The idea of starting a business sounds good. You have a product (good or service) in mind and you can deliver it profitably. However many businesses fail very early on in life, and that is ultimately down to a failure to scale or grow. The worst-case scenario is the business failing to take root. There are things you can do to prevent this from happening. We will look at 5 things you should consider before starting a business. Your response to these considerations will mean a lot to the success or failure of your business venture.

Sales system

The sale is simple, you give the customer the product, and they pay for it. The sales system is all about how you get the customer to the point where can consider making a sale to them. See with many products people want them but demand them must be stimulated as must be the choice of you as a provider. So you need to be able to answer questions such as where you will find your ideal customer, what matters to them, what motivates them and how to appeal to them.

Customer Acquisition Cost

In discussions, I’ve had with people starting businesses, this is the one that is most often ignored, yet perhaps the most important. In simple terms, the customer acquisition cost is the monetary value of all the efforts required to get a new customer. So many people start businesses thinking “if we build it they will come”. The reality is far removed from this and costs of marketing, advertising and selling are all included in customer acquisition costs. However, customer acquisition cost comes out of experience, and it is difficult to estimate without practice. What you can do before starting a business is find out the exact cost for similar or related businesses.

Distribution

The idea is to grow your business, and a big part of that is getting the product in the hands of customers. The term for this is distribution and the simpler you make it for people to get their hands on your product the better. So while you may have a product that everybody wants, it counts for little if everybody can’t get their hands on it. Nowadays, the gospel is selling online, and while that is undoubtedly the way to go, you need to think about how you will cater to customers who may be in other countries. Many products which people may not always feel are the best have a distribution advantage over others.

Know the legal terrain

One of the best things you can ever do for yourself is to research the legal area you are about to enter. A lot will depend on the type of business you want to start. In some cases, you may have to look at 4 or 5 different authority bodies to understand all the laws that relate to your business. ZIMRA, your local authority, Health and Safety, and Environmental Management Agency are all examples of bodies that may impose legal requirements on your business. You are always better off knowing what the law says (and means) than not.

Research the market

Last but certainly not least is researching the market. While everybody will tell you to do this it’s what to research that often lacks. There are two things I like to focus on in this regard. Firstly the size of the market. Sure everybody buys tomatoes, but how much do they purchase, and how often? Secondly and perhaps more important is the switching cost. This can get complicated depending on your line of business but our tomato example has very low switching costs for an individual customer. As long as the new choice is of similar quality to the old choice,

However, with more complex products, we must underscore that users have been dealing with the problem in a certain way before you came along. Does switching to your product come with costs, and are those costs bearable?

These are not incredibly difficult things to consider, and they will help us better prepare for the practical elements we will deal with if we decide to go into business.