5 Tips for New Small Businesses
1. Start with money and a plan:
Starting a business without any savings is a plan for failure. While friends, family, and loans are a viable option for funding, small businesses need to be realistic with their expectations of when they will be able to start paying the money back. Most new business owners expect to be able to start paying loans back right away with their profits. What these business owners don’t realize is that it can take months or even years to start making a profit.
A better plan is to save up as much of the needed investment money as possible, including cost of living for you and your family for the first year or even two. Chances are that your business won’t be profitable for the at least that long. Once your business does start to make profit you will want to be able reinvest that money into your premises, materials, or employees.
2. Start small.
Don’t rent a workspace or studio if you can work from home; don’t hire employees until you have enough work to keep them busy. Consider independent contractors or temps if you need some help.
Businesses that have been started small, often times in a garage or apartment by owners that intend to do most or all of the work themselves are often afforded the opportunity of being able to make mistakes on the small scale. This leaves them room to learn and grow as opposed to becoming buried in debt..
3. Protect your personal assets.
When you establish a business by yourself, you are more often than not personally responsible for all the losses, debt, and judgments accrued against the business. Creditors can go after your personal assets like your car and home to settle these debts.
While you can protect yourself against lawsuits by buying business liability insurance, this won’t help you with business debts. If you intend to accrue large amounts of debts or substantial loans, consider forming a corporation or limited liability company (LLC). Usually one person can form these kinds of businesses. Consider a service like www.BizFilings.com to form these types of business.
4. Make a business plan.
Knowing and forecasting when and how you will make money will help keep your business on track and help you keep your goals in sight. Before you start making products or performing services, do a cost / profit analysis. How much will you need to sell your products for to make money? Will you need to pay an assistant or helper? Do you have a supplier for materials? What about advertising? How about insurance, rent, utilities? You get the picture. A business plan will help you address some of these issues and give you a realistic picture of what to expect.
5. Get good employees.
The key to small business is that the workers are usually both skilled and highly motivated, as they usually have a personal investment in the business. You need to aim to hire great trustworthy workers – not just competent workers. A motivated and invested employee will prove to much more valuable than one just shows up to punch the time card.
Remember that your employees are more than just the grunts, they are more often than not the face of the business and they represent you in your absence. So interview carefully and consider hiring people you already trust when just starting out.
Most new business endeavors fail because the adventurer failed to continue on until they could go no further; such is small business ownership. There will be highs and lows, as well as profit and debt. Stick with what you believe in and do what you set out to do. I am reminded of an old Chinese proverb “Failure is not falling down but refusing to get up.”