So you’re thinking of starting your own business? Do it the right way!
We live in an era when it seems like everyone is starting their own business. Inspired by the success stories emanating from the likes of BBC’s Dragon’s Den or hearing about the modest start-up ventures that grew into multi-million pound empires for well-known business gurus such as Richard Branson, people are jumping at the chance to run their own show, make their own future and off they go into the unknown.
And it is exactly that………into the unknown……….into a place where most of us have never been. Being your own boss, making all the decisions, with every pound of profit made being your own. No longer are your efforts lining the pockets of someone else. Now the world is your oyster……..or is it?
Before taking the massive leap into the world of business, you need to understand the true risks and rewards of making that move, and you need to know the right way to start your own business.
More than one step to go………..
Once you’ve made the decision to go it alone, what you first need to realise is that, in most cases, you aren’t automatically running a business. Most people becoming self-employed and there are some crucial differences.
Employee: This is the stage before deciding to run your own business. So many people are highly skilled employees or managers before starting up. They decide they can do things better, faster, more efficiently, get more customers, develop their own niche. And they decide to leave the security of their jobs to start their business.
Self Employed: Once the employee leaves their post, they automatically become self-employed. Being self-employed is an ambitious step in itself, but it’s not running a business. Being self-employed usually means it’s me, myself and I. You’re working for the craziest person on the planet – YOU! And you soon learn there is so much more to making it on your own than your ever thought of.
Business Owner: Becoming a business owner usually takes time, time spent being self-employed in most cases, understanding the true requirements of running a business. There are common themes and characteristics to a business which sets it apart from self-employment. These include:
• There will usually be more than just you involved in the day to day running of the business
• The business will have plans in place and targets to achieve
• There will be specific systems for all aspects of the business
• The business will have a range of customers and suppliers
It’s important to identify the key differences between self-employed and business owner at this early stage so that you are able to take necessary actions to actually having a “business” in the true sense of the word.
The right things to do………….
OK, so now you know the difference between self-employed and business owner. And you want to move into the business owner category. Here are 10 key tips to starting (and running) your business the right way.
1. Know your market
Whether you’re going into business selling goods or delivering services, you need to know the market you’re in. You need to understand your own product, its competitors, the size of the market you’re going into, the price and USP of the competition. Do your research before you start your business and plan to be unique and to set your business apart from the rest. Plan to stand out from the crowd. Too many businesses have failed in the first 5 years by following the trends set by similar businesses in their area, all of whom had also failed………..copying someone’s else’s mistakes is a sure fire way to ruin your business before you start!
2. Market to your market
At the outset, draw up your marketing plan. How are you going to promote your business and its products/services? Where will you promote? Focus locally initially and aim to build your home market share. The power of social media in today’s world cannot be underestimated but again there are right ways and wrong ways of using Facebook / LinkedIn / Twitter. Develop a way of using social media in an automated fashion, perhaps bringing in someone to handle this for you. Be positive with your marketing material. Finally, develop a system for referrals from your customers as your business grows. There are no better critics and champions for your business than the people who have already bought from you.
3. Systems, systems, systems
I cannot stress this enough. In a nutshell, have a procedures manual in place before you start. The guide to “here’s how we do it here”. Ever been to McDonald’s? Notice how they always ask the same questions in the same order and have the same goodbye? Develop a procedure for everything in your business – answering the phone, email sign offs, all the admin issues (timing and methods), recruitment, on-boarding your new customers, feedback from customers, dealing with suppliers, financial procedures………….the list is endless. But document most if not all of your systems before you launch. Revisit and re-jig as and when necessary.
4. Cash flow really is king
Now to some financial aspects. The truth is that you need to make money to stay in business, as much as you need to keep breathing to stay alive. Whilst it’s true that many new businesses lose money at the outset whilst establishing market share, this can only last so long. Lack of profit is lack a cancer to a business. It’s only a matter of time………….
