There are many advantages to starting your own business: the freedom, the flexibility, and having control over your own success. However, starting your own business is not without its challenges, and if you want to make your business a successful and profitable one, there are certain rules you must follow.
Here are the 6 key rules for starting a business that every budding entrepreneur should know.
1. Prepare, Prepare, Prepare
The first rule in starting a new business is to make sure that you a well-prepared. This means having a proper, formal business plan in place before you start your business. A business plan will help you define your goals and objectives, work out the best way to get there, and keep you on track in both respects.
Being well-prepared also means making sure that you have systems and processes in place right from the start. Systems for accepting payment are critical and should be established before you launch your business. You should also have budget tracking systems and staff management processes established and confirmed before you hit the ground running.
2. Have Enough Starting Capital
Another golden rule of starting your own business is making sure that you have the money you need to get your business off the ground. How much starting capital you need will vary greatly from business to business, but all businesses need some kinds of funds to get started, to cover start-up expenses and see you through the first months or years until the business starts to turn a profit.
A major reason for businesses failing in the early stages is that they don’t have the necessary funds to get off the ground. As part of your preparations, make sure you work out exactly how much money you will need. Make realistic profit projections, remembering that most businesses run at a loss at first. Then, secure enough (or preferably more than enough) capital for your needs, whether this is through an investment, a loan, or by building up your own savings.
3. Don’t Be Afraid of Debt
Speaking of taking out loans, this brings us to rule #3: don’t be afraid of debt. In many cases, there is nothing wrong with borrowing money either to start your business, or as bridging finance to cover certain expenses once you’ve started. Taking on debt in order to expand your business when things are going well can also be a very smart strategy. If you are too afraid of debt, you could limit yourself from many opportunities.
However, it is, of course, important to make sure you take on the right kind of debt. Don’t take out bad loans, or anything that you are not sure you will be able to repay. For example, it is not a good idea to take out a large, high-interest loan to fund a risky business idea, or to go further into debt to prop up a failing business. However, when approached the right way, debt can be not just ok, but a smart approach.
4. Know Your USP
Your USP, or unique selling proposition is what puts you apart from your competitors. It is what you can offer your customers, and the reason they will pick your products and services over others. Knowing your USP is critical in order to convince people to buy your products. After all, if you don’t know what your USP is, how are you going to communicate to others?
If you’re not sure what your unique selling proposition is, start by comparing your products and services to those of your competitors. Think about the features that are unique to your products, as well as if there are any differences in your manufacturing process. Think of the ways your product performs better than your competitors and what makes your service offering different.
5. Keep Your Business and Personal Finances Separate
Another golden rule of starting a business is making sure that you keep your business and personal finances completely separate. Be sure to have a separate account for your personal and business expenses and income.
This is critical for you to be able to accurately track payments and know what is happening with your business. Mixing your business and personal finances could also get you into trouble with tax authorities at some point, so it is much better to just keep everything separate.
6. Develop Your Management Skills
Great management is critical in any business. However, if we’re being honest, not all business owners are naturally good managers. You may be highly creative, an excellent innovator, or a whizz at sales and marketing, but being a great manager requires specific skills.
Luckily, like anything else, these are skills you can learn. As your business grows and you take on more staff, make it a priority to develop or refresh your management skills. Consider taking formal or online courses, or seek out a mentor to give you management advice. Becoming a better manager will let you get the most out of your team, which is essential for building a successful business.