- 9% of the population owns a business.
- 7 out of 10 business start-ups never reach their year 2 anniversary.
- 51% of the remaining 3 will still be in business after 5 years.
- 5% of the remaining 1.5% have annual revenue more than $1,000,000
How do you become .08% of business start-ups that can fetch more than $1,000,000 purchase price in the end?
Get the right information right from the start!!! Don’t just ask those people that you know who are in business for advice with your business start-up. Most of them are struggling with their own challenges and don’t really know how they got to where they are right now!
As a business start-up, or at any other stage of business growth, there is only one question that you need to ask for business success…
What do I need to do so that my business will run without me?
That is, how do I create business self-sustainability! That is the mission of DE, Inc. and this blog to teach you what you need to do to make sure that your start-up business is able to run without you so that you can have the independence and financial freedom that you seek.
Here are some articles you may find helpful which are specific to business start-up and the first stage of the business growth cycle.
Posts for Business Start-ups
To build a successful business is easier than most people think. You just need to ask the right question that lead you there in the most direct way possibleTonight I’ll be meeting a bunch of new people. Most will be at the event because they are starting their journey to build a successful business. Too often I find those beginning a new business asking the wrong questions. The problem is, “so called” experts are answering the questions which giving them the wrong advice which steers them down a long and difficult path! I know, “Dino, what the heck are you talking about?” Here, let me tell you by asking you a couple of questions. How many of you know someone that is trying to build a successful business and saying, “I need an investor or I need a load to start this business?” It might even be YOU! Well, good luck. Money people want proof before they’ll give you money. I know your answer, as I’ve heard it a thousand times. “I can’t start my business without $XXXXX amount of money.” THIS IS YOUR FATAL FLAW!!! To be a real entrepreneur you need to be a problems solver. Here is you’re first problem. Can you solve it? Sure you can! You just need to ask the right question!
HOW DO I BUILD A SUCCESSFUL BUSINESS WITHOUT A LOAN OR INVESTOR?It’s really that easy! I heard a statement that Tony Robbin’s made more than 2 decades ago and it really struck me. Your brain will search to answer the questions you ask of it. If that’s the case you need to ask the right question to get the right answer. When you tell yourself "I can’t build a successful business until I get a loan or find an investor", your brain focuses on that! However, if you ask it how to do I build a successful business without a loan or investor, your brain starts working on the real problem. A plan to start without money! Now, I am not advocating you can build a successful business into a giant corporation this way. It’s nearly impossible to do so. I am just saying learn the skills you need at the begin of your journey to REAL entrepreneurship. Doing it this way is actually faster! Without money you’ll focus on what’s needed to create CASH FLOW! Guess what, when you have cash flow banks and investors will talk to you. So, don’t put the cart before the horse. Ask a better question and start executing on your plan. Before you know it the investors and bankers will be seeking YOU out instead of telling you NO! If you don’t know where to start I would suggest our DIY Membership. Or shoot me an email. I am happy to give you 30 minutes of my time to get you started down the right path.
- assure enough cash to meet financial needs
- prove a market exists by getting enough customers to survive
- provide service well enough to be create customer loyalty
- complete the necessary proper legal structure for the company
Assure enough cashThis objective a profitable business would seem to be self-explanatory, but if it is then why do so many companies go under because of lack of cash? It’s because many people starting in business don’t understand the concept of cash flow. Cash flow means money “in hand to pay bills. A signed contract or an invoice out the door doesn’t qualify. Depending on how long it takes you to deliver what was contracted and the terms and conditions of your order it could take you months before you see your money. Do you have enough cash from when you started to carry you through this timeframe? What if your plan doesn’t go exactly as you think it will, then what. That’s why it is important to always look at a best case and a worst case scenario. While the worst case may not happen at least you know the range of possibilities and can plan accordingly financially.
Get enough customers to surviveWhile this objective for a profitable business also would seem quite obvious, do you really understand this objective well enough? How many customers do you need to break even every month? That is, how many customers do you need to keep the doors to your business open? If you don’t know this number then you are “flying blind” and your success is left to chance. Remember the last objective – “get enough cash.” Once you know that target, then you must understand how many sales you need to make each month to hit that target. Your picture becomes clearer now and you know how much work it will take to keep the doors open. Add in what you want to make in profit and voila you have your goal to make it to the survival stage of the small business growth model.
Create customer loyaltyNow that you are getting customers you need to do whatever it takes to keep these customers coming back and bring other customers to you. This objective for a profitable business is your operational focus at the foundation stage. What does it take to make people say “wow, I want some more please!” When you get your business to this point you don’t have to find new customers every month. Either they’ll come back for more or send others to you. Now, you get some part of your last objective accomplished without working at it. That doesn’t mean slow down your sales and marketing. It means the same amount of sales and marketing effort actual allows your company to grow and that growth mean moving to the next stage of the small business growth model.
