You can’t be a proper entrepreneur if you are not ready to take on some risk. After all, startups are all about creating new solutions to existing problems. Like with any successful innovation, a period of trial and error must come first.
Fierce competition, insufficient cash, and low market needs are just some dangers lurking around the corner. Many believe the gamble is worth it if it means being in full control of their own destinies. However, you can minimize exposure during your businesses’ early stages by taking smart, calculated steps.
Deliver Value for Cash
Many entrepreneurs prepare for a successful business launch by designing an app or a website, taking courses and reading a couple of books to fill in knowledge gaps. But, the reality is – people will pay you right now to solve their problems.
I’m not saying that personal education, product development, and web presence are not important. They are! But you can serve your clients while you carry out those tasks.
The focus should be on creating tangible value, instead of spending valuable time just fundraising for product development. Become the product yourself.
Create a functional record-keeping system as soon as you start with your endeavor. You can save yourself a lot of time and money if you keep up with paperwork and develop a proper filing system. You’ll realize that whenever it’s time to file taxes or pay bills. Maintaining a transparent and documented record keeps Uncle Sam happy as well.
Failing to save receipts, or mixing up personal business accounts, might get you in trouble with the IRS. Sloppy account keeping can lead to an audit, which can lead to lost business.
If it sounds like too much to deal with, don’t let it deter you. It’s not something you have to be a natural at. Use accounting software or hire a proper tax expert. You might even score a tax deduction you didn’t know you qualify for.
Make sure your clients are paying invoices on time. Keep track of your accounts receivable. You need to collect on whatever it is you are offering. Your success depends on bringing profits into the cash flow.
Align Your Skills with Your Endeavor
When they see growth potential, entrepreneurs are usually tempted to try out shiny ideas. Those ideas usually require extra skills, however. Time is money, but you are in control of your time.
A business owner with engineering or programming skills can create an early version of a product by investing one valuable resource: their time. But, if you are a non-technical entrepreneur, you’ll have to invest your own funds, as well as time, to boost your startup. That breeds more risk.
By combining the solution with your own, human capital, you can carry out a field test without spending funds. If your business requires complementary skills, make them be your product as well.
Keep a Steady Stream of Income
You might not need to keep your day job for very long if you utilize your skills to deliver value for money. However, until you get there, consider your day job to be your insurance. Leaving your full-time job will require some planning.
Set a target for recurring monthly revenue that will allow you to go all-in once you reach it. And when that moment comes, you still shouldn’t quit!
Wait for at least three more months. It will not only be a more confident decision then, but it will allow you to test your startup’s stability even better.
If you prefer to run your business as a side gig, team up with someone who thinks like you. When it’s time to expand, think of hiring a freelancer. Remote workers with different roles can help you grow your startup. Use your limited time to focus on work that only you can do or on tasks that will benefit the most from your personal touch.
Limit Loans and Expenses
Take out a loan only if you need to. Make it as low as you can comfortably manage. But, if you must take out a loan, it should provide enough cushion to ensure success.
It does sound a bit vague, I know, but it all depends on your personal financial situation and the type of operation you are running. If you can avoid loans, do it. Limiting expenses might help you in that regard.
Unfortunately, there are many ways you can increase risk without actually helping your business. Common unnecessary expenses include: building a team too soon, advertising without careful validation, investing in product development, and renting unneeded office space. For example, if you can’t work at home, start in a co-working space, instead of an office.
As a takeaway – be careful when you diversify. Diversification can be an excellent move, but not necessarily when you’re making your first steps.
You might hinder your performance if you run many projects at the same time. Don’t end up being a jack of all trades and a master of none. Build one thing at a time.