Are you starting a new business or revitalizing an existing one? Think of the newly hatched sea turtle. The egg is buried in the sand on the sea shore, far enough away from the ocean to be safe from the tide. Once it’s time the turtle emerges from the shell, amidst the many other baby turtles, and makes a run for its life to the ocean. Only 1 out of 1000 sea turtle hatchlings makes it to adulthood.
As you begin your new business, there are many things that could threaten your survival. Here are three common mistakes that I see new business owners make:
- Fail to plan or obtain necessary knowledge,
- not taking action and
- being too general – taking every customer and offering everything possible.
Plan to succeed. To kick start your new venture I recommend that you plan for your run to the water’s edge. Take time to find a way to succeed on paper. Write down your business plan and work through the numbers. Specific areas to address –
- Identify your ideal customer, how to attract them, what to charge and how to deliver it.
- Define your cash flow formula: SALES – COST OF SALES – OVERHEAD = NET INCOME – TAXES = YOURS to live on or reinvest.
- Know your minimal sales amount to pay for your overhead.
Compliance. Another area of risk is compliance. First it can be overwhelming, it can also penalize you. Obtain an understanding of the regulations that impact your business and specifically your industry. Topics include-
- Sales tax -know sales & use tax laws for your industry, keep invoices for sales tax
- Tax records – keep receipts, bank statement, mileage documentation, home office
- Independent contractors – if you pay over $600 send a 1099misc in January
- Payroll – learn the rules or hire a payroll processing company
- Income taxes – place 15% to 35% of your profits in a savings account to pay your income taxes
Time is money so move quickly. Now that you have a plan on paper, get started. The faster you find your cash flow formula the higher your chance of success. Don’t give yourself the excuse of being profitable in 3 years; make it profitable in one month. Keep focus on what is important. Here are some ideas that I have found that will help speed up the process –
- Keep an open mind. Change as you find easier ways to be more productive and improve your results.
- Invoice and collect at the time the product or service is of most value to your customer.
- Deliver as soon as possible. The longer it takes, the more it will cost.
- Treat your time as money. Prioritize activities and focus on activity that brings results.
- Work on reoccurring sales or repeat business. This cuts down on future sales time.
- Keep expenses flexible. Expenses are easy to commit to, harder to get released from.
Instead of being a generalist – get specific
Take advantage of your smallness, be unique. The best way to distinguish yourself amidst the other business is to narrow your focus. There are riches in niches. Know who your best customer is – the one who can afford to pay the most and get the most value from your business. Identify your best product or service that provides the highest value and can be delivered at the lowest cost. By narrowing your focus it is easier to explain to others what you do and much easier for them to refer business to you. A referral is the best prospect. The trust factor has already been started.
Simplify behind the scenes. Keep business finances separate from personal. Set up a separate checking account, credit card, Pay Pal, etc. It is easier to update your financial records once you have your sales process ignited. It is easier to delegate this area once you can afford to.
Once you make it out of the nest to the water, then you can start swimming with the sharks and face a whole new set of challenges. Happy swimming…
Mary Guldan-Lindstrom, CPA
