Starting Your Own Business Series: Your First Year

by Gene Muchanski, Executive Director Dive Industry Association, Inc.

 

Your first year in business may be your most difficult part of going into business for yourself. In fact, it is going to be harder than all of your business planning up to this point. If you think doing a personal assessment, feasibility study, or business plan was hard, think again. You may even think that creating an action plan and going through the start-up process was more complicated than you could have imagined. I grant you; it probably was not easy, and I know it was a lot of work, but it is nothing compared to the first year in business. Think of your journey so far. Getting to this point is like climbing Mt. Everest. You may be on top of the world now, but you have only completed half of your journey. To underestimate what comes next and not bothering to plan for it can result in failure and financial ruin.

 

Planning a business takes a lot of research, study, and SWAG (Scientific Wild A_ _ Guessing). But when you finish your planning, all you have invested at that point is a lot of time and manpower. That’s a good thing. You probably learned a lot about starting a business. When you went through the actual start-up phase, you put your resources to work and hopefully build your business according to your plan. At that point, you have not lost anything yet, either. Your investment is intact and is waiting to bring you a return on investment (ROI). What’s it waiting for? You. Now it’s time to get to work, but don’t stop your planning. Remember, this may be all new to you because you have not been here before. With each passing day, you will be building a history, and that is something you want to record and learn from.

 

Dropping the ball on planning after a successful retail store grand opening happens all the time. I worked with a sporting goods retail start-up not too long ago. We went through the entire business planning process, and the entrepreneur excelled at it. His research was thorough, and all his assumptions were complete, well thought out, and realistic. The Business Plan was textbook perfect. All bases seemed to be covered, and he was ready to open. His start-up period was short and complete. On opening day, his store looked fantastic, was well stocked with the correct amount of inventory, represented by the best brands in his industry, and his hardware and business software programs were installed, online and ready to go. I congratulated him on his achievement and told him we should proceed with the next phase of his start-up, the first year of operation. You could imagine my disappointment when he said, “That won’t be necessary, Gene; I’ve got it from here.

 

A year later, I got a call from that same entrepreneur. He needed to raise $4,000 by the end of the weekend to pay his rent or face eviction. When we reviewed his past year of operation, we found out that he had not recorded any of his sales history, did not have a database of his current customers and did not keep adequate records of his income and expenses. Basically, he did not use any of the professional business programs he purchased and installed during the start-up. With a beautiful store, an excellent inventory that was paid for, and the best legal, accounting and marketing programs that money could buy (with no useful data in them), there was little he could do except hang a GOING OUT OF BUSINESS sign in his window and move out on Monday. Don’t let that happen to you.

 

Now, do you believe me that going into business for yourself is for reals? That’s why you don’t open a store on Monday and put up a “GONE DIVING” sign on your door on Tuesday. After you open your doors to the public, you have a big responsibility to make it work for you, your family, your local diving community, and the industry. Learning how to operate your business will be easier and more enjoyable if you develop a Board of Advisors that you can casually meet with from time to time. Remember, you are in the recreational diving business, and you will undoubtedly have customers that work in the various professions, like marketing, accounting, law, and business. If they patronize your dive store or business, I am sure they will want you to succeed. Get to know them on a personal basis and recruit them as volunteer advisors. I am not saying that you should get them to give you professional services for free. I firmly believe that you should pay for your legal, accounting and tax services using professional companies that do that for a living. Keep your professional services and your advisors separate. An advisor to me is someone I can socialize with, as a friend, who lets me pick their brain for ideas. Sometimes they may even give you constructive criticism on different aspects of your operation. Your accountant, lawyer, and banker provide services that you pay them for.

 

During your first year, you want to record your history of customers, sales, students certified, and everything to do with income, expenses, and cash flow. It will help you create your own seasonality curve, giving you a competitive advantage the following year. Until then, you are really operating on assumptions and realistic estimates.

 

Customer Database: Starting on day one, you need to create a customer database. Every time someone walks into your store and every time you meet a scuba diver, get their full contact information and record it in a useable CRM (customer relationship management) program that could be integrated into your point-of-sale software program. This will be your potential customer list. Every time you make a sale, make sure you capture the customer’s contact information. People who have made a purchase from you in the past 12 months are considered your current customers. Get in the habit of frequently marketing to your current customer base. This collective group of people is referred to as your circle of influence. When a current customer has not purchased from you in 12 months, they become your former customer. Knowing who they are is important but contacting them again is more important.

 

Sales History: Knowing your sales history is important. You will want to know how you are doing this year and how it compares to last year. After the first 12 months in business, you will have a one-year history that shows your first seasonality curve. From that point on, you can start to see trends in your sales. I have always maintained a simple Excel spreadsheet for sales. At the end of every day, I enter the daily sales. The spreadsheet gives me the total for the year, the daily average, and the projected total for the year. Those four columns are compared to last year’s daily sales, and at a glance, I can tell if we are up or down compared to last year by the daily amount, total amount, average daily sales, and projected annual total. My spreadsheet gives me the answers in dollars and percentages. Once you set up the spreadsheet, all you have to do is put in one number per day. Easy.

 

Point of Sale System: I can’t recommend enough having a good point of sale software program. I used Scuba Prophet in my dive store back in 1988, when it was first introduced. A good point-of-sale program will help you control ordering, inventory, sales, customer data, marketing and merchandising. Knowing what you sell, how much you sell, and to whom is invaluable information. Knowing the revenue, current selling price, cost, and profit per unit sold is priceless. Being able to forecast sales accurately is a skill you need to develop as a professional dive retailer or dive equipment manufacturer.

 

Accounting Software: Most small businesses use an accounting software program like QuickBooks. You want to be able to track the flow of your income, expenses, and cash flow. Your software will also keep track of your vendors, customers, and employees. You will always want to be current with your invoices, bills, payments, deposits, payables, receivables, taxes, and payroll. Accounting software is necessary to manage your day-to-day operations and for accountability and government compliance.

 

Office, Marketing & Graphic Software: Business tools are designed to make your job of operating your business easier, more accurate, and more manageable. Using an integrated system of programs like Microsoft Office 365 and the Adobe Graphic Suite will make getting your daily tasks done quicker and easier and look more professional. The key to getting the most out of your computer software programs is to purchase a book or a course on each software program, read the book, complete the course, and keep the textbook on hand for future reference.

 

Staying Current with The Diving Industry: During your first year of operation, it is important that you refine your business model and make any changes or adjustments to your original business plan as you think necessary. What you should be trying to achieve at this point is to develop a business model that works for you as you iron out any bugs in your current assumptions. Your goals should be to utilize the current business tools you have and do the best you can within your current market. We will address shifting to a growth strategy in future articles. For the present time, you may want to keep yourself current with what your competitors and the rest of the industry are doing. Don’t just focus on your local market but start noticing what other vendors in the equipment, training, travel and lifestyle sectors are doing. If you haven’t joined your industry trade association yet, now would be a good time. The Dive Industry Association has a book on how to stay connected as a Dive Industry Professional, and it’s free as part of your membership.

 

Congratulations on getting this far in your own business. Keep going. For more information on getting through your first year in business, as it relates to a Dive Industry Professional Business, contact Gene Muchanski, Executive Director, Dive Industry Association. Phone 321-914-3778. Email: gene@diveindustry.net