Tag: Business startup

5 Things you Should Know Before Starting your Own Business

So, you’re thinking of starting your own business.

Leaving a secure income for an entrepreneurial venture can be exciting and scary at the same time.

I’ve been through the process before, so I know about the mix of anxious emotions you are going through right now.

Fear not! I have a short guide that covers the five things you should know before you start your own business – giving your new venture the best chance of success and a heads-up on the common pitfalls when starting a small business.

When I left my job for my first full-time business venture, I’d already dabbled in various businesses throughout College and University, and I had built up the business I wanted to go full-time with whilst I was working a 9-5 – so I had experience and a little know-how, plus a revenue generating business to hop-over to and not have to wait until my business began to generate income.

This put many of my anxieties at ease when the time came to leave my 9-5, and I’d recommend building your business alongside a secure income if you have the opportunity to do so, it just removes that little bit of extra stress and allows you to test the feasibility of your business before you take the plunge.

That said, whatever route you choose to take, these 5 tips I’m about to show you will help you to hit the ground running and get your new business up-to-speed as quickly and as painless as possible.

So, here goes:

Understand your market and build your USP (Unique Selling Point) around it

Don’t be naive.

There will very likely be more established competition already out there serving your potential customers.

It won’t be easy to convince those customers to leave that established competitor and try your new, untested brand.

You need to offer customers something that meets their needs better than your competition.

So, you need to understand what is currently frustrating them about your competitors. Where are your competitors failing your potential customers?

Are they not offering additional products/services that customers find valuable? Are they offering poor after-sales or customer support? Does their current offering not quite meet customer needs properly?

Run surveys, read reviews, and scan forums/blogs to find what customers are saying about your competitors.

Find what is frustrating them, and you’ve found your usp, that you can enter the market with and fulfil customer needs better than anyone else.

And if you can’t find any obvious frustrations, then aim to serve customers even better than competitors currently do – can you be more competitive on price? Offer more attentive customer service? Or offer superior products/services?

It’s much easier to understand and communicate your unique selling points before you launch, rather than have to switch the direction of your business after launch to better serve the market demands.

So spend the time now researching what your usp will be and make sure that it offers true value to your audience.

Noone cares as much for your business as you do

Friends, family, employees, suppliers, advisors, customers, everyone!

Nobody cares about your business as much as you do. They just don’t have the emotional or financial investment that you have in your business, and they never will.

They will also never fully understand the pressures and situations you will face with your business.

Friends and family who have paid jobs will not understand the financial pressures and the need to take on debt or other finance to grow.

Entrepreneur friends will be too busy with their own business and pressures.

Employees, suppliers, and customers all have their own objectives, goals and pressures to be concerned with the pressures you face with your business.

You therefore need to learn how to cope with pressure on your own, and fast!

You also need to understand how to concurrently manage and satisfy various stakeholder objectives. If you focus purely on your own objectives, you’ll never achieve full productivity from employees, you’ll never achieve mutually rewarding relationships with suppliers, and you’ll not satisfy your customers properly.

Work towards your business objectives, but also be mindful of what the objectives are of those around you – the people who will help you to meet your business objectives.

Don’t be selfish. Help others, and they will help you.

Cashflow is king

Pay close attention to this from the outset.

Run out of cash, and your business no longer exists.

It’s important here to outline the difference between cash and profit.

Your business can have no cash but still show a profit – if you’re investing in stock or capital equipment for instance. So no cash doesn’t necessarily mean you are failing – it may mean you are reinvesting every penny to fuel profitability and growth.

But just be careful – you have to achieve a fine balance between short-term survival and long-term growth.

This was, and still is, the biggest challenge I face in my own businesses.

In one of my businesses, it never has cash in the bank! Every penny to date has been reinvested in capital equipment or software and stock, so the business has shown a profit for the last 6 years, but still doesn’t have a penny in the bank. But what it does have is over £310,000 in stock, assets, and property.

This is an extreme example of focusing purely on long-term growth and maintaining bare minimum finances in the short-term to survive. I know of entrepreneur friends that have done the opposite in their business, they have large cash reserves but barely any asset value – this doesn’t really interest me. I don’t see the point in cash unless you are doing something with it – holding cash in the bank for the sake of reducing your anxiety and having something to look at on your statement can hold you back in the long term.

