“Take this job and shove it, I ain’t workin’ here no more!” Who hasn’t dreamed of saying that? Songwriter David Allan Coe’s anthem sums up how everyone has felt at one time or another.
A lot of people dream of owning their own business one day – but some brave souls, otherwise known as entrepreneurs, decide to seize the day and make their business dream a reality.
But starting a business is not easy.
It can be quite scary, actually.
Looking at stats on the number of failed businesses is enough to make brave men retreat back to the nine to five rat race.
But you’re different! You’ve got the fortitude to make your business a success. But where do you start?
Start As You Mean To Go On
The best assurance of success is the solid foundation of good planning. Starting a business off on the right foot is largely down to how much thought and planning you put into your business before you even open up your doors (or launch your website or see your first client).
Here are 3 rules to get you going on the right path to start-up success.
1. The Customer is King (or Queen)
Never forget this rule! It will make or break your business.
When starting a business, your main job is to work out what your customer wants and what they are willing to pay for.
It’s no good planning a business around something you like or that makes you happy – then you are just hoping that there are paying customers out there who think like you do, which is a big gamble.
Do your research. Talk to people. Find out what people are already spending their hard earned money on and then plan your business accordingly. If there isn’t already a need for your business, then you better budget a lot of money on marketing in order to generate that need.
At every stage of your business, you need to be looking to your customers to see if they are happy. Your customers will tell you what they want to buy, how much they are willing to pay for it, and what they would like to do next. Your job at every stage is to listen to them and to acknowledge that they are always right.
2. Cash flow is everything.
If you think of it, any business comes down to a simple equation:
Cash in – cash out = profit.
The problem arises that often you are having to pay cash out (buy supplies, undergo training, licensing, advertising and marketing costs, staff costs, rent, utilities) before you necessarily have the same or greater cash coming in through sales.
If you don’t manage this equation carefully, and keep an eye on it at all times, it is easy to get snowed under.
Countless small businesses (and large businesses for that matter) have folded because they’ve had too much money going out on a monthly basis and not enough coming in.
You can only survive on a cash deficit for so long. This takes us to point three.
3. Make friends with money and those who have it.
Access to cash is vital. Whether it’s in the form of a bank loan, a low interest credit card (or even better an interest free credit card, if one is available), an employed spouse, or wealthy and generous investors – you are likely going to need to identify and cultivate your access to money.
These funds will help you start up your business, see you through when there isn’t enough cash coming in, or help you to grow and develop the business. Each of these stages is likely to need a cash injection and unless you have endless money of your own, you will need to find it from somewhere.
Cultivating access to finance should be done BEFORE you need it. It’s very difficult to seek financial assistance when your back is up against the wall. Your desperate state will likely make borrowing costs higher. You have a better chance of lining up favourable borrowing rates when you are in a position of solvency rather than being in the red.
As a caveat, even if you have endless money of your own (and lucky you!) you shouldn’t use all your own money in your business. You are too close to your business to really see clearly what is happening with it.
The process of seeking external funding, which will require sharing your business case with financial institutions or successful business people, will help strengthen your business plan and therefore your chances of success.
They are likely to ask you challenging questions, but in having to find answers to them, you will further clarify your vision of the business and improve its chances of success.
If you dream of starting a business, the best time to start is now. Begin by working your way through the three rules above, and you will be well on your way to establishing a firm foundation for your new venture.
May it be a success!
This guest blog was contributed by Kayla, Editor of The Credit Letter Blog, an Australia based blog dedicated to sharing financial tips and credit card wisdom aimed at empowering people to live a prosperous financial life.