Successful people with entrepreneurial spirit are quite rightly admired for their tenacity, foresight and innovation. But what turns a good idea into a successful business? How do you go from Joe Schmo to Jay-Z?
Dream Big but Be Realistic
Forget about fancy inner city offices and company cars to start with. Your financial frugality will be your savior in the early days. Keeping overheads as low as possible means that any profit your business makes can go straight back into making it more productive. If your idea is good, the glitz and glamor will eventually come, but only after some hard graft and sensible accounting.
Be Positive but Don’t Gamble
Don’t make costly mistakes before you can afford to make them. Scrutinize every deal, offer and opportunity that comes your way and asses them based on risk. Low risk strategies may seem to reap lower rewards but they also have a higher success rate. Many businesses do make risky investments but they will have saved up a safety net using low risk strategies first; this way they can cover themselves if a riskier investment fails.
Many businesses have started up on as little as a credit card, whereas other entrepreneurs have taken out secured loans against their property. That said, I would recommend getting into as little debt as possible. Think about creative ways you can get other people to invest in you. As an example: Film director Sam Rami (Spider-Man, The Grudge, Drag Me to Hell) got funding for his debut picture The Evil Dead by making a trailer first and showing that to the richest people he knew; spiking their interest and convincing them to invest.
Getting investors interested is not easy but if you sit down, brainstorm and keep trying to grab people’s attention, someone will have the same belief in your business/product that you do. When you have caught an investor’s attention, you need to be able to get your business’s message over to them quickly. Practice your pitch until you can get it down as succinctly as possible. Remember; an investor needs to know how they will get a return on their investment so this should be the focus of your pitch.
Crowdfunding is a new, fresh approach to sourcing capital. It basically involves asking the public for donations in return for a future return on their investment. For example, a small bicycle repair business in the English county of Surrey recently managed to raise £40,000, around $64,750, in under a week by promising bicycle repair and manufacture tuition in exchange for donations to set up their warehouse. Consider what you could offer potential investors in exchange for investment in your business?
Manage Your Money
Or hire someone who can. Small business accounting can make or break a start-up, so be sure that you are making the most of the money that is coming in and effectively budget the money that is going out.
Manage Your Tax
If you hire an accountant you should optimize your use of their accounting services. Most accountants will have methods to get you paying the least amount of tax legally possible. This can be a key financial advantage in the early years, especially as your business starts to expand and employ staff. Having an accountant handle your tax will also eliminate any risk of handing in careless tax returns which can be punishable with a fine.
Providing yourself with solid financial start will give your business the foundations from which to flourish. Being adventurous is fine when the time comes but keeping yourself secure will ensure longevity.
This post appears on behalf The Accountancy Partnership, providers of small business accounting and other accounting services.