Starting a Business in High School

Budding entrepreneurs are everywhere. From the toddlers who try to sell the family cutlery to their parents. (Well, hopefully, their parents and not some passerby.) To the pre-teens out on the roadside selling lemonade, sneaking the odd sip while no one is looking. Then there’s the teenagers, or tweens, wanting to set up a business while still at school.

Some are simply driven to make money — whether through family circumstances, or just nature. Others drift into it because they discover a hobby they are into happens to be a door to cash. There are those who decide to get into business because they are bored with the ordinary lot of someone their age. And some are encouraged, directly or indirectly, by a mentor, supportive older person, family example, or chosen hero.

However it happens and, in fact, regardless of the age of the budding entrepreneur, there is a process they must follow. Some seem to innately know this and act accordingly. Others don’t know it or are too impatient to bother with it. Many suffer the result of not following it.

What’s the process? Well, it goes something like this:

1. Develop a business plan,
2. Prepare a budget,
3. Gather a group of key supporters,
4. Start small.

Some might think that all sounds a bit technical for a student to undertake. But I liken it to looking before leaping, getting your ducks in a row, and all those other sayings. Let’s remember what these wise businessmen said — firstly Alexander Graham Bell:

Zig Ziglar expanded this a little:

So, preparation is important. Let’s, therefore, discuss the steps I mentioned in a little more depth.

Develop a Business Plan

The encapsulates a wide body of due diligence, including the following:

1. Researching everything possible about the products/services it is planned to sell,
2. Learning as much as possible about the industry and market within which it is intended to operate, gaining (whether by market testing or some other method) an assurance that, in fact, what is proposed will actually work, and
3. As a consequence, establishing the viability of the proposed business.

Once these things are covered off, and the result is a green light, it’s time to get to the actual plan — detailing out how the business will function across every area in order to reach the desired goals. This should cover the key elements below:

Marketing — this includes the P’s of Marketing, which I’ve written above before. To summarize:

• Product — the business must have a product/service the market wants,
• Price — the business must sell the product at a price the market is willing to pay,
• Promotion — the product must be promoted in a way as that causes customers to want it. It’s about the message that makes customers want to buy,
• Place — the business must be accessible in a way / at a place that is attractive to customers. This may be premises in the right place, or a readily accessible website, or a friendly customer order phone system, …
• Process — the process by which customers receive the product must keep customers happy. This includes the delivery system,
• People — the people within the business that customers come in contact with must enhance the customer experience, such that customers want to buy (more),
• Physical environment — the premises must not only be in the right place but also be attractive to customers. If the ‘premises’ are the website, this must also be attractive, and easy to use,
• Performance — the service or purchase experience for the customer must be one that causes them to want to continue the relationship, and
• Packaging — the product must be packaged in a way that is attractive to customers.

The first four above are the original Marketing Mix P’s (the original Four P’s). Items 5 to 8 have been added since. We have added number 9 because it is so often forgotten. Too often a quality product is shoved into a cheapo package!

Alongside this, there is a need to establish just who the business’ ideal client will be, and this can be spelled out according to their demographics, including things like:

1. Their typical income,
2. Their typical age,
3. Where they typically live,
4. Who (the type of people) they typically live with (and ages again),
5. Clubs/associations they typically belong to & sports they typically play,
6. Their typical favorite colors/design styles, and
7. Where they typically like to holiday.

Finally, it’s necessary to document how the business will achieve its sales — its channels if you will. Will it be through a mix of online and physical sales or just one of those? Will they be driven by social marketing, other advertising, salespeople, or a mixture of all of these?

And, yes, there needs to be a plan for each facet of each of the things mentioned. Denise O’Berry demonstrated the importance of marketing this way:

Operations — a part of the plan covers, in particular, how the business will deliver on the marketing/sales volumes. As such it would cover:

1. How products are sourced — where from, how they get to the business, and how they get to the customer,
2. How the products are manufactured, and
3. How the products are designed, or
4. How the services are developed, and
5. How the services are delivered, plus
6. How the products and services are quality controlled.

Human Resources — is all about how the operations (& sales for that matter) will be staffed. This includes how they will be hired, how they will be managed, and how they will be incentivized. The best way for an organization to achieve its goals is to make sure that the goals of each individual are clearly spelled out, and form a subset of the organization’s goals. Incentive plans are then tied into these expectations. I.e. when the individual is performing on their part of the business’s goals, they are rewarded (as is the business, because it too will be achieving. This goal allocation and incentivization must start first with management, who must walk the talk.