Don’t be scared to reinvest it all, it will pay off in the long run. But make sure you keep enough back to pay the bills!

Do it for the love, not for the money

Money is great. Money motivates you to get out of bed and get to the office. But money does not motivate you whilst you’re in the midst of dealing with tricky situations, whilst replying to customer queries, or mucking-in and packing customer orders.

It motivates you to get to work, but doesn’t motivate you when you’re AT work. That comes from an intrinsic love and passion for what you are doing.

If you are doing something you love – beyond the financial benefit, your motivation will be much stronger and you’ll last longer than someone pursuing purely money.

Although my businesses have mostly been profitable from the outset, I only started to see significant returns and growth after several years of hard grind.

In those years of hustling and grinding for little reward, if I was in it purely for the cash, I would have given up and gone to get a job instead – heck, it seemed a lot easier and more financially rewarding and I did entertain the thought more than once.

But something else motivated me, I had a vision to build a multi-faceted brand that operates in health, wellness and ethical sectors – to deliver better health, wellbeing, and enjoyment to other people in as many ways as we can. And this is a vision that still drives what I do today.

If I didn’t have this longer-term goal, I’m certain I’d have given up long ago, way before the real growth and financial reward started to materialise.

It’s quite ironic. When you look at most billionaires, and you research their approach and mindset, there’s a lack of emotional attachment to money. They are more focused on a vision or high-level goal.

They won’t have achieved billionaire status by focusing on becoming a billionaire – because when they made their first million, they’d value the money too much to reinvest in high risk, high reward ventures, and their investments would be less bold and therefore present less reward – meaning they never reach billionaire level.

Lose your emotional attachment to money, and stay focused on the goals that truly motivate you. The money will follow.

If you want to grow fast, you need investment

Don’t expect to build a multi-million pound business in a couple of years with no investment.

I’m not saying it is impossible to achieve this, many have. But the number of people who haven’t, and have tried, are 1000 fold.

It’s unlikely you’ll grow that substantially, that quickly, without an initial injection of cash.

Imagine this. You set up a business with £200 seed capital, and you spend this on your website, incorporation, and so on – as though you were following my 4-week business set-up course.

You achieve your first £500 in advertising after a few weeks of promoting and populating your site with content. That repays your initial £200 investment and leaves £300 to reinvest. You then invest this money into physical stock to sell on your site. You work on 50% gross margin and you start to store the stock at home and pick/pack the goods yourself to minimise overheads.

Assuming you have total stock turnover every 4 weeks, that’s a £150 surplus after repayment of your initial investment in stock, and you can then invest £450 in stock for the following 4 weeks, and it starts to have a compounding effect throughout the year.

By the end of the year, you’ll have made a few thousand pounds. Which is great, but when you start to throw in overheads that come with growth like a warehouse and employees, that will soon disappear.

Add three 0’s onto the example figures above, and you’ll be making millions each year – and economies of scale will ensure that a good chunk of profit remains even after overheads are taken into account. But not many people will have £300,000 to invest in stock from the outset – so here’s where you need funding if you want to see fast growth.

This principle is highlighted in another exercise. Start with 1, and x2. Then times the result by 2, then that result by 2, and so on.

The growth as a %age remains the same each time – your figure is growing by 100%. But the actual figure, in the early stages, is only increasing by 1, then 2, then 4 and so on – small numbers. But get to 1,000,000 and times by 2, and you’ve just created another 1,000,000 – a substantial figure.

If you receive investment, it bumps you up the multiplication table and makes sustantial returns more accessible in a shorter period of time. Starting at 1, multiplying by 2, takes a long time to hit substantial numbers.

The same principle applies when you are building your business. So if you want to grow fast, be prepared to take on debt or give away equity to achieve investment.

And there you have it!

All of these tips come from my own experiences in business – they aren’t an exact science, and your experience in business may differ wildly. That’s part of the beauty of business, no one rule applies to all businesses!

But they should provide a good degree of guidance before you get your own small business underway and hopefully prepare you somewhat for what’s ahead.

If you already have your own small business and have your own tips to share on starting up, please drop your comments below. I would love to hear about your particular experience and advice.