It’s been said that companies don’t fail due to a lack of profits, they fail due to a lack of cash. It’s so easy when you’re starting up a business to focus entirely on marketing your new product (or service), that you take your eye off cash. It’s a particularly dangerous time because all of your expenses seem necessary, yet you have no (or a very small) income. Inevitably, this can lead to a quick depletion of any cash that you started with.
Worry not. There are some tricks to learn from people who’ve already been down this path.
There’s so much to do and not enough time. You certainly have to give yourself and your business the best possible shot, but does that always mean employing other people to help you?
There’s a great deal you can do to get yourself established before the additional cost (in time, as well as money) of hiring more people.
Primarily, you need to get a sense of what sales volumes are likely to be. No-one will know your products and services better than you to start with, nor will they have the same passion. Meet and speak with as many potential customers as possible. Get a real sense of what you can sell and what the size of the market is for your products. Get genuine feedback on your products and services.
When you’re sure that the market is there and the products and services are right, you can hire with the confidence that the additional cost will be covered by the increased income from sales. And don’t forget, in these early days you may have family and friends who are happy to help out, filling gaps where necessary.
The story of success, for many business people seems to start at home. In the early stages of your business, the drain of a costly office will do nothing to help you make a better product or generate more sales. Working from home will also save you a commute, which can cost you in both time and money.
Several entrepreneurs have failed because they believed that they had to have enough stock on day one to fulfill the most ambitious sales plans for the whole year.
The problems with this approach are that:
It’s better to apply the method of “Just In Time” production. This does require a little careful management, but, it’s better than sitting on huge stock piles that you can’t sell.
The world has become a more even marketplace. If you are creative enough, you can use social media to establish a real buzz about your products and services. We’ve all seen how campaigns or videos can go viral. Rarely are these videos created by the ‘big boys’ who spend millions on digital marketing.
When you’re setting up a new business, there’s a real temptation to buy new equipment. Sometimes, this is the right thing. But, it’s worth looking at second-hand options. Big companies are upgrading their equipment all the time and they may need to get rid of perfectly good existing equipment as quickly as possible. This can be an excellent way of saving a huge amount of money.
If you keep a keen eye on cash, you’ll be giving your business the very best chance of success. Above all, though, you need to get yourself some customers. And they needn’t cost a penny. As recognised by American engineer, W. Edwards Deming: “profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them”.
Heather Foley is a consultant at etsplc.com, a UK-based HR technology company and consultancy.
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