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Small Business Primer – Part 1: What Business Are You In?

Jeremy Wright

You’ve got the idea, you’ve got the passion, and heck, you’ve even got the shoes. You’re well on your way to starting your own killer small business (though hopefully not in the literal sense)… but how will you actually do it? What needs to be planned? Who do you need to talk to? Where do you start? There’s a simple one-word answer to all of the questions above… here!

Welcome to this comprehensive six-piece series on starting your own small business. Expect to see an article each week for the next two months!

What Are You?

This may seem basic, but one of the first steps in setting up any business is to ensure that you know exactly what you are. What is your business trying to accomplish? How do you plan on achieving those goals? Who will your customers and clients be? We’ll show you how to define your business model and basic principles, plus you’ll learn how to establish your target market and clients.

Who Are You?

One of the most confusing aspects of setting up a business is the legalities involved. Will you be an Inc, an LLC, or maybe part of the mafia? This is an important decision that can have a huge impact on the future of your business. We’ll walk you through the registration process, explain the difference between incorporation and sole-proprietorships, and alert you of some simple daily activities that can help with your company brand recognition.

Who Are They?

Perhaps the single most embarrassing situation you can ever find yourself in is to have one of your present or past clients call you, when you don’t have a clue who they are, what they wanted, or how much they owe you. We’ll cover effective client management techniques, including reviews of helpful software titles, and we’ll outline some basic client management techniques. After all, the chances of closing a sale when you don’t even know who you’re talking to are less then the chances of you winning the lottery – without buying a ticket.

Who? Huh? Wha..?

There are times when all of us are clueless, and there are times when all of us need a little bit of help. We’ll show you how to find the right accountant and a dependable lawyer to help you through sticky situations.

A Lasting Impression

You’re walking down the street on a gloomy day and suddenly you feel the dampness of water being splashed all over the legs of your pants. As you glance up with disgust, you see a brand new Mercedes-Benz pulling over to the side of the road. That’s right, he stops, walks over to you, expresses his apologies, and asks if there is anything that he can do for you.

Of course there are two typical responses, of which only one is appropriate: you hand out your business card and ask him to pay the dry cleaning bill. Not only is free dry cleaning really cool, but it also gives you the opportunity to promote your business. As you might have guessed by now, we’ll also cover marketing, branding, and several other ways to build on the free dry cleaning theory.

A Long, Long, Long Time From Now…

…where will your company be? Will you survive the bitter conditions of the current economic downturn? Or will you just be another depressing statistic in The Wall Street Journal? We’ll show you how to retain your success over the long run and plan for the inevitable.

That’s it. Are you ready to turn your brilliant idea into a profitable business? Let’s go!

Defining Your Business

Perhaps the single greatest mistake a new entrepreneur can make when they start a business is to not have a place to go. "Without vision you will die" may seem rather extreme, but as any smart business owner will tell you, it’s entirely true.

Sure, you could perhaps survive in the short term, but at some point you’ll stand back and ask "now what?" This first article in our series is designed to prepare you for that moment, and to get you started on the right foot so you don’t step on too many toes.

Failing to Plan is Planning to Fail

Much of the information contained in these articles may seem dry, dreary and unexciting. After all, we aren’t talking about how to make millions or figure out how to win clients over. In essence we’re doing nothing more than creating a foundation — something most people outside your business will never see, let alone care about.

However, with this solid foundation and some detailed planning, you’ll be set! When push comes to shove and you need to make snap decisions about the future of your business, the decisions and outlines you put together at this early stage will be what carry you through.

What is Your Business?

One of the first things you need to define right up front is what your business is going to be. Are you going to sell custom plumbing parts, be a plumber or consult on the plumbing mistakes of others?

There are some fundamental decisions you need to make before you even set out to define exactly what your business is and what you will sell. The companies that have lasted the longest (few companies have life spans longer than that of humans) have always been borne of knowledge and passion.


If you’re passionate about an idea, you’ll have the drive to carry it through to perfection (or as near as any of us can make it!). So, if you’re passionate about plumbing, it probably isn’t the greatest idea to start up a pineapple distribution company.


