How do I start my own business?
So you’re thinking of starting your own business. Why may I ask?
Wealth? Ha! Ha!
Passion? Now you’re talking!
But if it is a passion for sewing or carving or designing or whatever it is that you do well, then sorry for you. You have to be passionate about being a business person, because it doesn’t matter what the underlying product is, you won’t succeed unless you run the business properly and that means you won’t be doing much of what the business does – you won’t have time.
The beginning is all too easy. You don’t have any overheads so you can be cheaper than the competition. You don’t have salaries to pay, so you don’t have to find a big market. You can work from home – no rent to pay. Simple.
But what happens when things start taking off? You can’t put your prices up because you’ll lose your customers. You can’t handle all this work on your own, so you’ll have to hire some help. And the house is too small, have to rent some premises somewhere. Month ends, rent to pay, salaries to pay, customers didn’t pay. Where’s the cash coming from? Oh hell, this isn’t fun any more!
What went wrong? Lots of things
1) Don’t go into the market cheap, go in the BEST and charge a bit extra for being the best. If you can’t sell on that basis, go get a job with someone who can.
2) If you don’t include overheads in your pricing, then when they do come along you won’t be able to afford them.
3) Manage your cash flow from day one. Don’t do business with companies that don’t pay. If all of your growth is in response to more and more good business then you’re on the right track, but if you grow to service bad payers, you’ll go one way.
4) If you have to pay before you collect, then the more business you do, the more cash the business will need. If the cash isn’t generated by profits, it can’t survive, but don’t forget that profits mean tax and tax gobbles up cash. You simply have to budget. Very few planes that flew on “a wing and a prayer” actually made it home.
5) I had a great product, but nobody wanted to buy it! Oh really? Secure your market before you start. I remember a guy named John in Wakkerstroom who spent his life savings on tunnels (we had so many “Johns” in Wakkerstroom, that he was known as “John Tunnel”) and a fancy irregation and feeding system to grow vegetables. The Spar in Volksrust assured him they would buy “all the lettuces that he could produce”. He grew lettuces. They complained that they were the wrong sort. He grew baby tomatoes. Nobody bought them. He grew cucumbers. More than he could ever sell. Life treated him very badly.
6) And the bookkeeper or partner that took you to the cleaners? That was because you let them. You cannot afford to take your eye off the money. If there’s an opportunity, someone will start feeding at the trough (as we South Africans all know). If you get taken, it’s your own fault.
7) I saw a great opportunity to make a fortune. I grabbed it but it blew up in my face. Greed! Do not be greedy. Base your business on giving great value for good money. If a deal looks too good to be true, it is too good to be true.
Have I put you off? Not yet? Great. Come and see me. I won’t rain on your parade. I’ll do everything I can to help and my time with you will be at no charge.
Should you wish to make an appointment, please feel free to visit Derek’s diary and book a time that suits you.