Nothing could be more liberating and rewarding than owning your own business. The ability to work from home (or wherever you please), the chance to spend more time with family and friends, to make your own schedule, and to control how much you earn is appealing to many. That’s what I thought when I first gave up a pretty nice corporate gig and dove into the dynamic world of entrepreneurship. But, it can be tough and I have the bruises and scars to show it. And it’s the same story for many others too.
What many fail to realize is that there are clear tradeoffs when you work for yourself vs working for someone else. It really just boils down to whether you’re willing to trade the security of a steady paycheck for flexibility and control of your own destiny. Doing stuff at your own pace and by your own terms is incredibly rewarding, but it also entails sacrifice (in terms of time and the risks you take) and stress, because it doesn’t always work out the way you like. As they say, a large percentage of businesses go belly up in 5 years, right?
On this topic, let me share with you a little ditty: my friend, we’ll call him Craig, had a very successful business that he started from home. He was up to 25 employees and moved to a large office space with training rooms and nice corner offices with a view. But within 6 months, he fired everyone and was packing up his belongings at midnight on the tail of an eviction notice. Ouch! That really got me thinking about a lot of what budding entrepreneurs could do to avoid similar fates and to make their lives easier. Here are 10 things I’ve learned as a business owner:
Things I’ve Learned As A Small Business Owner
1. Don’t be a square.
You need to think outside the box. What you’ve learned, did, or heard in the past may no longer be true nor relevant anymore. From business models to marketing strategies –- it’s a whole different situation than when you work for someone else. For instance, I personally know people who have been very successful owning franchises, using a quality multi-level marketing platform (although I may have my own issues with this), and traditional business models. So keep an open mind.
2. You can teach a man to fish: be honest about your skills.
After you have spent the time and money to get up and running, you don’t want to find out that you don’t have the required skills to be successful. While it’s an ongoing learning process, learn as much BEFORE you start. There are plenty of small business organizations in almost every community. Leverage those resources. Once you’re up and running, continue to build your knowledge base and hone your craft.
3. Will you be my valentine? Love your work.
Have some underlying passion or driving force behind what you do. You need passion to sell yourself and your business. Passion and purpose will keep you going when things are going badly — and they will! Like and enjoy what you are doing. You know you’re in the right track if you can think about it in these terms: would you be in the business you’re in even if you weren’t paid a whole lot (or anything at all), just as long as you’ve got some other independent source of income? If it passes this test, then there’s a good chance you’ve found your calling. Maybe you’d like to turn your hobby into a business?
4. Failing to plan is a plan to fail. Have a plan.
Having no business plan that details your vision and ultimately, how you will be making money, is akin to driving with your eyes closed. There are a couple of important reasons to have a business plan. If you need to secure capital, you will need one. In addition, with so much to do, it will keep you focused on what matters most. Something else I’d like to add: there are times that your plans may not work out. If so, then it’s also important to be flexible and nimble in your particular space. If you have faith in your ideas and are able to adapt to changes that happen in your industry (with the help of a flexible business plan), then you could have an advantage over your competitors.
5. Panhandle. Have and/or find capital.
For small businesses, cash flow is king and is one of the main reasons most businesses fail within the first 5 years. Not only will you need technology, marketing and sales, and operational money, etc., but you will need cash to hold you over until you become profitable. It is common for your customers or clients to be SLOW with their payments. Plan on it. You may also want to ask yourself: how deep are your pockets? Can you afford to take the risks you are taking? How are you financing your business?
6. You are not GE. So focus!
GE used to be and largely still is considered so diversified in their businesses that they function like a mutual fund. Maybe you’ll be like them some day, but for now, it’s important that you find your target market or niche. Being a specialist in your target market will increase your success and profits ten fold. Do not try to be all things to all people!
7. Manage your time well and prioritize.
Managing your time is paramount. Have systems and clean processes in place in order to be more efficient and to give yourself more time to focus on what’s most important (this would be typically your clients and team members).
8. Divide and conquer. Leverage your time and money.
Think about outsourcing and don’t be afraid to invest back into your business. But don’t rush to hire employees. Instead, use inexpensive ways to hand off your work to other people –- especially those with specialties you don’t have. A virtual admin assistant is a great place to start, as he or she can really help you free up time on your end. What’s great is that you can use these contractors on an as-needed basis, say based on your project requirements. Check out Elance or ODesk if you’re looking to hire.
9. Manage your money as a business. You are a business so make sure you run it like one.
I have seen a lot of people who do not have a separate name and separate bank accounts. This is quite unwise! Do not commingle your funds. This can become an accounting nightmare and can be especially problematic if you have set up your company as a Corp, LLC, LLP, etc. Your set up won’t protect you if you commingle your funds.
10. Remember that cash flow and liability are your two biggest pitfalls.
Have adequate cash on hand and in reserves. For new businesses, at least 6 months (12 months would be better) worth of expenses for reserves is necessary. Mitigate your liability with the right insurance from day one. Mitigate risks and manage cash flow by assembling your dream team: a financial team that would ideally consist of a good business attorney, a financial planner, an accountant, an independent insurance agent and business banker. With their guidance, you will be much better off. Now if you can perform some of these roles yourself, then you may be able to get by with a smaller team. Just remember that you don’t need to go it alone.
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