07 Aug Top 3 mistakes when starting a business – Part 1
This is part one of three blog posts looking at the top 3 mistakes people make when setting up a business. I’m talking about Solopreneurs primarily here, and specifically those who choose to set up a business to get the lifestyle they crave, such as having more time with their families and for themselves.
I work a lot with small business owners who are setting up or growing their business and I see these mistakes cropping up time and time again.
Mistake 1 – The money stuff
This is also the number one reason why I see people not going for their dream of setting up their own business.
Some people will shy away from doing anything because they don’t want to leave the perceived financial security of an employed role.
Others will jump in head first, believing if they work hard enough and want it hard enough, then they will grow a profitable business.
I’m more with the 2nd team BUT to grow a profitable business you must take a long hard look at understanding your money stuff.
I’m not talking fluffy ‘money mindset’ and how you need to change how you think about money (though this may help some people!). Just taking some time to cover the 3 simple steps below before you dive on in.
1. How much money do you need to live on?
Put together a simple spreadsheet, list or whatever works for you, summarising all your monthly expenses. If you’re not sure (and lots of people aren’t), then keep track for a month of how much you’re spending. Some of it’s easy to see, like the the direct debits and standing orders coming out of your bank account each month. But some of it is a little harder to quantify (where does my money go each month?).
Some quick tips to help: Use a debit card to purchase everything so you can track it all on your bank statement. If you need to use cash, keep a small notebook handy to record cash purchases in. Also, get a receipt for everything and have somewhere to stash it when you’re out (A small make up bag works well!)
Once you’ve done it for a month, you’ll be surprised at some of the things you’re spending money on.
Go back through the list and see what you are prepared to live without or reduce spending on to get a truer figure of what you actually need to live on each month.
2. How much do you need to invest in your business?
All businesses need some kind of investment.
This can get quickly overlooked if you’re planning to set up a business from home using mainly resources you already have.
Take some time to mull this one over and have a good think about what you need. Bear in mind here that most business take 12-18 months before they start making a profit. It takes time at the start up stage to get the word out there and start to get your first customers (by the way, download my free report to help with that, if you haven’t already 🙂 ) so at a very minimum you will need to invest the amount you need to live on each month whilst you build up your customers and sales.
Some other examples to get you started include:
- Office equipment (think hardware, software, printers etc)
- Marketing costs (advertising, networking etc.)
- Website set up
- Paying for expertise outside of your skills (techy, finance, graphic design to name a few)
- Mentoring / coaching
3. What reserves do you have?
The final step for now is to look at what reserves of money you already have in place that you are prepared to use to invest in setting up your business.
A quick list of where to look for your reserves includes:
- Personal savings
- A partner who can cover some of the monthly living expenses
- Getting a credit card for your business expenses (preferably one with 0% on purchases as introductory offer!)
- A part-time job alongside your business
- Contract work you can do
Now just put all 3 steps together and see if it stacks up
Don’t panic if it doesn’t yet. It probably won’t at first. You need to get creative at tweaking your numbers to see where you can make changes.
Is there more on your monthly expenses you can reduce?
Can you do a skill swap to reduce some of your investment needed?
Do you need to carry on working to save some more money or maybe reduce to part time hours to bring in some income but give you the time you need to set up and get going?
If you’d like some more support to help with this then please make sure you are signed up to receive my free weekly ‘Rock Your Business Tips’.
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