9 out of 10 small business starting this year, will fail. The 10% that succeed, execute on a careful business plan. How do you know that you have that will succeed and what steps you can take to ensure you don’t become part of the 90% that fails?
Failing to plan is a good plan to fail. Many quit their job in the hopes that there are plenty of contracts or freelancing work. Even though it may look like that guy over there is making a ton of money, the truth may be something different. They may be successful but it does take years of connections, effort and work to reach a certain level. Let’s discuss what exactly is the secret ingredients for success that will avoid failures.
Failure to cut costs
You should be ready to ruthlessly cut costs in the initial years of your business. Being a business owner doesn’t mean that you need to buy everything. That is the wrong mindset. If you can start your business from a small warehouse, you don’t need to lease huge commercial space in downtown. Lease or rent the equipment whenever possible instead of buying it (you could even take advantage of an equipment leasing calculator to assist you with that). If you are someone with the mindset that “I need to buy everything upfront so that I can focus on producing”, buy used hardware or equipment from Craigslist instead of brand new. I met a business owner in Canada who drove more than 150 miles to buy and pickup equipment’s from a USA based business who happened to be upgrading themselves and thus saved more than $12,000. These savings are of immense value when you are just starting out. If your business is successful, you will get plenty of opportunities to buy brand new stuff.
Cash Flow is important
When you are new and have little brand awareness, your prices may not be at the top level. Asking for 50% or more deposit as soon as an agreement is signed, can protect your bottom line. Most clients will agree to it as they know they are getting a good deal.
You may not know all about tracking income and expenses in the beginning. Start using online accounting software’s like SlickPie, right from away when you met a client for a coffee or paid for something from your pocket. Doing this will ensure there is no leakage of your money. Send your invoice right after work is done. Most businesses fail due to poor cash flow. What if your biggest client where you spent your most of your time didn’t pay? Or if they pay late in 60, 90 or even 180 days? There would be always some surprising extra costs that you didn’t plan for foresee. This all can lead to long sleepless nights. A good accounting software should follow up with clients that have not paid you on time and allow you to take an action to save the day.
Be ready for lifestyle change
Mostly qualified and experienced employees do earn more than freelancers. They have a stable income and a nice lifestyle. If you are someone who thinks that have something that will take you to the moon, go ahead and start your own business but be willing to live at basic income for years without any social life and no lifestyle. You will end up working 12-14 hours a day during the prime years of your life, but there is also a possibility that any success will bring more money and a better lifestyle with the option of being your own boss.
Most freelancers start small, providing superior services to a small set of clients for a few months and build upon that base. Ideally, current employers should be your first client. You know the process, they have the tools you need to perform and you just sell your expertise as a contractor without any social security net that you get as an employee. This potentially puts more money in your pocket to save or reinvest into your nascent business. Never steal clients from your employer, but build those valuable relationships and they will start referring you some of their friends from their group. Bounce ideas off your existing connections to see who can be a part of the team at some other stage of your business.