The 5-E Steps in Pursuit of Business Success
By: Lyndon Magsino, EMBA, CPA, CIA, CRMA, CFSA, IFQ
A lot people are asking me for the “steps how to become an entrepreneur” and “how to start a business”. There are different ways how to discover your entrepreneurial mindset because there are several variables in kickstarting a business — to name a few, here are the things you need to consider: business nature, business model, target market, competitive advantage, strategy, location, products and services, etc.
From my experience when I entered the business world 15 years ago, there are things that every entrepreneur must do. So, here is The 5-E Steps in Pursuit of Business Success — your guide to start your own business.
1st E: Educate
Without proper business skills, it would be impossible to launch a successful company. Currently, the failure rate of startup companies is 90% within 5 years from the launching date. It means, only 1 out 10 startup companies can make it in the first 5 years. One of the major reasons is because the founders / owners lack specific business-related skills and education.
Taking business masterclass programs and reading books can help you acquire some of the critical business-related skills. Practicing these skills and having the real-world experiences while being employed can develop your skills even further. The critical-business related skills you need include:
- Leadership and managerial skills
- Communication and writing skills
- Financial acumen
- Digital Marketing
- Time management
- Research and analysis
- Public speaking and presentations
- Computer and technology skills
- Risk Management
- Customer relationship
If you are targeting the international market, having the basic knowledge of foreign languages and understanding their culture can help you a lot. So, a skillful team can be your great-asset and competitive advantage. I believe start-ups really need a great team to make the company successful so you and your team should have the right skills.
2nd E: Explore
You need to explore the most-suited business for you and your target market — which should be driven by ‘NEED’. Here are the few questions that can guide you:
- Why do you want to start a business – is it because of money, freedom, fame, to solve a problem, or some other reason?
- What industries do you know about?
- What is the nature of the business do you want to establish? Do you want to provide a service or a product?
- What are your skills? What is your level of expertise on your business idea?
- Will it be a full-time or a part-time venture?
- When I started my business venture, I was blessed to have ticked-off this important question: do you have the support of your family? They may have to make sacrifices too at the beginning, so it is crucial to have their support and buy-in.
Your answers to these exploratory questions can help you to zoom-in your focus.
These questions are not supposed to discourage you from starting your own business. Rather, it can help you to keep on planning, thinking and exploring. In my experience, to start a successful business, passion alone is not enough. Passion can fade-away when you are stressed and you don’t know where to get the funds for the next payroll or how to settle your bills.
You need to set your goals, plan thoroughly and have a self-awareness i.e. know your strengths and your weaknesses. By knowing them, you can maximize your strengths for your day-to-day operations and hire someone to complement your weaknesses. Conducting a Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis on yourself can help you to figure this out and really to know yourself.
As soon as you explore, your business can easily dominate your life. You need to make sure that you really thought-through this and planned thoroughly because you are going to be in it for a long-term. Use the result of your SWOT analysis to think through what you really want in your life, not just “what you want from your business”.
3rd E: Evaluate
Once you decide on a business that best-fits your goals, expertise and driven by demand, you can now start in evaluating your business idea.
These questions can guide you in your evaluation:
- Do you have any idea on your market size i.e. Total Addressable Market (TAM)? What is the level of the demand within the city or your location?
- Who will buy your product or service? Who are your specific target market?
- How much money are you willing to put in as your capital?
- Do you understand the risks involved in starting a business? Are you willing to take the risk?
- Who are the other existing players that can be potentially your competitors? What is their competitive advantage?
- What is the business formation that is suitable for your business (e.g. Corporation, LLC, Partnership, Sole Proprietorship, etc.). Do you know the pros and cons of different business formation?
- What would be your pricing and margin per every sold item/service rendered?
Your answers on these questions can be your “reality-check” and can keep you thinking. It may take some time to do a research about your business idea, industry, and location.
There are many of ways how you can do this like: reading books about your target industry, Google search, asking for advice from people who are already working in your target industry, reading relevant news, articles and industry magazines and importantly taking a masterclass or any relevant programs.
It is important to validate your business idea by creating a comprehensive Business Plan. Your business plan is like your “google map”, a written document that describes how a business defines its objectives and how it can achieve its goals. A business plan lays out a written roadmap of your business model, market analysis, marketing strategy, competitor’s analysis, projected financials, operational, strategy and competitive advantage.
If you will be asking for an investment or a bank loan, then a business plan is a must. But, even if you are going to finance your business using your own funds, a business plan will help you figure out how much money you will need to get started, what it takes to make your business profitable, what needs to get done when, and where you are headed.
In my first venture, my business plan was not very formal and academic, it does not need to be, especially I don’t need to present my business plan to a bank or any investor. Your business plan can be simple and practical — i.e. high-level overview of who you are, the problem you are solving, your solution to the problem, your target market, and the key tactics you will use to achieve your goals, projecting your financials for at least 5 years, etc. Even if you do not think you need a formal business plan, you should go through the planning process anyway. This process will help you in discovering any risks, holes or areas you have not thought through well enough.
In my experience, most of the time, the presence of competitors can be a good sign – it means that your target market already exists! You are assured that you have potential customers who are willing to spend money on your product or service.
In your evaluation, take time to understand your target market (your future customers) and be familiar with your competitors (e.g. about what they provide to their customers, how they attract attention, and whether or not their customers are happy). If you can find out what is missing, exceeding your customer’s expectations can be much easier — even before your Grand Launching date!