Proper legal structureFinally, we get to the administrative objective. A proper legal structure is more important than for just taxes and legal purposes. It also demonstrates that you are a real business that is serious about what you do. Many companies check a business’ status before they will place an order or even spend time talking with them. If you are serious about your business make sure you demonstrate all the traits of a serious business that means putting the proper legal structure in place. Additionally, there are tax and legal obligations that come with doing business. Not having the proper legal structure creates risk and exposure to you and your family. The tax and legal obligations will eventually catch up with you. Understand what they are up front so you can plan appropriately. If you don’t they can kill your business later or at least slow down your growth for a time.
So, are you focused on having a profitable business?If you do not have your eye on any one of these 4 key objectives then you are leaving your company’s success to chance. I am not saying you won’t be successful, just that the chance are less and that it may take you much longer to realize that success. By having a lack of attention to these 4 key objectives you lower your chance of having a profitable business. I’d like to hear from those of you who have not been focused on one of these objectives for a period and then when you did focus on the objective how everything started clicking for your business. Share your story. Others are in a similar situation and your guidance could put them on the path to success.
Foundation Growth Stage - Startup:
- Assure you are generating enough cash to meet financial needs
- Test market acceptance, determine a market exists for your product or service
- Can you find enough customers to survive to the level of your sales plan
- Provided service well enough to be create customer loyalty
- Expand beyond 1 key customer
- Accomplish the proper legal structure for company to protect yourself and the entity
Survival Growth Stage:
- Move your focus from cash to sales
- Establish a customer base and market presence by modeling profitable client needs
- Focus on getting your product/service into the market.
- Generate enough cash flow to break even & to finance growth
- Hire people to help
- Conduct a reality check: Is the business on the right track, or does a different business model create greater future asset value for you company?
Get monthly cash flow to the point of consistent breakeven.Getting cash flow to breakeven is critical. If you can’t do that you’re business becomes another of the millions that fail in the first 5 years of existence. In the selling for startups is all about mechanics – getting to breakeven as fast as you can. So, you need to understand exactly what it takes to get to breakeven and forget about all the “bells and whistles.” You can look at the sexy side of sales after your business is on solid ground!
Selling for Startups Means-How Many Sales Does It Take to Breakeven?The first thing you need to know is how many sales do you need to make to breakeven? It’s just a simple calculation, but you’d be surprised at how many small business owners, even ones that are beyond the foundation stage, even understand that number. First, figure out how much money you need to pay all the bills for your business for a month. This includes all the materials and labor for your service or product. Next, divide this by the AVERAGE price for one unit of your product or service.
Monthly Breakeven $ / Average Price per Product/Service = Number of Sales/MonthFor example, a handyman needs to bring in $7,000 to pay all his bills, loans, and salary. He bills an average of $350 for a service call. Selling for startup in this case is as follows:
$7,000 / $350 = 20 service calls
Where Will They Come From?When selling for startups the next question is to get focused on your target market. Who buys what you sell? Are there more than one group? If so, does one group want something different than the other? The whole point of this step of selling for startups is to begin refining where you will spend your time. Too often startup companies are all over the board trying to be everything to everyone. This is a bad formula. You have limited time and money. So, you need to spend it where it will give you the best payoff. If we go back to our example, who can he sell his services to?
- rental property owners,
- property management companies,
How Do You Reach Your Customers?Now that you know who you want to speak to, where do they look to buy your type of product or service? Internet, friends, colleagues, store, directories, etc. This tells you where you need to engage with them so that you can get their attention. Part of selling for startups is engaging prospective customers in a conversation. This is really more marketing than sales at this point, but you need to understand where you will find the opportunity to sell so that you can build the appropriate sales & marketing plan. From our previous example, property management companies while the biggest bang for the buck may be too big for him as he gets started. So, he will target rental property owners. He may find these people by talking to realtors or by contacting areas where larger groups of rental properties exist. Again, this approach is much different than trying to find individual homeowners and might require a lot of advertising.
Do It!Selling for startups begins by answering these 3 basic questions. Once you have all the information you can create a solid sales plan. Build a targeted list and begin connecting so you can tell your story and create interest in your product or service. Once you get here you’ll find that sales are well within view! One reason you want to build your plan this way is because you can document what you did and how you did it. Once you know it works and is creating breakeven consistently you want to pass it on to someone else. This is a sales specific example of what we describe in our eBook The Startup Guide to Small Business Growth and may help you understand how to apply this approach to other aspects of your fledgling business. Additionally, if you need help determining what to do I recommend taking a look at our online training course Calculating Your Revenue Engine’s Horsepower. It will help you organize the thing necessary to put your overall plan together.
- A detailed understanding of what it takes to breakeven
- Complete your installation/delivery SOP’s (quality assurance)
- Establish a customer service policy and framework to support it
- Provide market feedback for product/service improvement