I promised the second part of last week’s article which covered the first 3 points. Read the full article by clicking here!
Here goes the remaining 4 points….
4. What have you spent your initial capital on?
There seems to be this common misconception in business that you NEED to spend all your capital within the first year or so. Why this is, I have no clue? Watch the Dragons Den and other pitches and you will find a significant number of new start-ups seeking investment who haven’t worked out exactly how they are going to make that money back within say 5 years. That is what investor really want to know, not how you are going to spend their cash, but how you are going to generate more of it. Do you need that brand spanking new car or machine? Have you done some research to find cheaper alternatives for carrying out your business’ operations? I purposely went for a low cost model business because of this. I reviewed how best to start my practice without incurring any extra costs. In fact my mantra is to earn more to reinvestment. It is a tough market out there; if you really want to be in business then you should be looking for the lowest cost model for entry into your chosen industry or business. Most of the successful business owners out there have a story to tell because they started with close to nothing and acquired everything through hard work. If you have the means, then by all means do what you have to do but if you don’t, then take my advice and really plan how you spend the seed money or capital you worked so hard to get.
5. Market till you drop
This is probably the hardest part (well maybe next to accounting) why small businesses don’t make enough to survive the challenges of the first few years. You need to have days that are devoted to totally marketing your self and being more visible in your marketplace. Most large corporate out there don’t just wait for business to come to them, they have entire business development departments whose sole purpose is to keep their pipeline full with prospecting clients. Devote a day to marketing and work at it and note the changes you will begin to see in your business. I have tried it and I works like a charm.
6. Would you have made a profit if you had paid yourself?
Some business owners are so excited because it looks like they have made an accounting profit. But they draw up blanks when you ask if they paid themselves. I am not particularly interested in sweat equity, I have a son to look after. Pay yourself the open market rate and see if you are actually making a profit. Paying yourself is great because it not only gives you a true picture of your businesses performances but it also motivates you to work harder to cover any short fall. After all, how long can you work for FREE without compromising your life and families well being. Pay yourself and declare a loss if you must. In the long run you will be happy you did. There are tax efficient ways of mixing dividend and salary so speak to your accountant if you are unsure of the best mix for your business.
7. Can your business still make profits even when you are on vacation?
Is it a business or a job? I think creating a job for yourself is probably easier than creating a business. A business is structured enough to operate and possible even continue to exist long after you. This is the area where most small businesses struggle. If your business is time intensive, then it means you will struggle to make money beyond your own capability. Use an approach that allows you to run a profitable business with several income streams. That is when you still make money and are profitable whilst you snooze. A lot of this is down to the mindset you apply to your business and whether you have given some thought to exiting your business. Read my post on exit strategies here. We all fall in the trap of initially just replicating our day jobs when we first start own businesses. That is ok at the beginning but we have to find a way of growing out of the mindset pretty quickly otherwise we stagnant our business and our potential to develop as entrepreneurs.
If you’re just starting up, then you need all the advice and support you can get. Sign up for AWOVI’s FREE weekly business tips to keep you focused on the right things. I’ll be cheering you on if you give me the chance to be part of your journey!
Leave a comment if you found this post useful, its always great to get feedback!
Do you want to use this article? You have my permission provided you include Griselda K. Togobo is the founder of AWOVI Consulting Ltd, a company devoted to increasing the success rate and profits of small businesses. The consulting and coaching practice is aimed at supporting small businesses to develop and implement the programs and systems that will make their businesses profitable. AWOVI’s online portal is used to support and inspire entrepreneurs with advice, tools and success stories. Visit her blog at www.awovi.com
The illustration is provided courtesy of Noldyx Designs