One of the most common mistakes new business owners make is spending too much money on the things they need to open up shop. They choose to go into a field with major investments in capital, supplies, and personnel, and they expend a ton of money before the first dollar comes through the door. They subsequently spend years paying off the initial investment, and eventually give up or just can’t stay in the black.
Let’s say you want to become a massage therapist. You can rent a nice storefront in a local shopping center, hire a receptionist to handle your appointments, and create an incredible mood in the place with candles and music. You can also go broke paying for all these things. A better option would be to buy a portable massage table, use social media to market yourself, and go to your customers. Give massages on employees’ breaks at a local office or between classes at a college. Cut your costs to boost your profits.
So if you’re thinking about a new field, look at opportunities that won’t require so much money up front. This is about more than just the concrete items you’ll buy, though. Business expenses cover a broader array of things that you might not think about, and they can prove significant enough to make or break your enterprise.
Begin With Where You Are
Do what you know. It’s that simple. If you currently work in construction, you should consider becoming a contractor. If you are selling cosmetics at a department store, think about becoming a makeup artist. Don’t invest thousands in re-training yourself when you don’t have a proven venue for those skills.
Instead, look at examples like those above or, if you simply must develop a new skill, at least try to build on what you already know. A construction worker would probably excel in a carpentry program, and the makeup counter employee would breeze through cosmetology school. Sinking money into a training program that’s a light year away from what you already know is a real gamble.
Keeping The Day Job
Many people go into business for themselves because of dissatisfying or unfulfilling employment elsewhere. They want to be their own boss, make their own decisions, and answer only to themselves. This type of thinking has made a lot of people wealthy. It has also bankrupted a lot.
New businesses have razor-thin profit margins. If you have already quit your job when you begin your new enterprise, you better have significant money already on hand to keep your personal bills paid and your stomach full, because you can’t assume that the business will be able to do it for you.
And if you aren’t able to make that benchmark, you need to think about your new venture as a moonlighting opportunity instead of your full-time job. This will burn up many evenings and weekends, as well as your holidays and vacation time, but you will stay afloat long enough to see when (or if) the business will be able to support you. Doing so will keep the company’s revenue from being consumed by your personal financial needs, giving both of you a better shot at survival.
Staying Out Of The Shark Pool
Competition can be such a good thing. It can spur you to a high level of performance and give you the chance to be the standout company in your field. It can also land you in bankruptcy.
The thing with competition is that it’s so…competitive. There is a reason these other businesses are in operation. They have been able to handle competition. You, walking in unproven and inexperienced, are really facing the dragon right out of the box.
And killing him will be expensive. You will have to spend more on advertising so that your name can be found in the fray of the market. You will have to pay more to employees to lure experienced workers away from established companies. You will have no room to scrimp on inputs because the competition isn’t scrimping.
In short, you will have to spend more on every phase of your operation to have a chance to survive, and that spending could be the very reason that you don’t survive. It is a far better choice to find an enterprise that isn’t already heavily populated with other providers.
Surviving in business is tough. It’s a money game, and if you watch your dollars and cents, you’ll make it.