Decisions in this area will also cover whether employees will be full-time, part-time, or casual, and what qualifications will be expected in each area of employment. Michael Kouly put this slant on it:

Technology — an increasingly important part of any business. Consequently, this part of the plan covers things like:

1. How it will be used,
2. To what degree it will be used,
3. Where within the business it will be used, and
4. What types of technology will be used?

As a consequence, the decisions within this area cover both software and hardware, team connectivity within the business premises, and from outside. How KPI data is captured and managed, how any data will be backed up, and where it will be hosted. Utilization of the web also falls under this area.

Financing — this is a key often missed in pre-setup considerations. Decisions in this area include the following:

1. When, or if, to take on new staff, how much they will be paid, and how they will be paid — e.g. commission (dependent on sales made = they pay for themselves);
2. When, or if, to invest in new assets, and how they are to be funded — e.g. from cash on hand or borrowed (if so, what form of borrowing);
3. How much emphasis is to be put on collecting funds from debtors — i.e. the terms of trade to be used;
4. How promptly creditors are to be paid;
5. What borrowings, if any, are to be used to finance working capital (=day-to-day cash needs);
6. What level of stock is to be carried;
7. How much time, effort and money will be spent in:

• New product development/sourcing;
• Setting up a new branch, or a new business subsidiary;
• Purchasing another business.

Innovation — which is often the reason some businesses just seem to keep on going (as well as keep on growing). Businesses, like the people within them, face change in many quarters at all times, some good, some not so good. While some changes can be avoided, some cannot. The smart business foresees the latter and puts in place plans to avoid them, they also put in place steps to take advantage of any opportunities offered by the latter. This means it must be built on a culture of change, and that encourages change — including change in:

• Processes,
• Systems, and
• Products and services;

All of this requires resources to be allocated, so the business can continually rejuvenate itself in order to meet the market of the future. As Steve Jobs said:

Prepare a Budget

A budget is the financial reflection of the expected results of the actions specified in the business plan, according to the financial period it reflects. The reality is that without first doing this, an entrepreneur can start something that has no chance of actually making money (without potential issues — not immediately obvious — being first ironed out). Sadly, far too many have done just this — leaped in, started up and lost so much. You see financial failure — while character-building — carries with it more than just a financial cost. No, it can also mean relationships lost or, at least, damaged. And it can cause dreams to die, with all that that can mean to their dreamer. What should the budget cover? Usually, you’d expect to see the following:

1. Period — usually the next year, but often longer,
2. Revenue — derived from prices that have been found to be acceptable to the market, products/services/quantities/etc,
3. Cost of sales — driven from the sales quantities, and established (as well as possible) costs,
4. Overhead costs,
5. The ramifications of all of the above on cash and the balance sheet items.

Bear in mind that — particularly in the early years — a budget is really a best guess of the financial consequences of planned actions. Reality can turn out considerably different.

Gather a Group of Key Supporters

This can’t be overstated as far as importance goes. It’s all about gathering a set of advisors with appropriate knowledge, who can keep an eye on how things are going, be a sounding board, and keep the business owner on task. While, initially, they might form a pseudo board, if the business takes off they may become actual board members.

Jeremy Moon, the founder of Icebreaker, called this group his silver foxes a reference to their grey hair image-wise, but in fact a reflection of their wisdom. Of course, you have to have the humility to heed their advice. As Jeremy said:

“When I started Icebreaker I was 24, broke and had absolutely no idea what I was doing.”

Start Small

While the trial run may have been carried out in the investigative phase of step 1 above, the less committed up front by way of time and money — while still making a fair go of it, of course — the lower the chance of big losses. Am I saying not to take risks? No — entrepreneurship is based on risk-taking — but I am saying always try to minimize/mitigate those risks. And there’s nothing wrong with starting small. In fact, it has the advantage of enabling the entrepreneur to iron out any bugs in and ensure the scalability of:

1. Products — be that parts or the finished product,
2. Supply chain — making sure it’s possible to get the number of items needed at the time needed, every time,
3. Sales channels — making sure the chosen channel(s) are effective,
4. Systems and processes making sure everything works efficiently, all the time,
5. Software — ensuring whatever software is involved (especially accounting software) is both understood and fit-for-purpose.

All of this, no doubt, sounds like complete overkill for a high schooler wanting to start a business. But, I have spelled all of this out (and there could have been more), so that the high schooler realizes that business is, well, serious business — that preparation is essential if that business is to deliver what it is they want from it.

And, on top of all of that, they need to be sure they can continue to achieve in their studies. So the student will also need drive and motivation. As Elon Musk puts it:

If you haven’t been put off check out my new training course written specifically for students wanting to set up a business Jack’s Kids

This post was first published at www.beanstalkknowhow.com on 23 August 2019.