Consider Scaling Down and Pilots
I know what it’s like… you have a fantastic business idea, you see the potential, you see how great it can be, and you want to put in all you can to make that vision a reality. While this is the only way to go for some business concepts which are pretty much, ‘Go Big, or Go Home,’ this isn’t always the case.
Where it’s possible, consider the option of scaling down, and testing the concept. This will allow for you to start up, while saving money, learning from the pilot and being able to action changes, and raise more funds based on proof of concept. This approach not only reduces start-up costs but provides valuable insight around the business, in real terms. It may not generate much profit, but it will offer a wealth of verified information that will help you to determine the next steps… If you decide to proceed with expansion, it is a great basis for second stage funding.
Consider Realistic Timelines and Pricing
Part of calculating your start-up costs will involve figuring out your initial cash flow. Without having actually operated the business this can be tricky. It’s also not uncommon to fall into the trap of under-pricing products and services in order to stand a better chance of competing, and to ‘tempt’ in more business. Be aware that you don’t necessarily need to do this. If you do, raising prices to the market standard could become difficult at a later stage, and you’ll have to do a lot more work in order to break even. My advice- recognise your worth, and price it accordingly.
Consider a Realistic Time-frame for Starting-up
Time is always potential money, and when you’re starting in business, this is true even more. If you’re going to have fixed costs like property leases, if improvements or modifications are required prior to opening this impacts on both time, and money (quite directly). These additional costs add to your start-up costs, but also add to the time before you can start earning. Don’t fall into the trap of under-estimating when you’ll be ready to trade, and build in a good time cushion before you ‘need’ to see funds coming in from business activities. Failure to do so could result in a significant amount of stress, and in some instances, can even result in a business shutting down before it’s even had the chance to take off, simply because there wasn’t enough time allowed to give it a chance to get going.
Consider the Cost of Money
Many entrepreneurs who have a great idea that they believe strongly in, will make the decision to finance the business themselves. At times, this can be at great personal cost, using the credit on credit cards or loans, and tapping into equity from homes etc. While for some smaller ventures the impact may be negligible, for larger ventures, self-financing should be considered exceptionally carefully before committing to this option. If funds are in abundance and potential delays, changes, etc. will have little impact and will be offset by the return, however long it may take… then go for it! If this is not the case, and any delays and progress are not going to plan will cause a great deal of personal and financial strain that could jeopardise business success anyway, then definitely consider other options.