Planning for success Don’t wait to design a business strategy, experts say

//October 8, 2018

Planning for success Don’t wait to design a business strategy, experts say

//October 8, 2018

In the life cycle of businesses — launch, growth, and exit — the first phase is the most challenging, but it’s also the most important. First, an entrepreneur has to figure out what he or she wants to do, then determine if there’s a market for the venture. Of course, there’s also the not-so-small matter of paying for everything.

Brian Bergen, owner of the interior landscaping company Bergen Botanicals, faced those challenges when he decided to launch a business. But when the West Point graduate and former Army helicopter pilot left the military, he didn’t have the capital to start a company. “So I started working in management positions at different companies, including Otis Elevator, where I could learn about business and put away some cash,” recalled Bergen. His wife is a teacher, which helps the family finances, but Bergen didn’t want to drain their savings.

 “In 2013, I enrolled in the Rutgers University MBA program, and had the idea to identify an underserved market,” he noted. “That’s when I discovered interior landscaping,” or plantscaping: designing, arranging, and caring for living plants in enclosed environments. To prepare himself, Bergen worked for a time at an existing plantscaping company, and he contacted an interior landscape association to get some tips.

Matching costs, revenues

To save money, he didn’t buy any supplies or hire any helpers until he lined up his first customer, a medical practice, in 2014. He also keeps his staff to a minimum, using a commission-based designer, on-demand sales and other help when possible. “Even after I later won a $20,000 first-place prize in the Rutgers 2014 Business Plan Competition, I continued to work full-time while I got the business off the ground,” he added.

Even today, though Bergen Botanicals now has clients in New York as well as New Jersey and grosses about $350,000 a year, Bergen still holds down a full-time outside job to cushion his cash flow.

“I designed and structured the business in a way that would enable me to run it without having to be on-site on a day-to-day basis,” he said. “It’s growing about 25 percent a year, and we’ll see where it leads.”

Bergen’s approach meets most of the items on a virtual checklist designed by Rutgers Business School Associate Professor Jeffrey Robinson. “There are five things a person should consider before they start a business,” he said. “I call the process VOICE: Vision, Opportunity, Innovation, Capital and Entrepreneur’s network.”

Vision refers to “know what you’re going to do and how it’ll affect your lifestyle — do you plan on staying small, or do you eventually want to grow the company?”

Then, he said, consider your opportunities. “What you want to do, and whether your skill sets match up with your choice. Also, is there a sufficient market for your proposed business?”

Next is innovation, or how to differentiate yourself from the crowd. “You need to distinguish yourself from competitors,” according to Robinson, “either through your delivery or your expertise or another way.”

Capital, or money is a big issue. “Think about what it will cost to launch the company,” he added. “Will you just need a website or a brick-and-mortar storefront? How about materials and supplies? Where will you get the capital?”

Finally, he continued, think about your entrepreneurial network, which can offer valuable advice: “Who do you know, and who do you need to know?”

Unfortunately, would-be entrepreneurs often underestimate the risks involved in a business launch, according to Eric Liguori, an associate professor at Rowan University and executive director of the Rowan Center for Innovation and Entrepreneurship.

Know yourself

“Start off by understanding your motives and why you want to start a company,” he said. “Some people are born with traits that predisposition them for entrepreneurship, but others can still learn many of the skills.”

He raised some warning flags, however. “I deal with a lot of young would-be entrepreneurs who say ‘I want to be my own boss,’ but that’s not enough. You still have to deal with other people, and unless you run a solo business, you’ll have to incentivize and motivate your employees. That can be very difficult.”

Underestimating the time it takes to get a new business or service to market is another challenge. “Someone who’s planning to start a business needs to think of their family and other obligations,” Liguori cautioned. “Prepare the people close to you for a variety of issues, including the time you’ll spend away from them while you nurse the business.”

Raising capital can be another sore point. “In the long run, you may be better off financing the venture without exchanging equity for funding,” he said. “It may be better to pay credit card rates and retain your ownership — but first check your credit report and clean up any errors, and try to improve your score.”

“You need to distinguish yourself from competitors, either through your delivery or your expertise or another way.”

– Jeffrey Robinson, Rutgers University

Bank financing may cost less, but a startup rarely gets a loan, he added. “Unless you’ve got significant collateral, like equity in your house. But if you do that, consider your risk, think very carefully about the chances for failure.”

Also think about ways to reduce your costs. “If the nature of your business requires a brick-and-mortar location, maybe you can dip your toe in the water before signing a long-term lease,” he said. “One option is to start out by renting a kiosk, or a booth at a fair, so you can build brand awareness and a following before you take the next step. If you want to open a restaurant, consider launching a food truck first, for example. Or a jewelry store can start online or at fairs as a way to build street credibility.”

Once you’re ready to sign up for space, don’t be in a rush to lock in an expensive Main Street location. “If your business depends on foot traffic, then you probably need a spot where you’re highly visible to customers,” noted Robinson. “But if you’re setting up a manufacturing or distribution business where you deliver to the customers, then you can use a ‘second-story spot,’ or one that’s not highly visible. But remember, you will need access to different modes of transportation and distribution.”

Launching your own business can be very rewarding. But it all starts with the right kind of preparation.