was in the 1980s. Yet it was in 1985 that Tony Ryan set up Ryanair and Aidan Heavey set up Tullow Oil.
Before you try to follow in the footsteps of Gates or Ryan, however, get your groundwork done.
Step 1 THINK
"The first thing you need to set up your own business is an idea or vision that you believe in," explains John Teeling, who set up Cooley Distillery --the company behind Kilbeggan, Tyrconnell and Connemara Irish whiskeys -- in 1987. "You must also have a huge amount of drive, energy and enthusiasm, because things will go wrong. You must be able to live with the risk of losing your home -- and be able to handle uncertainty."
It's important to stick to what you love when setting up a business, advises Jerry Kennelly, founder and chief executive of Tweak.com and a co-founder of the Young Entrepreneur Programme. "If you're doing it for the money, life won't be much fun," says Kennelly. "When you're in your 'zone' you can work day and night, but it'll never seem like work."
Step 2 RESEARCH
It is the market research that will tell you if your business idea will work -- and if you will be able to sell your product or service.
"Even if you have a great idea, it is the market research which will be the nuts and bolts of your business," says Fiona Leahy, business adviser with Kerry County Enterprise Board (KCEB). "You have to know who you are selling to -- if you don't, how will you know where to find your customers so you can make them aware of your product or service, and in the end, convince them to buy it?"
It is important to put together a "one-page" analysis of your competitors -- where you rank them by scale, pricing, success and customer reach, according to Kennelly. This will help you to work out what's different about your business -- and why you are likely to win customers from competitors. "Ideally you should be faster, better and cheaper than the competition -- but at the very least, you should tick two of those boxes," says Kennelly. "You need to be able to clearly articulate in 60 seconds how you are making life much better for customers. If not, you probably need to reconsider your idea."
You should also know if your business must be local, national or global to make it profitable. "If you're setting up in the local market, international competitors can easily land on your doorstep, possibly undercutting you or offering a more recognisable brand," warns Kennelly.
Step 3 PLAN
Once you have done your research, it's time to get your business plan in place. Some of the things that should be covered include the goals of the business, how you plan to achieve them, how much money your business will need, the threats your business could face and why you believe your business can succeed.
"The growth and development of your business can get lost sometimes in the day-to-day running of a company," says Leahy. "It's good to have a one-page business plan that you can refer to every day. The day of the 50-page business plan are is gone."
If you want advice on business plans -- or some mentoring as you set up your business, contact your local city or county enterprise board.
After writing a business plan, you should know whether or not your business idea is feasible, if you're the right person to set up a business, how you will fund your business, if you need to hire people, how much sales you expect to make -- and how you will generate those sales.
You should also know if you will be selling your product directly to customers -- or paying someone else to sell your products.
Step 4 NEED
Decide what you need to run your business, such as equipment, staff and insurance. Decide, too, where you need to base your business and if you need a business premises.
"If you need a premises to run your business from, there are a number of things to consider," says Leahy. "Can customers reach you? Is it easy to supply and remove goods? Is there enough parking? Are you located near similar businesses? Is your business dependent on footfall?"
Ask yourself if you really need a shopfront or business premises -- or if you can work from home instead. "A business premises comes with rent, rates and overheads. All of these costs need to be absorbed into your selling price for your product or service," says Leahy. "It's good to avoid unnecessary costs."
Step 5 CALCULATE
It costs about €3,500 to start up a business, according to Eibhlin Curley of Dublin City Enterprise Board. That bill covers basic costs such as official letterheads, business cards, stationary, designing a website, registering your business, office equipment, and some professional fees. Once your business is trading, you will have to cough up for running costs.
Of course, if you're setting up your business from a garage, start-up costs could be a few hundred euro -- but if you're setting up a large company such as a medical device manufacturer, start-up costs could run into the tens of thousands, according to John O'Dea, manager of the High Potential Start Up Unit in Enterprise Ireland.
The price you charge for your product or service will ultimately determine whether or not your business can break even.
When deciding how much to sell your product for, the very least you should do is cover the cost of making it. "You should then look at what the competition is charging," says Teeling. "And then decide what people will pay for your product."
If hiring a company to sell your product, it's important to motivate it by paying them more than your rivals. "That company will need to be incentivised to prioritise your product or service over the competition," says Kennelly. "You can never undersell a product."
Step 6 SHAPE
Decide what type of business you're setting up and register its name -- if giving it a business name or setting up a limited company.
The simplest way to start up in business is to set up as a sole trader. But if it fails, your personal assets, including your family home, could be called on to repay your debts. Another option is to set up a partnership, where at least two people agree to run the business. If a partnership fails, both partners are jointly responsible for any unpaid debts. If setting up as a sole trader or partnership, you can use your personal name, rather than a business name, for the company. If you use a business name, you will need to register that name with the Companies Registration Office (CRO).
The safest way to set up in business is as a limited company because your personal assets cannot usually be called on to repay debts. It is more expensive to set up, however, as you will probably have to hire an accountant and you will need to pay legal fees. You must register a limited company with the CRO and file company reports and accounts each year.
For more information on registering your company, call the CRO on 01-8045200 or www.cro.ie. It is cheaper to register your company online through www.core.ie.
Step 7 TAX
If setting up as a sole trader or partnership, you need to register for tax as a self-employed person and file an income tax return once a year. You may have to pay Pay Related Social Insurance (PRSI) and Value Added Tax (Vat).
If setting up as a limited company, you must register for tax using Form TR2. You usually have to pay PRSI, corporation tax and Vat.
To find out more about your tax obligations, contact the Revenue Commissioners or visit www.revenue.ie/en/business/running/registering-tax.html.
Sunday Indo Business