Are you in the process or thinking of starting your own business? It’s not an easy journey, and there are plenty of potential pitfalls involved, but managing your own successful businesses and being in charge of your future truly is liberating. Having started several successful companies, I’ve learnt a thing or two. Here are five tips that I’ve learnt along the way:
DON’T SPEND MONEY ON THINGS THAT AREN’T IMPORTANT:
It may be tempting to spend money on an expensive website and branding when you’re starting your business, but if you’re still not sure of the direction you’ll be taking within your business and exactly what your focus will be, this will be a futile exercise. You shouldn’t spend a lot of money on marketing and branding until you’ve got some traction. At this point, it’s essential to separate the wants from the needs.
DO YOUR MARKET RESEARCH:
A lot of people make the mistake of developing products or services because they think that there’s a need when there isn’t. Market research is essential!
Before you start a business, you need to have done the market research. Who are your competitors, and how can you do things differently and more effectively than them? What are the wants and needs of your target market, and how can you give them what they want? Testing out your services and making sure that your business idea is relevant is essential.
RAISING CAPITAL & CASH BURN RATE:
If you have to raise money for your business, it’s crucial that you understand how much money you’ll need to raise, but more importantly- how much money your business is worth.
When your business is making no money, it’s not worth anything. Essentially your idea is just an idea. Until it’s proven that your idea can generate revenue, your “business” is just a hobby. Don’t have an over-inflated value of what your business should be worth.
If you want to raise money at this point, the best place to look is friends and family. These are the people who know and trust you. After you’ve worked out how much money you need to raise, you need to work out how much money you’re going to spend. As a business, typically over the first three years, you won’t make a profit. It’s, therefore, essential to know how much you’re going to spend. What is your cash burn rate going to be? Build some projections into your business to understand how much cash you’re going to be burning and at what rate? For example: If you’ve raised $1.2 million, and you’re going to be burning $100K a month, this means that your cash burn rate will take you down to 12 months.
If the money that you’ve managed to raise has to last you three years, then you need to divide this number by 36 months to know how much money you can burn on a monthly basis. I know so many people who have gotten loans only to run out of cash soon after starting their venture. When the business runs out of cash, it’s gone, so don’t let that happen!
RECRUIT THE RIGHT PEOPLE:
Many businesses tend to focus on numbers instead of defining the avatar of the type of employee that they want. Your corporate culture starts with the people that you hire. These are the people who represent your business and what you stand for. Your corporate culture should be defined, and the selection process of the people you hire should be more refined.
DON’T PROMOTE PEOPLE INTO MANAGERIAL ROLES WHO DON’T HAVE THE REQUIRED SKILLSET:
So many of the businesses that I train have the same problem- they’ve promoted people who either aren’t qualified for the job, they don’t possess the skillset needed for the role, or they haven’t had the training required to perform well enough in their positions. A lot of businesses promote their top-performing sales staff into managerial roles thinking that they’re the right people for the job. Let’s clear something up – just because somebody is great at sales and is a great salesperson, doesn’t mean that they are going to be a great manager too. Very few people have what it takes to be a good manager. Managing others requires effort, patience and a tremendous amount of selflessness!
If you’d like to know more about the steps to take when starting your own business, and the mistakes to avoid click here and watch my video on the topic.