I was sitting with a client a couple of weeks ago discussing start-up success for his new business. When we were wrapping up, I summarized and realized that my summary included a few universal truths I have learned about business over the years; especially starting my own.
When I started my business I had a slow, part-time approach. I had saved from my corporate days and my husband was supporting our household. I could go at my own pace because I didn’t have to make a lot of money personally in the beginning. We had savings and bought an office so I didn’t have to pay monthly rent if I didn’t have the money. We were able to buy everything that was needed to start and minimize monthly cash flow needs.
I just needed enough cash flow to stay positive in the first year. Later, when my kids were a little older and I could work more, we started to grow. My first employee was outsourced. I found someone significantly more experienced than I was in the area of content marketing to teach me and help me put a system in place to grow. By outsourcing, I paid a much, much higher hourly rate, but because they were really experienced, it didn’t take very many hours a week to do what I needed.
I also hired a virtual assistant to help. Again, a higher rate, but I didn’t need a lot of hours.
My first in-house assistant was in her late 30s and was experienced. I paid more to get her, but I knew I didn’t have any time to develop and train. Quite the opposite. I needed her to take care of me.
It was the start to really being able to grow.
Universal Truths To Ensure Growth and Success
Here is my summary of the 5 most important principles everyone should adhere to when starting a business.
- Capital – don’t start until you have enough. You must be capitalized from set-up to start-up and through the full first year of operations. If you are not, you may make terribly short-sited decisions. Everyone picks a different strategy for their business. You may want to start small and pay as you go (i.e. no debt). This may require less initial capital for this strategy, however, it still needs to all be covered.
- Sales are the main priority once the doors open, no matter what. Don’t start your business if you don’t have time or are afraid to sell. Or, hire someone to sell. You must be doing some business development consistently every single week. Most people get a few customers and then go do the work. When the work is done, they rest a little. Then they panic and start looking for new customers. Then they repeat. If you are not putting new customers in the pipeline consistently, your sales will stay in a cycle that resembles a roller coaster; up and down, up and down. If you continue this pattern, each year you will have multiple ups and downs, but year after year will never have consistent sustainable growth. No matter how busy you are, you must be doing some business development consistently every single week; it must be consistent and on-going.
- Hire up when you start up. Even if it costs more, your first hires need to be experienced and competent in the role they are being hired for. We tend to want to ease in to staffing with minimal cost. Just about every single solitary time, let’s say 98%, small business owners don’t do this. Yet, this is when we need help and we have little time to train and manage. We are wearing all of the hats for our business, most of which don’t fit, and we are stepping out to hire that first person to help. Make sure that person can actually help…day one. Don’t think of it as hiring someone for $50,000 vs. $35,000. Try this. It is only $15,000, or $1,250 per month to actually add someone who can really free up your time and allow you to add more business. Usually if you can pay the extra $1,250 per month for three months, you will have had enough time to add the business to cover it. (This is just an example – it obviously depends on the position.)
- Marketing should be higher at start-up. If you are going to spend money on marketing, do it in the beginning. Ensure that you start off strong. Most people wait to see how they do. If they don’t do well, then they panic and need to do something to generate revenue. By now though, they haven’t done as well as they had hoped, and they have less capital and cash flow then when they started. At this stage, the money is tighter and it is scarier to spend it on marketing that doesn’t seem tangible. So, we get nervous and do a few things but not enough to move the needle. With this now reduced marketing budget, we might as well save the money because it isn’t enough to be effective. Budget the marketing in the beginning start-up costs and spend it at start-up. It will give you the lift you need to gain momentum in the beginning. Then with higher revenues it will pay for continued, consistent marketing.
- Do the work. The other side to number 2 above, is some people get business but don’t have a team or a system to get the work done. In the product world it is the same thing as being “out of stock.” If a customer pays for a service and you can’t get to it or you do a poor job, you didn’t deliver. An example is the people that come out to your house to review a job so they can give you an estimate. You tell them you want them to do it. You don’t hear back from them for weeks. Or better yet, many times they don’t even send an estimate. We have to do the work and do it well or we will ruin our reputation and never have repeat business.
Universal Truths Apply To All Businesses Regardless of Size or Scope
All of these are important regardless of the size and scale of the business you are starting. My point is that you can start and grow as slow as you want, however, do it on purpose. If you know you want to go in with a pay as you go mind set, still save up and start with what you need so you can make the appropriate decisions.
If the type of business you are starting has high start-up costs, make sure you have the capital to get open and to stay open. I have seen too many businesses spend all of their money to build it, but customers didn’t just come. They end up shutting down merely months later because they couldn’t sustain operations until they built up the customer base.
If you make sure that the five principles above are followed, I know success is just a matter of time.
Great advice Sue…