Starting an entrepreneurship journey comes with a lot of activities. There are details about finding space (in cases where one needs a physical office), designing business cards, advertisements, gathering intellectual resources, legal technicalities, etc.
At the time, most startup owners are overwhelmed with getting all these details right. But, the success of a business goes beyond the tangible materials.
In this post, we’ll look at the 4 basics every entrepreneur should know when starting.
1. Reinvest Your Profits
This is the #1 rule every entrepreneur should follow. A startup business is like a plant, the more you water it, the faster it grows. It is vital to reinvest profit earned back into the company for better future results.
Profit refers to the amount remaining after subtracting expenses, including workers and personal salary. As an entrepreneur, you’re also the company’s employee. Therefore, paying yourself a reasonable wage prevents one from digging into profits. Also, don’t forget cash-in-hand cash flow, or petty-cash for daily activities.
Some experts suggest 30%, others 50%. All in all, the actual number isn’t significant. The strategy employed is what matters. A good option is to focus on areas that require necessary improvement, upgrades, or extra resources.
For instance, marketing and scaling up a company’s PR is always in dire need of additional funds. This is because it helps to build brand awareness to generate more income and leads. Other areas that require resource injections include workforce enlargement, equipment improvement, enrolling for classes, etc.
It is very important to even out every area of your business to avoid shifting too much focus on one side and neglecting the other.
Note that re-investing doesn’t touch on expansion. As a startup entrepreneur, diversifying should only come after ensuring that a business is fully stable to support itself.
2. Test Market Output
Testing the market output is a key step before launching a new product or business to customers. The hard truth is there is always a product or service which executes the same purpose you intend to.
Carrying out market research allows an entrepreneur to identify or rather re-define a market niche. It assists an owner in developing a bulletproof marketing strategy that makes a brand stand out from fellow competitors.
Also, in business, speculated incurred cost must not surpass profit earned. Otherwise, a company will be running at a loss. You cannot launch a product without a clear outline of the profit expected to be earned. And, you can’t estimate yields minus knowing the target customers and possible remuneration. All these factors are intertwined.
Market research can be conducted through qualitative or quantitative methods. This doesn’t necessarily mean complex figures and diagrams. It can be through split testing, studying competitors to get approximations, mock products, and trials to test consumer reception, online questionnaires, etc.
Results obtained from the research enable an entrepreneur to know the production cost, workforce a business can support, type of products or services needed, distribution channels, and the approximated time frame before the company can stand on its own two feet.
In other words, it lays out a detailed road map to be followed.
3. Reason Outside Standard Guidelines
This means, start thinking outside the box. A SMART entrepreneur is open-minded. To become a free thinker, you need to learn new techniques, habits, and tricks.
Start by studying new materials outside your comfort zone or from different industries. For instance, if you operate a pharmaceutical company, you can read style magazines once in a while.
Cross-information allows a person to discover new techniques. It assists an entrepreneur in seeing things from a different perspective and developing an innovative wit. Uniqueness comes a long way in business ownership.
Reading books also helps in expanding thinking horizons. A person who reads will forever be knowledgeable. It creates room for mental flexibility. A good entrepreneur shouldn’t have a fixed mind. Being open to ideas creates better opportunities, thus yielding commendable results.
Once in a while, an entrepreneur can enroll in a new class. Thanks to technological advancements, we can study from the comfort of our homes. Take a class, especially those covering entrepreneurial necessities, i.e., digital marketing, employee relations, motivation at the workplace, etc.
Lastly, always make it a habit to visualize an actual problem. Having an actual mental image of a challenging situation brings creativity at its best.
4. Manage Expenses
Mastering the art of managing expenses can be difficult for a startup entrepreneur, especially after you purchase an online business or a fully operational brick and mortar enterprise.
Most entrepreneurs have the notion that a business for sale automatically translates to massive profits. Not entirely. With insufficient information, a well-established entity can come tumbling down in months.
Expense management cuts across separating oneself from your business, having back up cash and support, and good employee governance.
First and foremost, an owner should exist separately from a business. Sole proprietors are at a huge risk of losing everything once the company comes tumbling down. It is advisable to form a distinct entity between yourself and the company to avoid personal financial liability.
Secondly, back up resources allow you to support your business at the toddler stage. It might take a while before a brand gets fully up and running.
Therefore, extra cash comes in handy when handling inevitable day to day resources. Without this, an entrepreneur will begin dishing out the money harvested from sales, thus using profits before calculations are even made.
Thirdly, correct resource management translates to happier employees. For strict policies, respect for work, and dodging unnecessary payment wrangles, all workers and partners should sign a contract.
A verbal agreement doesn’t provide visible evidence; hence it can easily be broken. However, a physical contract subjects an employee to an agreement that can lead to a lawsuit if rapidly terminated.
Entrepreneurship isn’t all about gathering resources and implementing ideas. Instead, it is highly determined by the ability to run a venture successfully. The basics mentioned above will help any starting entrepreneur view his/her venture beyond sales and leads.