Your next consideration, after passion, is your area of expertise. If you know nothing about a given industry, but have passion, you either need to get knowledge and expertise, or consider exploring another market.

What Type of Business Do You Want?

The next step in your business definition phase is to define the type of business you want. There are four main types of business:

  1. those that create products,
  2. those that supply products,
  3. those that supply services and
  4. those that consult.

A product-based company will typically require factory/production facilities, a supply chain, a larger work force, etc.

A supply company will need products to supply, as well as customers to supply the products to. Often they’ll need to constantly seek out new areas of demand in order to stay ahead of the game.

A services company, like most Web companies, will be extremely vulnerable to market interest which, as we all know, can shrivel up rather quickly. These businesses must constantly be on the lookout for new markets and clients.

A consulting company is perhaps the easiest business model, because it involves no product creation cycle. There is simply knowledge, and the search for clients who require that knowledge.

What Will You Be?

Let’s look at an example. If I have a passion for programming, backed up by a considerable amount of knowledge, there are several routes I could pursue.

  • I could program software for people to use (a product-based company)
  • I could set up an online store to supply programming tools to others, along with witty and insightful reviews (a supply company)
  • I could offer my hand to complete custom Web development for clients large and small, the world over (a services company)
  • Or I could found Penguin Consulting, a company which specializes in pinpointing the mistakes of others without providing real solutions

For now, let’s assume I am starting up Penguin Consulting because Penguins are cool, pun (sadly) intended.

What Is Your "Product"?

After you’ve determined which industry you are passionate and have knowledge about, and the business model you want to pursue, you’ll need to develop at least one product idea.

Let’s take our previous example, Penguin Consulting. Though you may be forgiven for thinking that a Consulting company has no products, this couldn’t be further from the truth. In reality a Consulting company lives and dies by their products: knowledge and experience.

So, in the case of Penguin Consulting we have both knowledge of and experience in development: Web development, product and lifecycle development, database design and operation, etc. This will be our “product”, or offering to the market.

Who is your Target Market?

Having determined what our company is, and what it’ll sell, we need to move onto the really exciting stuff: delineating our client base.

The process you can use to figure out exactly who you want your target market to be is fairly simple. Ask yourself:

  • Who do you want to serve?
  • Who can you serve?

As before, when you start your business, it’s best to first think about what you want. Put aside all the financials, the dreams of big houses, big meetings and big cars, and just sit and think: if you could have any type of client, what type of client would you want?

Dream a Little…

Do you want to deal with Corporations or mom-and-pop shops? Do you want clients who desire quick turnarounds or do you prefer to take your time? Do you want clients who like face-to-face meetings, or would you prefer a long distance relationship? Do you want local clients or would you rather fly out to see them?

These are the types of considerations and questions you need to ask yourself in order to determine what you want. At the end of the day, you need to be able to define a fairly precise client type that you’ll pursue, because these are the people you’ll work with day in and day out. If you don’t enjoy being around them, you’ll simply burn out.

…then Take a Dose of Reality

The next step is to look at which types of clients are available to you. It’s all well and good to say you want to deal with large corporations, but what if you live in Sticksville (population: 3), and there aren’t any? The previous exercise allowed us to dream. This one allows us to get practical.

What types of clients exist in your region, or area of interest? Are these types of clients in the market for your type of product? If they are, are their needs already being thoroughly fulfilled by another company?

These are the considerations you should address at this point. After all, you want to be happy, but also have a reasonable chance of success. It’s pointless to launch a business where you will need to fight tooth and nail for every single client. It’s also rather unwise to think that companies who don’t need your product will buy it. In essence, you need to strike a balance between being happy with what you’re doing and who you’re dealing with, and your ability do actually do what you want to do with whom you want to do it with. Don’t settle for second best, but be willing to compromise in order to do what you love.

At the end of the day, you’ll want to set a good foundation, and launch into your business with a certain degree of peace of mind. You will never know everything going into establishing your own business, but the more you know and plan, the better prepared you will be.

Next, we’ll look at the legalities of setting up your business, and help you decide which form you want your business to take. Don’t miss it!