What to Know Before Establishing a Business

Most business owners who fail to get their business off the ground do so because they rush in blindly. Knowing what awaits could save you some costly mistakes.

There’s much to learn about building a business from the ground up and turning it into a success. Some things you pick up along the way, others you have to know before getting started.

That said,  it will be much easier to succeed if you remember a few key things.

Tip #1. Identify Your Audience

Operating in a service-based niche means that your business will depend on your clients. But it’s not all about quantity – it’s also about quality.

Before coming up with a business plan, it’s important to figure out your market and audience. So it’s critical that you understand your skills, what you can do, and who you can help.

The better the clients, the easier and more exciting the work.

Tip #2. Put Together a Business Plan

Those that start a business without a good business plan often fail. Their ventures die or never reach full potential.

One of the best ways to avoid that is to create a solid business plan.

A business plan presents a detailed overview of everything you need to know. It outlines costs, goals, scaling potential, client demographics, and much more.

On top of that, it’s essential to have a business plan if you want to get funding for your startup.

Tip #3. Dedicate Enough Time to Marketing

Some people are under the assumption that clients will come running to them. But the fact is that to run a successful business, you have to go after them.

That’s why it’s vital to dedicate enough time to marketing strategy. You need reliable campaigns, targeted advertising, and solid content.

Remember that growing a business requires a consistent lead generation, the ability to nurture relationships, and compelling salespeople.

Tip #4. Know the Numbers

Any business is a numbers game. You have to be prepared to stay on top of your finances.

If you lack experience, hire professionals to do it for you. And if you don’t have the time, outsource your accounting.

Understand that your business may not always go according to plan. Your initial plan and projections may fall short. But you have to keep an eye on things to spot issues and take action.

Tip #5. Consider a Mentor

Some people start their first business after getting some experience working for others in their preferred niche.

Others go into business for themselves with an even lighter background.

Whichever the case may be, consider asking for guidance and training.

Having a mentor from the earliest stages of your business can be an invaluable asset, especially if your main goal is to one day mentor others on how to improve their own businesses.

While it’s true that you can learn from your mistakes, that won’t happen if you don’t have the knowledge and insight to understand what you’re doing wrong.

Be In It to Win It

It takes a certain level of commitment and passion to start a business and make it successful. Unfortunately, not everyone has that.

That’s why it’s important to set exciting and also realistic goals. Look beyond financial freedom and find other things you can get from helping others.

In the end, composure and drive help you succeed. So find the right motivators to keep pushing forward.

How to Write a Comprehensive Business Plan

Are you planning a new business or thinking about pivoting an existing one? Spice up your business plan to start on the right foot.

Having a detailed business plan is critical to any venture.

It helps you understand your goals and keeps you focused on what to do. At the same time, it can help secure vital investments for growing your business.

Here’s an outline that may be of help if you need to create one for your business.

The Executive Summary

Always start with an executive summary. This is a brief outline of the business plan that contains the proposal and objectives.

It’s an overall snapshot of the proposal that will get a lot more detailed later on.

Background

The background section contains information about what the business does and also how everything works and the current stage of development.

Here, you must explain the niche and highlight how the business fits in it.

Service Provided

Offer relevant information about the services provided. In the case of a B2C company, you may substitute with product information.

Make sure to cover all the benefits, costs, and so on.

Market Breakdown and Strategy

Business plans should always contain a detailed market breakdown. This includes things such as barriers to entry, market structure, among other market characteristics.

The market breakdown section requires a fair amount of research. That’s why it’s the part that often takes the longest to complete in great detail.

As for the marketing strategy, this is where your business plan outlines your ideas on how to build awareness. Write about how you plan to market your business, package your offer, and sell it.

Business Operations

If you want to create a really detailed business plan, don’t forget to cover the day-to-day operations. Outline how everything runs and create a clear outline from production to sales.

This is particularly relevant information to any financial investor.

Management Breakdown

This is an optional step, but if the goal of the plan is to secure funding to start strong, you wouldn’t want to skip this.