But lack of cash-flow is like a heart attack. When it kicks in, it could be curtains very soon afterwards! So aim to get your cash-flow right by focusing on:
(a) Having firm credit control policies in place with customers, backed up by written terms of business
(b) Utilising any credit terms offered by suppliers when possible
(c) Getting some money upfront before delivering your products or services – at least 50% is the norm
(d) For service based businesses, aim to get regular payments (DD’s or SO’s) in place with your customers for recurring services
(e) Have enough money on day 1 to cover at least 6 months’ worth of outgoings and own salary
(f) Keep track of your cash-flow regularly and always look ahead for 12 months minimum
5. Know your profits, see your profits
You need to know whether or not you’re making money, how much you’re making, provide for any tax that might be building up. If you’re not making money, get to grips with when the business will break even and turn that corner. Invest in good financial advice at the outset, bring in an accountant at a very early stage and invest time and money in a good financial/bookkeeping system. You will need to keep this up to date weekly and look at the financial reports on an ongoing basis.
6. Understand your costs, control your costs
A good financial system will help you see the costs of your business, but it’s more important to understand your costs and what is driving them. Do you have any wastage or inefficiency issues in your business? Only by understanding what gives rise to your costs can you start to control your costs. A simple example might be postage and stationery costs. Are your team printing too much? Should more use be made of electronic communication and data sharing at much lower cost?
7. Always be ready to knock on doors
When you start your business you might have a good idea how you will get your first customers. You may have a few already lined up. What next? You can’t rely on them forever and you may not be able to rely on the same product or service forever. Have a proper plan in place to get new customers, to develop alliances with other businesses, to keep knocking on doors. The world never stops spinning, and your business never stops needing more ideas to generate new money-making schemes!
8. Pricing and value
One of the key mistakes made by new businesses is on pricing. A lack of experience in dealing with business accounts and numbers can lead to costly errors. Learn how your business works financially. Understand your margins (and what this means).
Not only can getting your sales pricing wrong be detrimental, but being too cheap can be catastrophic. It’s easy to undercut the competition, but that policy can only last so long before your business runs out of gas. If you manage to stay afloat whilst dropping your prices, you will need to bring them back up again at some point and now you have an even bigger challenge ahead.
Rather than beat the competition on price, beat them on value. Throw in added extras to your customers for a premium pricing offering. Keep in touch with your customers to show your business cares. Ask for feedback and react accordingly. Simple things like being hospitable, having clean offices/premises, making contact with customers outside of when doing business, giving your customers more open choice on price………..these are the types of things you can do to add value to your business transactions so that you don’t have to price-drop.
9. What’s the big idea?
The biggest tip for anyone starting a business is to have a plan………a real plan………….a written business plan. A good business plan is not just something you do for your bank or investors……..it’s a road map for your business from start to finish. Your business plan should be revisited every 12 months but certainly no longer than every 2 years. Draw up your financial budgets and projections, then look at how the business is actually performing against budgets. Look at major variances and understand the reasons for these, react accordingly.
Your business plan should set out what needs to be done before the business starts, when the business starts, how the business will grow and also the “get out” plan. It’s vital on day 1 of your new business to decide and document your exit strategy!
10. Learning is earning
Running a business can often be a lonely experience, even though you may have a good team around you. There will always be times that you need the voice of reason and experience to point you in the right direction.
So at an early stage start networking with other businesses and business owners in your market, and speak to businesses in other sectors. Join a local business group or chamber of commerce. If possible, find a business coach or mentor who you can speak to regularly about your business and shout about any issues the business is having. Aim to pick someone who has been in your shoes.
And remember there is no such thing as a stupid question, but listening is even more important in business. So open your ears to advice, take the critical comments on the chin, and get up the next day with a positive attitude to implement any good advice you get.
If you can remember the buzz you had on day 1 of your new business, bring that euphoria to your business each and every day, use it to invigorate yourself and your team, and you’re giving yourself the best chance possible to succeed with your new business.