I have seen so many businesses start and fail within 6-12 months of trading. I have also seen many businesses and companies continue to trade after 12 months and grow in profitability. The common thread that I have noticed in businesses that fail and businesses that succeed, is that those that are financially prepared and have extensively planned their business, are those businesses that grow and become successful. Those that fail (and usually very quickly) are those businesses that don't plan and just jump right-in or take a disastrous leap of faith. To help teach this principle and to provide greater detail, I have written this post and have uploaded my Guide to Start-up Business Profitability video series to my Bookkeeping, Accounting and Business YouTube Channel.
Starting a Profitable Business #1
Planing and preparation is a key to success when starting a new business or company. Most of this planning and preparation is down to you and the amount of research that you do. To help with your business research, I have listed my 3 essential research tasks below...
Research other businesses - You need to ask yourself a lot of questions; Are there others doing what you want to do? If so, how are their businesses performing? If not, why not? If some are successful and some are not, what makes the successful ones different from the unsuccessful ones? These are some of the questions that you should be asking yourself.
I have learnt over the last decade, that to be successful you need to duplicate what other successful businesses or people are doing and/or have an edge. Research the successful businesses in your industry and find out why they are doing so well and what other businesses are not. I provide more examples of this in my video below.
Research your costs and expenses - You need to list all of your expenses. It's easy to overlook, underestimate or completely forget about some expenses. You don't know how much your business is going to cost and how much money you are going to need until it is all researched and written down. Viewing my Business Expenses List may help. It is vital that you know all the expected costs of the business or company. If you don't and you run out of cash, your business may become insolvent.
Research streams of potential capital - You need to list all possible avenues of capital and the amount that each of these avenues can bring. Bank loans, personal savings, personal assets, investors, business partners, family and friends are all sources of potential capital for your business. Remember, cash is king! Without cash, your business is over.
Starting a Profitable Business #2
Once you have completed your research, you can now use that information to create a detailed business plan. Most business plans cover a 3 year period and include the following...
Expenses Forecast - A forecast of all business expenditure. Usually detailed month by month.
Sales Forecast - A forecast for potential business sales. Usually detailed month by month.
Cash Flow Forecast - A forecast detailing the amount of cash the business will have at any given period of time. The cash flow forecast is perhaps the most important part of the business plan.
Projected Profit & Loss Statement - A statement detailing the expected profit or loss for the business. Usually detailed year by year.
If you would like me to create your business plan, please contact me for more details email@example.com
Starting a Profitable Business #3
I believe that planning and preparation is one of the most important keys to success and profitability when starting and growing a business. There are other things to consider too though. I have listed some of these things below...
Management Accounts - Having a bookkeeper compile monthly sales and profit reports are the best way to evaluate your businesses performance. I can do this for you from as little as £25.00 per month (contact me at firstname.lastname@example.org). You can outsource your bookkeeping or learn how to do bookkeeping yourself.
Setting Goals and having Vision - Having a vision provides motivation and determination. Creating and running a profitable business is hard, without vision it will be even harder.
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