- Personal Finance
How to Start and Run a Business
Starting a Business
There are a lot of people today who are interested in starting a business. Over time, this is one of the best ways to build up your income and steal back your life. The business environment is more competitive today than ever before. With millions of students graduating with student loans, there are a lot of people more interested in starting a business than getting a typical job. Anyone who wants to start a business needs to realize there are many variables to success.
- Always Be Selling
- Scale Appropriately
- Use Technology
- Customer Focus
With the internet today, there are more opportunities than ever before to make money online. A lot of people have interest in starting a business selling products or services through an online medium. Starting an online business is not easy, but the rewards are worth it. Many people think that starting up a business based online is easier than a typical business. The start up costs may be lower, but this does not necessarily mean it will be easier to stay in business.
A lot of business owners get into trouble when they borrow too much money in the beginning. Bootstrapping your business is essential in the early days. This essentially means spending as little money as possible in order to get the business started off right. Instead of buying inventory on credit cards, business owners should work to have as little debt as possible.
Product Or Service?
When starting a business, you can decide whether to sell a product or a service to customers. There are actually advantages to both. With a product, you are not limited by time. If you have the inventory and the customer demand is there, a business can literally sell billions of units of a single product. However, it is difficult to carry that much inventory from a cash perspective. As a service-based business, you are more limited by time than money. Doctors can only see so many patients in a day without burning out.
Choosing Your Products
Over the long term, choosing what products to sell is essential. There are a lot of people who simply look to see what is in demand now. This is not necessarily the best approach. Those markets are probably saturated with companies with large economies of scale. You will be competing with companies that can produce and scale on a much larger level than you. As a small business, you should try to appeal to customers with a unique selling proposition. Amazon started out this way in the online world. When choosing products, pick something with good margins and a strong underlying demand.
A business can only sustain itself without profits as long as it has cash. Much like everyone has a mortgage payment and other bills, every business has fixed and variable costs. Business owners should work to reduce fixed costs by as much as possible in the beginning. This will allow you to scale quickly and with large profit margins when the customers buy products or services from you.
Gross margin is retail price minus the cost of goods sold. As a general rule, the higher your gross margins the more profitable your company is going to be over the long term. Selling high margin products does several things for your business. Not only does it give you more cash to work with, but it also allows you to discount your products without killing your bottom line.
When selling any products, it is essential to continually look for new sources of goods. There are always ways in which you can reduce your cost of production. As your business scales up over time, you will have more sway over suppliers who want to conduct business with you. There are many companies that started off selling just one product or service and became successful.
Are You Interested In Starting Your Own Business?
Financing Your Business
A lot of business owners wrongly assume that financing is a fast way to wealth in business. However, there are a lot of companies that have gone out of business in recent years as a result of issues from financing. Financing too much capital does several things for your business.
- Reduces Bottom Line Profits
- Reduces Financial Flexibility
- Hurts Credit
- Limits Opportunity
There are a lot of people who have been able to start a business with little capital on the front end. Over the long term, there are many ways to scale up a business without spending too much money. There are more marketing tools than ever before that can be used as a way to reach new customers. Always make sure to use the technology that is available to you in order to reach new levels with your company.
If you can't feed a team with two pizzas, it is too large.— Jeff Bezos
Starting a business is hard and scary, all at the same time. Few people truly understand the magnitude of their decisions when first starting out. Never try to scale too quickly in order to gain sales. Over time, using too much borrowed money eats into profits and hurts your financial flexibility. Here are a couple of tips when starting up a business.
- Value Your Time
- Be Lean
- Be Slow to Hire
- Scale Appropriately
- The Riches are in the Niches