20 July 2012

Top 5 new business basics

Success and/or failure is a two-way street
This week we’ve met Peter Unsworth, Kendel Falkson and Styli Charalambous, all South African entrepreneurs in the media space. But the experiences and information they’ve shared can be applied to any start-up, no matter what industry. The common threads in their working knowledge are:

1. You don’t always need a formal business plan
Many new entrepreneurs get so freaked out by the thought of writing a massive, formal business plan, they simply don't bother. But if you're a small business person who is looking to secure funding to get your venture started, you definitely will. Business plans are there to assure the people you're looking to loan money from – be it a bank, angel investor, venture capitalist, friend or family member – that your venture is viable, has a future and will provide the income to pay their investment back over a set number of years. So, if you’re applying for funding, some admin time will be required – do your sums, make those projections and get that plan down on paper to prove to potential investors that your idea/product/service is worth the cash-injection that will give them payback at set points down the line. You’ll find some great example plans and more advice here, here and here.

Just one thing to remember about getting a second person on-board as “the money” – there needs to be a rock solid, yet reasonable contract in place, crafted by a lawyer (expensive, but worth it in the end). As part of their expectation, the funder may ask you to hand over a percentage of ownership in the business and you need to be comfortable with that; if you’re not and want to retain sole ownership, you may need to relook where the money’s coming from. The contract also needs to handle the “what ifs”… like exit strategies for you and/or your partners, loan payback terms, share buyouts, restraints of trade and non-disclosure agreements (NDAs).

2. Strategise, be confident and over-deliver
You may not need a formal business plan to get your venture going, but you must take a day or two to sit down and figure out a strategy on how you plan to attack every aspect of the business. From setting up an office and filing, to setting your billing cycles, branding your stationery and what you’re going to say to people when they ask you what your business does. You have to know what you do, the services you offer and the value you can add to potential clients’ lives better than anything in the world. That certainty breeds confidence, and if you’re 10 000% sure about what you do and how you do it, people will be more likely to buy into using your company over a competitor.

In learning about your new business you may want to get some “rules” or have systems in place before you start. Like setting yourself the goal of responding to correspondence within 24 hours, especially if you’re making great service one of your key deliverables.

3. Manage that cashflow
All three of our featured entrepreneurs say mismanaging cashflow is the biggest mistake a newbie makes once the money starts coming in. It’s great having all this cash to wave around and it can make a huge difference in your life – but only if you look after it.

Business – especially new business – comes in ebbs and flows, so until you’ve established yourself a solid reputation in the market, you’ve got to be prepared for those quiet times. Immediate cash relief is great: it will get you out of a debt hole quickly, but there will still be overheads to pay to keep that cash cow grazing. Pay all the bills, salaries and taxes relevant to you and your business in time and honestly, and resist the urge to run out and buy the trappings of a luxury lifestyle. How you spend your profit should be strategised, too! Plan for that “rainy day” wisely.

4. Want new business? Go out and get it!
We live in a connection economy, so the more people you know professionally is a massive plus. All our entrepreneurs agree that if you want to generate leads for your new venture or to seal the deal on new business, you’ve got to leave your house – and your comfort zone!

Whether it means cold calling potential clients, or following up recommendations and referrals from friends and family, no-one sells yourself better than you can – especially if you don’t have an advertising budget. Relying on email shots and phone calls is simply not enough – you need to connect, in person, with as many new contacts as you can. The most important thing to remember is that potential new clients only need to know two things: how your product or service is going to add value to, or simplify, their lives and how much it will cost. Know this information by heart, be confident, show genuine interest in them and keep your promises! Follow up regularly, stay top of mind, but abandon needy and creepy.

5. Passion pays off
Above all else, if you’re not passionate about your business, no-one else will be. Doing something you don’t love it just not worth it – and people can pick up on it. It’s easy to become discouraged when things are slow and aren’t going well. And, judging by our entrepreneurs’ comments, this is exactly the time to “fake it till you make it”! But that doesn’t mean hiding your emotions. If you’re having an off day and you can afford to, take a step back from the business, do some things that you enjoy and reconnect with the reasons why you started the venture in the first place. And lean on that support system – brainstorm new offerings, strategies and business leads. Who knows where the ideas may take you.

But if the cycle of bad days outweigh the good ones, our entrepreneurs agree that there comes a time when you have to assess whether continuing the venture is viable or not. It's a hard decision, but there's no shame in closing doors if something's just not working. Finally, be grateful for what you do have and take the time to say “thank you” in a way that suits you best.

And from me, to the universe, thank you for this -- and something better!

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