While setting up your own new business can be very rewarding and offer certain freedoms, it can also be a very costly exercise if you don’t set yourself up for success.
Here are my top tips for starting your own business.
Do your research
Before you do anything, make sure you intensely research the industry that you are hoping to jump into and make sure that your research is relevant to today. Identify both the pros and cons of entering the industry and communicate with people in the industry to gain and better understanding of what you are getting yourself into. This is crucial in terms of deciding whether this industry io right for you or not as during the process you may discover things that may put you off from opening a business in that space.
Know your market
Gather, analyse and interpret data about your target market, consumers and competitors as gaining a better understanding of the data within these sectors will allow you to see what works well and what doesn’t. It will also help you spot what the industry is lacking and how you can satisfy potential demands and wants. This process should also help you identify ways you can differentiate your business from competitors.
Learn how to manage your cashflow
This is a big area where start-up businesses fall down so I have a few tips:
- Perform weekly cashflow forecasts to help you stay on track of the money that you have coming in and out of the business. This will allow you to better manage your finances and budgeting. You can find ready-to-use cashflow forecast templates for free online.
- Make a list of essential and non-essential expenses to identify exactly where your money is going. All expenses can be broken up into two categories: a need or a want.
- Monitor your inventory and establish which items are selling and which are draining your working capital
- Focus on cashflow, not profit. The mistake most businesses make is they do not stick it out past six months because they do not see a profit. If your cashflow is in order, your profit will be in order.
- Work with reliable, quick paying customers. Penalise customers for late payments.
One of the reasons as to why 60 per cent of new businesses fail in the first three years of operation is that they are not injecting enough upfront capital into the business to get it off the ground. There are not many businesses around which are cashflow positive on day 1. The rule of thumb is that at least three months cashflow should be injected when starting your business, this doesn’t include any equipment requirements for the business.
Seek tax/financial advice
Having an independent professional review your initial business model and cashflows is an important health check on any proposed business. Get an accountant to handle your books and ease the pressure of the administrative workload. This eliminates the risk of messing up payroll, falling under during tax periods and miscalculating figures, especially if you do not come from a business/financial background
Build a good team
Probably the most important ingredients in building a successful business is having a good accountant, good bank manager, a good solicitor and great staff. Whatever amount of time and energy you give to sales, marketing and customer service, invest even more in keeping your team equipped and informed.
If employees are fully engaged in your business and are motivated to help you succeed, this leads to a premium customer experience and in turn, increased sales.
Gerry Incollingo, Managing Director, LCI Partners