Four Suggestions for Developing an Idea for Starting a Business

The first step to finding a business that's right for you is to develop an idea you can become passionate about. Starting a business doesn't require you to develop a new product or process. In fact many successful businesses are started by selling a known successful product or process that is already branded and in demand. If your goal is to start a business, without the involvement of partners, you have to search your inventory of skills as a starting point, for developing a business idea. In fact, it doesn't make much sense to even think about planning until you develop an idea. I offer these four suggestions for how you might develop an idea for your business:

In the end, you have to follow the money. But a good first place to search for a business idea, would be to develop a list of everything you're passionate about. One of your passions could be something that excites other people as well. If your passion is lounging, you could develop an idea for a line of lounging wear or supplies like pillows. If your passion is eating you may be able to develop a new taste sensation. If fashion is your passion, you may be able to design clothes or accessories.

If you have a hobby in which you are an expert, if it has the potential to earn a profit, that may be the source of your idea. If you're an avid model rail road enthusiast, you may be able to build a business around designing custom rail road layouts, for sale. If you like fish or plants, you may design a business around an aquarium or plant decorating company, for rentals to offices. Just be certain you can make a profit because the IRS will frown on hobbies turned into businesses that don't earn a profit.

Consider work and other experiences you already have. Unless you are very young, it's likely you have had many jobs. The issues you addressed at one of those jobs may provide you with an idea you could turn into a business. If you ever worked as a secretary, you could earn a lot more money setting up an administrative overflow service. Performing the overflow work of a few large companies has the capacity to pay far more that most secretaries earn.

If you are creative, have an engineering background or feel you're capable of improving on existing products or processes, consider designing a new product or process. This unfortunately may be the most difficult method for developing an idea for a business. Your new product would need to be branded and promoted. Sometimes it may be best to license your idea to a large company. This is easily the most challenging method for developing a business to start. But, if you think you have what it takes, this may be a possibility. This could lead to the collection of royalties or a big payoff if your idea is good.

The best thing you can do when you are considering opening a business is to absorb all the information you can get your hands on about the industry your business will operate in, idiosyncrasies related to the specific business you plan to open, and best practices for promoting your business. Because once you develop an idea, you then have to determine what problem it will solve for your target market and the consumers most likely to buy your offering. Finding an idea for a business you can open is simply one of the many steps you must perform prior to planning or preparing to open for business.

The Saafenet corporation has the information you need to start and stay in business. Visit our website at http://www.saafenet.com to be certain you understand the basics. And if you want additional help,our business consultants stand ready to assist you.

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Managing Working Capital Effectively

Managing working capital effectively is an essential business discipline, regardless of the stage of business' life-cycle you have reached. During a start-up or growth phase, many businesses grow rapidly, run out of cash and fail. They simply do not keep pace with the business' increasing cash needs. Established businesses must also pay close attention to cash flow and maintain adequate working capital to pay suppliers and expenses as they fall due.

In my experience, business owners often overlook two essential questions when addressing their working capital needs. Firstly, how much they require and secondly, how they will finance or fund it. Determining your business' "cash conversion cycle" is often a good indicator of your working capital needs. It's determined by calculating how quickly your business converts its purchases (materials, inventory, etc) into cash received from customer sales.

Managing Working Capital Effectively

You can use other working capital ratios or measures to review working capital needs. Ratios such as inventory turnover, creditor days, and debtor days can be used to help identify potential concerns or trends. Regularly reviewing them will help you prevent inadequate liquidity and cash flow and enable you to take proactive action before it's too late.

Adopting "better business practice" will help you manage cash receipts from debtors (also known as "accounts receivables"). Providing easy payment methods, developing and adhering to credit policies, and following up on late payments will all help. However, you'll need to consider any possible negative effect these may have on your customers. For example, customers may go elsewhere if your credit terms are unfavourable to them.

Paying close attention to paying your suppliers and expenses ("accounts payables") is equally as important. Pay invoices when they are due (rather than paying early); check invoices for accuracy, negotiate credit terms, and utilising any prompt payment discounts will all help. Remember that in doing so you'll need to ensure that your suppliers continue to supply you with materials, utilities, etc.

Economic Order Quantity

For many business, an important area of good working capital management is in managing inventory. Determining optimum stock levels and the ideal time to re-order inventory will help preserve cash. The "Economic Order Quantity" (EOQ) calculation will help you to determine how much inventory you need. It will help you to balance "holding costs" (warehousing space, etc) with costs associated with ordering stock ("delivery charges, etc). EOQ will also help prevent you running out of inventory by determining "safety levels".

Irrespective of whether your business is a start-up or not, managing working capital effectively will be vital to your success.

Mark Gwilliam FCCA CA is the founder and Director of Chakra Partners, an internationally recognised finance & accounting outsourced company.

He advises executives & small business entrepreneurs on complex challenges including strategy, risk management, managing shared-service centres, operations and how to run successful businesses. He combines his natural enthusiasm for sharing his knowledge with his proven ability to provide practical down-to-earth solutions for clients. He's written several eBooks and regularly writes business articles.

To learn how you can gain access to his insight, head over to http://www.chakrapartners.com

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