Provide a clear picture of the key roles that the business needs. Define those roles and perhaps even the type of employees desired.

Proposal

Your business plan is all about getting that proposal to make sense. So, the goal is to state your requirements clearly.

At the same time, list the benefits that your proposal brings to the table.

Financial Risks

Apart from the sales and cash flow projections, another important element of this section is any trading or existing balance sheets.

Again, a business plan isn’t only for proposing a new business. It’s also a useful tool when you want to pivot or seek funding for a struggling venture.

So make sure to include a dedicated subsection that evaluates the risks.

Legal Information

Some industries are highly regulated and you may have to include legal disclaimers or any permits needed.

Keep everything that has to do with the law in a dedicated section, most commonly somewhere near the end.

Ensure a Good Flow

An often overlooked aspect of business plans is the flow. A comprehensive plan can get very detailed and this is where you want to figure out how to lay the plan out and build anticipation for the proposal.

To begin with, you can use a story formula that goes: premise, context, and realisation.

Always remember that a good business plan not only has all the necessary details but also has a good flow. It’s crucial if you want to make the reader sign on the dotted line.

How to Set Up and Maintain a Budget for Your Startup

Creating and following a realistic budget for your startup is essential. In fact, it can even determine whether or not your business makes it out of the gates. A budget shows you how much money you’ll need to make in order to break even and highlights what you can and can’t afford. It also helps you to forecast and manage your cash flow, which is essential to keep your business in good financial health. Budgeting can be a daunting task but this guide is here to make it easy by breaking it down into four simple steps.

1. Calculate Your Costs

It takes money to make money, and it’s important to work out how much you’ll need to launch your business. Think about what you’ll need in order to start serving customers, whether that means setting up a website or opening the doors to a brick-and-mortar establishment. You can generally group your costs into three main categories:

  • Facilities: this could be the location of your shop, restaurant, co-working space or offices. If you haven’t found the right place yet, it’s worth doing some market research to give you an estimate of how much the rent or mortgage will set you back. However, the costs don’t always end there. You might need to remodel your chosen location to fit the needs of your business.
  • Capital Expenditure: this is how much money you’ll need to maintain and improve your facilities. Office furniture, equipment and decorations all fall under this category.
  • Materials and Supplies: these are the items you’ll need to use in order to run your business, such as ingredients for a restaurant or beauty products for a salon.

Remember to stay mindful of smaller costs; it may be tempting to overlook them, but they can add up very quickly.

2. Work Out Monthly Expenses

Your monthly expenses are the costs associated with the items and services needed to run your business. You’ll need to have an idea of how much you’ll be spending each month in order to calculate the amount you’ll need to earn to break even. These expenses fall into four different categories:

  • Fixed expenses stay the same each month. Examples of fixed expenses include rent, internet packages, subscriptions and insurance.
  • Variables are more difficult to predict as they change in line with your volume of sales. Supplies, shipping costs and raw materials are all variable expenses.
  • Semi-variables are fixed costs which can become variable if production volume dramatically increases or decreases. A surge in demand might require you to pay your staff overtime or result in a higher electricity bill than usual.
  • One-time expenses are often unforeseen costs such as equipment repairs, but also might account for planned events such as business conferences.

3. Estimate Your Monthly Revenue

It’s difficult to know how much you’ll actually earn during your first few months in business. What’s more is that your monthly revenue is likely to fluctuate, so do your research and take a look at how similar business models fare throughout the year. If you’ve hired an accountant or financial consultant, they might be able to offer some valuable insight. Factors such as retainer contracts and industry-wide seasonal trends will also help you to predict what your income. However, it’s advisable to remain conservative with your estimates to prevent overspending.

4. Review Cash Flow

Cash is king in business and maintaining a healthy cash flow is essential for survival. Bear in mind that you won’t always be able to collect money for your goods and services straight away, which can lead to cash flow issues even if profits are sky-high. A booming sales month is great, but you may have bills that are due before you’re able to collect payment. If you don’t have money set aside for this instance, you’ll find yourself in hot water. In this sense, cash flow is just as important as profit for the financial health of your business.

