What’s the secret to success in starting and operating a successful business?
It starts with some guideline basics and then moves on to common sense.
To begin with, you don’t start with your business but start with business in general.
What are you are going sell?
How are you going to sell it?
Where are you going to sell it?
To whom are you going to sell it to and finally, how are you going to pay for all of it?
If you are like most people, you are operating on a limited operating budget, with a limited amount of time to make it work, and a limited amount of money to start it up and promote it.
The No. 1 rule is to start small. Invest as little as possible in testing your theory of sale. Don’t spend hundreds on a website unless you can afford to lose that same amount. Don’t go out and rent a giant office, don’t go out and buy a new vehicle and don’t go out and hire a bunch of people. If at all possible, start with just a home office, spending as little as you can to start it up. Use existing furniture, existing phones and phone lines, and buy used equipment if you must have equipment. Ask yourself, if the business does not succeed, can you afford the things you are buying.
Be it as a result of overspending, underbudgeting, not selling enough or costs that are too high, whatever the reason, running out of cash is the number one killer of businesses. A good guideline to use is to prepare to have no cash inflow whatsoever for three months, and no profit for 18 months. Use these guidelines, then allow enough cash to keep the doors open and have enough to live on for at least a year. If you don’t have the money to survive without income for at least this long, you are in a dangerous area financially.
When hard-earned money is at stake, hope for the best but prepare for the worst. I can’t tell you how often I have heard people tell me they are going to sell so many units at so much money and make so much in such and such a time and suddenly find the money isn’t rolling in as they thought it would.
For revenue projections, be conservative, take your original projection and cut it by 75 percent. If you make more than that, great; you certainly will stay open.
A good product or service is, of course, mandatory, but don’t think a good product alone with make you successful. It is only part of the equation. Remember, you’re not going to get new customers for the most part. The ugly truth is you will only be stealing most of your customers from other businesses just like yours. A good product must be coupled with great service and follow-up. You have to be better than the next guy or customers won’t give you a try.
No matter how convinced you are about how customers are going to beat down your door for your product or service, this is usually not the case. Business is hard to come by, and the competition is fierce. Realizing this at the onset will better prepare you for what’s to come.
Remember to budget more money than you think you will need and probably a lot more.
If you turn a profit earlier than expected, great, but if you don’t, you don’t want to be forced to close the business before it has had the chance to succeed. It would be a shame to have a great idea yet not be able to take the time to allow it to take off.
My ideology is: spend the bare minimum, don’t overexpand, build on strength and give a good product and the best of service!
This article expresses the opinions of Marc Cuniberti. He hosts “Money Matters” on KVMR FM 89.5 and 105.1 FM at noon Thursdays and syndicated on more than 30 radio stations throughout the U.S. His website is www.moneymanagementradio.com.