Wednesday 23 October 2013

How To Survive Your First Two Years As A Start-Up

Small Business
The Great Recession and subsequent recovery has been rough for just about everyone, unless you are fortunate enough to be one of the 1%. But for a lot of people, it provided the opportunity and the determination to begin their own businesses.

However, the recovery hasn't been all that kind to new business start-ups. While the failure rate for new businesses has always been quite high, the failure rate rose by 40% between 2007 and 2010.

On the bright side, there are a number of successful people who are more than willing to share their stories with newbies, and much can be learned from both their mistakes and their triumphs.

Don't Be Afraid to Fail

Sara Blakely, the founder and inventor of Spanx slimming shapewear, had this to say about advice her father gave her when she was growing up: "My dad encouraged us to fail. Growing up, he would ask us what we failed at that week. If we didn't have something, he would be disappointed. It changed my mindset at an early age that failure is not the outcome, failure is not trying."

A Handshake is Great, But Get it In Writing

Marcia Kilgore, the serial entrepreneur and creator of lifestyle and beauty brands, says a friendship in business can only take you so far. "Get everything in writing, especially with business partners. When you're starting out, things can be quite friendly and exciting, but people's memory can change due to money."

Let Your Customers Be Your Best Marketers

You might have the snazziest marketing campaign in the world, but it's a lot cheaper and frankly more convincing if you can get your customers to market for you. When you have a great product and you treat your customers well, they will tell other people about your company. Provide a good forum for feedback, do care about what your customers think, and they will not only come back for more, but they will bring others with them.

Better than the Competition

If you are not either better or cheaper, then you really have no reason to exist. Take it from Jim Koch of Sam Adams fame: "You have a viable business only if your product is either better or cheaper than the alternatives. If it's not one or the other, you might make some money at first, but it's not a sustainable business."

On a more concrete level, here are some specific things you can do to cut costs and make sure your business has a decent chance to grow:

Control Inventory

If you carry inventory, make sure you are not carrying far more than you need. Not only do you have to pay your suppliers for goods that are sitting around, you also have to shell out money for storage. Keep only enough on-hand to suffice until the next supplier delivery date.

Shorten Receivables

Make sure that your customers are paying as quickly as they should be. If your terms have been overly generous in the past, send a note to your clients that terms are changing, and be sure to BOLD the due date on invoices. Start collection efforts as soon as the payment is late.

Consult your tax accountant for any overlooked breaks

Deduct all equipment purchases as quickly as you can. If you are going to lose money this year, investigate carrying it back to a previous year. Make sure you are deducting health premiums and self-employment tax. And if you have not yet started up your new business venture, be sure to look into the tax atmosphere of the state where you plan to locate. Some states are friendlier than others.

Don't Spend Money Until You Have Money

And finally, from the founder of DailyCandy, Dana Vely: "When we used to put candy in our media kits, I would go to the Duane Reade store the day after Easter because the candy was on sale. Of course, it's important to spend on certain things in the beginning. You need good servers but you don't need Aeron desk chairs."

About The Author: The article was written by Audrey, who is working for Wallace & Associates, a Sherman Oaks CPA serving the Los Angeles area.

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Until my next post on Friday on how Pinterest can help your small business, enjoy the rest of the week! See you back here on Friday!

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1 comment:

  1. As someone who is in the process of finding their way, this has been an enlightening read. There is great advice here for anyone, not just start-ups!

    Jonathan Wong,
    Creative Writer,
    Centel Media


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