4th E: Execute
Congratulations! You made the decision to execute your business! Your first step to be in the real-world is to register your business with your licensing authority (e.g. Philippine SEC, Dubai Municipality, Free zone, DIFC, QFC, etc.). The business formation should have been analyzed in your “evaluation phase”. Equally important, you will need to decide on a business name and make sure that the domain name is available for your website.
To avoid a costly mistake, consult with a CPA or a lawyer to iron out the details because I am sure you will regret if you get it wrong! So, do it right for the first time! You will also need to get the proper business permits and Tax Registration. Depending on the nature of your business, there may be other applicable regulations as well. This is also the time to find a good and trust-worthy Accountant.
This is the time to use your business plan – track your progress and manage the detailed things to reach your goals. Your business plan should not just be a document for seeking a bank loan or investment, rather, it is a useful tool to manage your business growth and achieve your goals. Maximize the use of your business plan to execute your strategy, tactics, and specific activities for execution, including key milestones, deadlines and budgets, and cash flow.
Depending on the size and goals of your new venture, you may need to seek financing from an “angel investor” or a venture capital firm. But most small businesses begin with a loan and help from friends and family.
In this stage, you should be contacting your potential suppliers, recruiting your first team, developing your website, and starting your digital marketing (e.g. creating your social media pages, designing your posters, etc.).
Here are the common reasons why many Entrepreneurs fail in the execution of the plan:
- You and your team are not aligned with your big picture goal.
- Team members are not given clear objectives, goals, and individual success metrics.
- Your plan is unrealistic; hence, you just plan to fail. Most of the time, a Business Plan is an easy concept, but it is too hard to execute.
With so many moving parts even in your small start up, everyone, including yourself should take accountability. Each person should perform at 100% – 150% capacity, especially during the first 3 years of your operations.
Most importantly, start at a small scale! There will be a lot of lessons learned along the way. Make sure you can sustain the business, or perhaps absorb the losses during this learning period.
5th E: Expand
Now get ready for the next challenge: how to expand and scale up your business! Even if you are achieving your sales target at the moment, you will need to solve this problem: do you have the capacity and capability to deliver the same quality and efficiency to a bigger market or to your target customers in another location?
Scalability depends on your capacity and capability. Here are some questions that can guide you in your plan for expansion:
- Does your business have the capacity to grow?
- Does your systems, infrastructure and team be able to accommodate the growth that you desire?
- Can your delivery channels effectively handle the massive group of customers in different locations?
- Do you have the knowledge and adequate information about the new market that you want to penetrate? Visiting the place first, talking to people and understanding the market and the competition can really help you to plan ahead.
Scaling a business means setting the stage to enable and support growth in your company. It means having the ability to grow without being hampered. It requires planning, adequate funding and the right systems, staff, processes, technology, effective distribution channels and partners.
Expansion requires you to make tough choices. This is where a good scaling plan is very essential. Here are some critical points when you think about scaling your business:
- Review your current performance and assess if you are ready for growth.
- Does your organization have the people and systems to handle those new orders, without failing or compromising other aspects?
- Prepare your sales growth forecast — by number of new customers, orders and revenue you want to generate.
- Review every item in your financials to see how it might be impacted by your expansion. Of course, expenses will go up — you have to anticipate where and how.
- Your expansion plan may require additional staff, implementing new technology, adding equipment and facilities, and creating reporting systems to measure and manage results.
- Do you have the capital to sustain the growth and your expansion plan?
- Secure your Sales in a bigger scale. Do you have a strong sales foundation to generate more sales (e.g. sufficient leads, marketing systems, robust system to manage sales orders, billing and collection system, etc.)?
- Technology makes it easier and less expensive to scale a business. You can achieve the “economy of scale” if you invest wisely in technology and automate certain processes.
Warning! Scaling-up is as risky as the start-up! If your expansion is causing failures in your activities, then you will have unhappy customers and your profitability will be impacted! These failures can emerge from different activities, example: confusion among your staff, orders are not properly and timely served, miscommunication across the supply chain, not sufficient production or inadequate delivery capacity. Therefore, your initial goal to expand and to have a better company — can just cause the downfall of your business.
As per the research conducted by a big-4 firm, it shows that only 0.5% (1 out 200 businesses) can successfully ascend to a scale up. You need to recognize that while the manual processes were fine when you were small, it may not work automatically when you become a big company. You may end up doing a “fire-fighting” job every day, sorting out a lot of issues, or you are just keeping your head above water. All of these can be incredibly stressful!
I recommend that you should think through and validate thoroughly your expansion plan.
I hope this article has brought you a lot of helpful insights and I wish you all the best in your business endeavors! God bless!
About the Author
Lyndon Magsino is a CPA and Executive MBA with extensive experience in business strategy, risk management, auditing and corporate governance of financial services industry. Currently, he is working in the Audit Department of a Bank in the UAE. Prior to this, he worked as the Head of Audit of an investment firm in DIFC Dubai.
In addition, Lyndon previously worked in the Risk Advisory Services of a Big-4 consulting firm and headed the Banking and Financial Services portfolios in the UAE. As part of his role, he headed various projects on Internal Audit, Risk Management, Corporate Governance, Compliance and AML for global and regional banks, Central Banks and other financial services companies. He is a recipient of Hult Global Professional Scholarship Program for the Global Executive MBA at Hult International Business School, based in Cambridge Massachusetts USA. He completed his Executive MBA degree with distinction. He also completed the Executive Leadership Program at Harvard.
He is highly qualified as a Certified Public Accountant (USA and Philippines), Certified in Risk Management Assurance (USA), Certified Financial Services Auditor, specialized in Banking (USA) and Certified Internal Auditor (USA).