For many people, starting a small business is a means to survival – but with vision and discipline, a small business can grow to become a source of good income and even wealth.
Whatever the endeavour, there are some tried and tested rules that no entrepreneur should ignore even if you think your idea is the next best thing to hit the planet. People who are successful in their careers and businesses invariably prescribe to the following pertinent habits:
How you choose your business is important. It might not always be what you want to hear – but it’s best to pick a business with low operating costs and good profit potential. Sometimes it’s not easy to know this, but if the idea is going to require a large amount of investment, and the returns are vague, it might be best to let go of this kind of idea early on. There are literally thousands of businesses out there – choose an option that is simple and which you can build on.
View your business as a tool for building wealth. People will tell you to work on your business, not in your business. If you’re working in your business all the time, you’ve only created a job for yourself. The goal is to build systems and develop people so that you are able to work yourself out of your role, and attend to the overall creative development of the business to greater levels of profit.
Begin your day early. Get a head start on the hours and give your creativity, energy and productivity a daily boost. A couple of quiet hours before formal work starts can be utilised in all sorts of useful ways: meditation; exercise; formulating daily plans; how to solve problems from the day before; how to get new ideas on the boil. This is a powerful thinking and planning time of the day to set goals and streamline your strategy, so don’t let it slip away.
Handle your money intelligently. It’s the simple old story – don’t live beyond your means, don’t spend more than you earn. You may have to borrow money to get your business off the ground to begin with, but make sure you always keep your spending in balanced perspective so that you can deal effectively with repayments. Build your business slowly, even if initially the profits are small.
Manage the risk. You will need to have the capacity for risk, and the courage to deal with things that may go wrong. All businesses carry the possibility of mistakes and failure. You need to be able to calculate the risks you can take in your business – and handle difficult issues with good analytical skill, planning ability, and the agility to change course if necessary.
As with any investment, give it time. Stay the course with your business just as if it’s an investment. There will be times of up and down, but don’t let go and always stick to the plan and the goals you have set. Time is money, they say…but in this instance, the more time you give your business to grow steadily, the richer you will be.
Keep to your budget. Evaluate all expenditure. Every month make sure that you aren’t spending unnecessarily. Running a business has numerous costs – from hiring employees to equipment and materials, and even to the coffee machine! So make sure you understand the costs involved to bring your business to life, and to run it successfully. Pick up on discounts where you can. Look to be frugal, but don’t cramp the operation of your business.
Don’t allow your customers to fall behind with payments. As a small business you cannot afford this, so you need to keep a finger on the pulse of invoicing, payments, cash-flow, and debts. Know what you can track and what you might have to let go – but try not to get into tricky situations. When your customers owe you, then it means that you might end up owing others – a position that will negatively affect your business.
Hire well, pay well. If you are at the stage of requiring assistance to run your business, make sure you hire the right people. Loyal employees are worth gold to your business. Make sure you have the best qualified, and train them well. Also ensure you pick those who will fit the roles personality-wise. Your employees are the ones who will build your company culture and stamp its brand on customers.
Get a good grasp of taxes and investment. Wealthy people understand smart tax and investment strategies. You work for your money, then you must make it work for you. Take advantage of the top tax deductions for small businesses. Business owners have specific tax and investment options, and you should investigate what is available, and take up the benefits where you can. Learn the power of compound interest. Respect money, and you will accumulate assets. Diversify your capital, and try and keep 6 – 12 months of expenses in liquid reserves so that you are prepared for any eventuality.
Business mentors. If you engage with a small network of key contacts with regard to finance and the substance of your business, you stand to substantially benefit from their expertise. Look for a reputable accountant, tax advisor, and lawyer.
Take out business insurance. There will always be unexpected events. It’s the wise business owner who prepares for this through savings and insurance. If you’ve worked for years to build your business, it would be foolish to lose everything in a sudden disaster like a storm, a riot, or a fire.
Let your future benefit from your business. Initially, the instinct is to re-invest all profits back into the business. But it’s wiser to put some money aside for yourself, and to grow it separately from the business to meet personal, long-term goals.
Real wealth begins with the end in mind. To build wealth through your business, you must identify what will build its value. This involves building a company that is self-managing, and which can run without you, sustaining itself into the future. This creates maximum value for your business, and allows you to develop options for new businesses, while still maintaining a passive income from the first business. Wealth and hard work are partners, for sure. But at the right point, wealth becomes more about strategy, agility, acumen and innovative management. With the right mindset and determination, it can be done.
Foster Wealth: steering business, driving wealth
At Foster Wealth innovation, agility and in-depth market acumen are our daily fare. The volatility of markets, unexpected events and fluctuating values continually take us to new levels of interest and possibility. Constant re-assessment and evaluation are how we keep ahead of the curve – but our hard work, professionalism, attention to detail and personal attention are the hallmarks of our business and will never change.
Find out more about us at: www.fosterwealth.co.za