According to a study conducted by the University of Phoenix in 2013, around two-thirds of people in their 20s either owned or wanted to own a business at some point in their lives. In the UK, an almost identical percentage of those in employment wanted to set up a firm of their own.
Here in New Zealand, things aren’t much different. According to the OECD, 59% of men and 47% of women have a desire to start their own business over working for someone else.
However, any entrepreneur who has already walked this path and started their own business will know that it isn’t easy. That’s why it is a good idea for those that are just getting their startups off the ground to look to more experienced business owners for tips and advice.
Of all the lessons and tips that successful business owners wish they’d known before they started out, here are some of the most crucial.
Planning is critical in business. If you ever want to access finance from an investor or a bank, you will almost certainly need to present a business plan. Even if you don’t intend to access outside capital, your business still needs a plan.
A business plan doesn’t need to be a 100-page dossier filled with buzzwords and bunkum. In fact, the smaller the better; if you’re a small business then you should keep it as simple as possible.
A good business plan will define your model, what you intend to sell to whom, how you will do it, and where you will do it. It will examine your strengths and weaknesses and compare them against your competitors so that you can identify your competitive advantage(s) and USP.
It should also have contingency plans for events like supplier failure, illness or injury of you or an important employee, and extreme weather that stops you from trading.
Have a Backup
It is an unfortunate fact that the vast majority of businesses fail. This is despite there being a plethora of support packages available for new businesses from the New Zealand government, including grants, mentoring, and training programmes.
While it’s not necessarily nice to think about, it is probably prudent to have a backup plan in case your entrepreneurial endeavours don’t work out the way you had hoped.
One way to do this is to head to university first so that you have a degree you can fall back on. Studying at university can also help you build a network, you just need to find the right one to attend.
Some higher education institutions tend to yield more successful graduates in a particular field than others. In the UK, Warwick University has become renowned for producing a large number of online poker players, while New Zealand’s Victoria University of Wellington has produced the most political leaders. In the same vein, some universities offer better business programmes, so it may be worth finding the best one that will help you find a job if you’re ever in need of one.
Get Your Finances Straight
The vast majority of businesses fail because of financial problems. Often, this is because the business owner hasn’t properly considered their costs when putting together their business plan.
It is important to understand your gross and net margins and build in some contingency as there will always be unexpected costs.
If you’ve ever watched Dragons’ Den, you will almost certainly have seen the pitching entrepreneurs getting muddled over their numbers. This is an immediate red flag for the Dragons as it shows them that the business is likely to fail.
It’s also important to keep track of your finances as you’ll need to set cash aside so that you can pay your tax bill, otherwise you may find yourself in trouble with the authorities. Many businesses get into trouble as the owners can’t pay what they owe to the government.
Most entrepreneurs will also tell you that it’s a good idea to be as frugal as you can possibly be in the early stages of your business. This way you can keep your expenses low and, therefore, reduce the amount of revenue you need to generate to cover your costs.
While starting a business is an incredibly exciting venture, it can quickly consume your entire life. It isn’t a good idea to work every waking hour as it can affect your physical and mental health, as well as put a lot of strain on the relationships you have with important people in your life.
Therefore, it is a good idea to make sure that you set time aside away from your work so that you can switch off, spend time with friends and loved ones, and do things that you enjoy. This might be hitting the gym several times a week, going to the movies on a Saturday, or having dinner with some buddies every Friday. Whatever it is, you just need to make sure that you set time aside for yourself.
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