Starting a business is not an easy job. You need to make sure everything is in order and you %100 prepared for your estimated client base. Lately quite a few people have asked me for advice on the subject so here is how I ready myself for when I was starting off:
Start-up Costs + Monthly Expenses
Start-up costs are normally a one-time cost the amount obviously depends on whether you are a service provider or a merchant will depend on how high your COGS (cost of goods) will be. Most service providers will have to buy start-up equipment and from there they will use it until it deprecates and needs replacing; since a merchant needs to restock on a regular basics. Calculating your total amount of expenses will help you calculate your total revenue and break-even point. Here is a link that will help you calculate your start-up costs:
Your break-even point identifies when your company will begin making profit. There are companies who make profit in the first few months where others make profit after their second year. The break-even point tells you when you’re out of debt and solely making profit ex: Let’s say your first year (the start-up year) you invested into equipment or surviving off loans, and paying for your start-up essentials and liabilities; the company ends up with a total cost of $450 000 even though your revenue was $200 000 the total loss will be $250 000 with no profit. Normally businesses will experience a loss in the first year due to all the start-up costs. The break-even point will show your profit (not revenue) after subtracting all your expenses in the second year and losses in the first (which normally occurs after the second year since you’ve already made your start-up investments). Take a look at this example I drew out (pardon my horrendous writing):
Keep in mind not every company reaches their break-even point in the second year. You need to do this calculation until you finally get a gain (seen in the second year). Once you’ve got your gain you can calculate the year you’ll have your break-even point.
You can also calculate the month in which you will make it in which you take the estimated monthly profit and divide 50 000 it by that number. You will get a number that will be between 1 to 12; you will have to match the number with the corresponding month.
Here is a link to help you calculate your break-even point:
Planning For a Business
Everyone needs a plan for their business. You need to know what you’re doing, how you’re going to do it, who is going to want it, and where youroffice will be. Bad planning is one of the leading reasons why businesses tend to fail. There are so many resources that can help you plan your goals and priorities. Here’s yet another link that can aid you in this:
Things you need to have before launching:
- Executive Summary
- Company Summary
- Market Analysis Strategy and Implementation
- Management Summary Financial Plan
These items will make your business look more appealing and will help create a higher volume of comprehension to your potential investors. Not only that but it helps toward everything in regards to starting a business. Making everything more clear and organized will help you grow faster and meet your business goals
Save Money Everywhere You Can!
As to whether you have the money or not you should always be looking for ways to save money. There are many ways to do this.
– Start looking at barter companies that allow you exchange services with other companies you have exchange services and save thousands of dollars. A good company for that is bizXchange
– Start partnering up with companies that will sell their merchandise cheaper ex: you’re an internet and phone provider so partner up with a phone manufacturer to get a cheaper COGS bill. A great social network for that is PartnerUp or BizAssit
– Cloud computing is a super economical way to save on storage investments, filing, printing, organization, backup. A great company to go with for that is Kontego Networks Inc
– Use Social Networks to get your name out there, Network online with other business owners and pitch your product in a genuine way(don’t be a sales person; be a contact). Use: Linkedin, Facebook, Biz Assist, PartnerUp, Youtube, Blogs etc.
By doing a bit of research you’ll be able to get a lot more information on free marketing and inexpensive ways to exchange. I will eventually blog about it as well. So perhaps subscribe and slowly learn at a reasonable pace.
Having your own business is truly an extraordinary change to one’s life style. You are the key decision maker; you are in charge of your success and your business’ success. As for next week’s blog post I’ll make a list of the things that will destroy your business and bring it all down to complete and utter ruins.
Let me know how this blog helped you!
Enjoy the beautiful spring weather!
Sponsored by: Kontego Networks Inc The coolest internet provider in Montreal :)