It’s wise to set aside some business savings for times when the cash flow slows to more of a trickle. Review your cash flow each month to spot patterns, prevent overspending and budget for the future.

The Golden Rule

Finally, it’s important to follow the golden rule as you work through the above steps: stay conservative. Highball your expenses estimate and be prepared for low sales. This helps to protect your profits and keeps you on your toes to prevent overspending. Careful budgeting allows you to make prudent financial decisions and keeps your startup on track for financial success.

7 Most Common Money Mistakes for Start-ups to Avoid

Smart financial management is essential for any business, no matter how big or small. However, it can be difficult to get things right, especially during the start-up stage. Poor financial planning is one of the most common reasons that start-ups fail, so the sooner you take ownership of your business’ financial health, the better. Dealing with your finances head-on from the get-go is the best way to set yourself up for lasting success. Careful planning can help you to avoid common money mistakes and shows potential investors that you’re serious. Here are the most common financial mistakes that start-ups make and how to avoid them.

1. Prioritising Instinct Over Information

Whilst following your gut is generally a good principle, it’s a dangerous game to make assumptions about your finances. It’s vital that you meticulously track your revenue and expenses and closely monitor your cash flow. If a small mistake goes unnoticed for too long, it could prove very damaging for your business. During the startup stage, using an Excel spreadsheet will suffice but be prepared to upgrade to bookkeeping software later on.

2. DIY Accounting

Managing your accounts by yourself will suffice for the initial setup of your business, but it’s wise to hire a professional accountant or bookkeeper as early as possible. Juggling self-taught accounting with running a small business will eventually result in a backlog of errors, which can prove costly. Professional accounting services save time, money and stress, allowing you to focus on growth. You don’t need to hire a whole team. Start by outsourcing your taxes or setting up quarterly meetings with a financial consultant for help and advice.

3. Failing to Assign Project Budgets

Assigning a budget to a project prevents it from draining your finances should something go wrong. A clear budget will allow you to reassess your finances should the project require more money and make smart decisions that won’t damage your business.

4. Unorganised Files

The importance of balancing bank statements and keeping receipts in order cannot be overstated. Patchy bookkeeping can cause chaos for your business and result in a lot of trouble, not to mention wasted man hours trying to resolve the problem. Keeping all of your receipts and cross-referencing your accounts with your bank statements is vital for transparency and future success.

5.  Misunderstanding Your Target Market

In order for your business to be successful, you need to understand what your customers need. Knowing your target market helps you to reach them, as well as how to appropriately price your products and services. Here are some questions to consider:

  • What is your market position?
  • What need do you fulfil for your customers?
  • How much value do your products or services provide?
  • Who is your competition – and what makes you stand out?

Miscalculating prices can prove to be a grave error for a small business, but knowing your market well will help you to figure things out.

6.  Hiring Quantity Over Quality

Over-hiring is an expensive mistake to make. Hiring employees is one of the most costly parts of running a business, so going overboard is a huge waste of money. It can also damage staff morale and productivity, and lay-offs further down the line will only amplify the problem.

Bad hires are another threat to a small business. Hiring the wrong employee can create an imbalance within the company culture. In turn, this can negatively impact other staff and even damage your business’ reputation. Don’t rush the hiring process. Taking extra care to avoid mistakes can save a lot of trouble in the long run.

7. Miscalculating Expenses

In order to keep your business afloat, you need to know exactly how much cash your business burns each month. Keeping a meticulous record of your expenses allows you to understand where your money is going, and how much you’ll need to survive. Underestimating your cash burn can land your business in hot water, so create a projection of your monthly expenditure and be sure to monitor it closely, making adjustments whenever necessary.

A successful business needs a strong financial foundation, so keep these mistakes in mind. No business is invincible and it really does pay to be cautious and always stay one step ahead.