How to Swim, Not Sink, in First Year of Business
Is your New Year’s resolution to start the business you’ve always wanted? Do you have a million-dollar idea, but you’re unsure of what to do first, second and third? Would you like to leave the cubicle world behind and earn a living on your own entrepreneurial drive?
As an entrepreneurship educator and venture investor, I spend a lot of time studying why promising start-up companies succeed or fail during their first years of operations. A key factor that affects start-up viability is how fast entrepreneurs adapt to their new job description as a business owner.
Many entrepreneurs say they started their companies for the opportunity to pursue their heart’s desire. New bakery owners like to bake. Software technologists like to write code. Contractors like to build. Filmmakers like to make films. But successful entrepreneurship is not defined just by how well you bake or write code, but how well you manage your overall business. You can direct a brilliant film, but if you don’t make money at it, you may not get a second chance to make another film. Besides your specific passion, other skills are required to succeed.
New business owners who assume that entrepreneurship is all about the freedom to do “whatever I want, whenever I want,” are also at high risk of business failure. Being the boss of a prosperous business involves focus and careful decision-making. In contrast, too much managerial spontaneity and freewheeling fun costs more than a young company can typically handle.
Here are three tips to help you make the mental shift from salaried employment to money making self-employment.
No. 1: Pay attention to cash. Businesses close when they run out of cash. It’s that simple. As the boss of your start-up enterprise your top priority is to make sure your company always has enough cash to operate. This means that you have to embrace numbers and money issues; take full ownership of financial projections and understand what kinds of business decisions can drain cash faster than others. You don’t need an MBA to manage cash well, just a desire to do it. Check out some accounting books or take an accounting class to boost your money management skills.
No. 2: Plan to achieve. It’s not enough to hope to succeed; you have to plan to succeed. Hoping for customers, won’t get them to your Web site. Hoping to raise money from investors won’t get you in front of top check writers. Hoping the check is really in the mail is not the best way to collect past due invoices. Successful start-up entrepreneurs set specific goals and then lay out practical day-by-day strategies to secure their first paying customers and profits.
No. 3: Get help. Just because you are the boss of your new enterprise doesn’t mean you will always have all the right answers. Most start-up entrepreneurs are first-time entrepreneurs who come across a lot of problems that they never encountered before in their salaried careers. It’s only natural that beginner’s mistakes will be made, sometimes costly ones. When you face business unexpected problems in product development, product packaging, sales, marketing, customer service, or finance, don’t guess the answer. Find someone who has already “been there and done that” and ask for help. Remember, every mistake you make now comes out of your pocket.
Here’s one last tip. It’s not enough to just get by in business; your managerial objective is to get ahead in business by using your head.
Susan Schreter is a 20-year veteran of the venture finance community and a university educator in entrepreneurship. She is the founder of www.takecommand.org, a community service organization that boasts of offering the largest centralized database of startup and small business funding sources in the U.S. Ask Susan your questions at susan@takecommand.org