Put together a solid advisory team
Starting a business is a lonely process, and thinking you have to do it all by yourself is heading down a road of extra stress and pressure. Try to study some successful business owners, and you’ll find they have surrounded themselves with a strong group of advisers. This should be one of your top management priorities.
A typical core team would include a lawyer, an accountant, a mentor, and your banker. You can then add experts who can give you quality advice on areas where you may lack skills, such as production, finance, marketing, or technology.
Choose the proper business structure – with advice.
Should you start as a sole proprietor, a partnership, a limited liability company, or something else? Get advice, as each structure involves regulatory, legal, and tax issues.
Try to think beyond this year. Which structure can carry the most credibility with customers? What is the best structure if you want to expand the business? What structure would best suit future investors? Think also about succession – one day, you will want to sell or pass on the business to family, staff, or even an outside buyer.
Sort out all compliance requirements
You don’t want to be distracted by all the compliance issues once you’re in business.
Start by listing everything you need to sort out, from health and safety issues to permits and consents required from Federal, State, or even local authorities. If you are starting a business from home, do you need any permissions? Is your business going to involve any dangerous activities, noise, or toxic chemicals? If so, what health and safety measures do you need to take, and what permissions do you need?
What taxes do you need to pay, and when? What will be an excellent system to get this done so you don’t miss any payments and incur penalties?
Make a checklist and work systematically through it with the help of your advisers.
Set up good systems
A profitable business is all about sound systems. To run your business well, you will need efficient processes.
Spending time setting up simple but effective systems will pay off greatly. Think about everything that goes into your business, from production and work processes to billing and shipping. With the right strategies, you can:
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- Deliver efficient and consistent quality products, services, and customer delivery.
- Run the business efficiently and delegate more confidently.
- Confidently take time off or delegate tasks knowing that others can follow operating manuals.
- Be able to train staff faster and more efficiently with clear operating manuals.
- Prospective buyers will be able to see the value-added to your business.
- Build the foundation you will need to franchise your business in the future potentially.
Develop good credit management systems
If you sell on credit, you will need an efficient, fast and, consistent credit management process. As a new business, you rely on the money owed to you as soon as possible so you can pay bills. Never let things slide, or some customers will treat you as a cheap source of finance. Key points:
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- Even being eager for new business, make sure you check the credit of all new customers.
- Make sure all customers understand your term of trade and that they sign an agreement with them.
- Set credit limits and have a system to flag orders that exceed the agreed credit limit.
- Bill customers promptly and send all statements out on time.
- Follow up on all late payers immediately, visit them, call them, or email them. Late payers must always know you’re on their case.
Make sure you have a great accounting system.
You need the correct information on hand to make the right business decisions. Get your accountant to help set up an easy-to-operate accounting system.
A sound accounting system will help you to:
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- Automatically download and categorise bank statement details. This process will help saving time and eliminate manual data entry errors.
- Generate instant budget, profit and loss, and other financial reports.
- View a quick summary of business performance on your dashboard.
- Bill customers, track payments and be able to flag overdue payments for your attention.
- Keep you updated on your cash flow position so that you can update your forecasts.
Choosing to have a cloud solution, you and your accountant get the added benefit of accessing the information from any available internet connection.
Identify and monitor your key performance indicators (KPIs)
Some key performance indicators (KPIs) such as net profit margins and gross profit are common. However, each business also will have KPIs specific to its types, such as Insurance sold for storage, the conversion rate of visitors into sales for a retailer, or billable hours per week for a service-based business.
Seek help from your accountant or financial advisor to identify the core drivers that suit your style of business. Then set out to monitor them closely and have improvement goals.
Monitoring your KPIs will help grow your business and show stakeholders such as lenders and investors that you have your finger on the pulse of your business.
Build good relationships with stakeholders
In addition to customers, investors, lenders, and suppliers are also stakeholders in your business. It is essential to make a point to develop good relationships with all of them. This will help enhance your business experience, but good relationships will help to pay off in tough times.
Ensuring you pay suppliers on time will develop a relationship you can hope to draw on later to negotiate more practical payment terms if times get tough. Showing you have good money skills and forecast cash flow issues well in advance will help build your lenders and investors confidence.
Try to start learning what you don’t know about business, such as financial management basics.
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