If you're worn out from working as an employee, it may be time to start your own business. Many smart individuals are choosing to build their own future, freelance or work remotely within their own time schedule. Small businesses can be anything from label manufacturing to pharma representatives to tech startups. It is exciting but before you start working from the ground up, here are three tips that can save you time and money.
Run Your Ideas by Other Business Professionals
Entrepreneurs may need guidance from established professionals in order to thrive. Skilled professionals with their own businesses can advise you on topics you may not have considered, such as dealing with change and assessing risk. Look to an admired friend, family member, or a mentor in your industry and ask for their help. According to Canvanizer, developing your idea from just an idea into reality takes lots of time and effort and a lot of that comes down to proper planning. Talking with others and brainstorming is how good ideas become great ideas, and great ideas become legendary.
A business professional can guide you on everything from hiring employees to marketing to sales. Show respect to your mentor by keeping the conversation within their own time. Book an appointment and prepare your questions beforehand on their schedule. Being specific can take you a long way as you will receive practical advice and the takeaway from the meeting is likely to be a checklist with action points. Imagine that you are planning to integrate a payments provider to accept credit card payments. Asking your mentor for an advice as to how to select the payments provider given that you are limited by your current technology stack and the geolocation of your customers will steer your mentor in the right direction. On the contrary, generic questions like ''What are the top trends in the fintech industry?'' are very unlikely to lead to the same result.
Know How Your Product or Service is Going to Work
Regardless of whether you are planning to develop a product or offer a service, having a roadmap is a must. There are many points to be considered as quite often great ideas are limited by the circumstances.
Freedom to Operate
There may be existing patents or regulations you need to be in compliance with. Collecting, processing and storing personal data is strictly regulated by GDPR in the EU and there are similar regulations in place in other countries around the world. It may be even more complicated if you need access to the health records of patients for your predictive analytics model or to offer them specific services and treatment. Be sure that all regulatory requirements are considered and your product or service is addressing them since the very beginning. Adjusting or customizing, later on, is likely to result in excessive costs and if not done timely, it may even result in fines and penalties.
According to MBI Nutraceuticals, you're going to need a product that is effective, consistent, and safe, especially if it's a health product such as supplements, beauty creams or protein shakes.
Research & Development
R&D can be costly and time-consuming. Building strong relationships with research universities and labs is a must to have access to the technology and knowledge base you will need to build your product. Also, it is worth checking if there are any tax benefits and be in compliance with the requirements since the beginning. In some countries, and in the UK in particular, there are R&D tax credits that are not to be neglected.
In all cases, discuss your financial projections with your mentor. Some expenses are not so obvious but manifest themselves in the worst possible moment. There is hardly anything worse than having a half-built product and no money to complete it. If you manage to raise funding in such a situation, it will be at an unfavorable valuation.
Speaking of valuations, there are at least three avenues an entrepreneur can take to secure funding for her/his project.
Self-funding your business is usually an option for ideas that are not capital intensive. Your own savings and help from family and friends may be enough to develop an MVP ( a minimum viable product), launch it and start generating revenues. Later on, the business will be funded by the positive cash flow and profits.
Taking this route has one obvious advantage and it is the fact that the entrepreneur remains in control of the business and no equity is acquired by third parties. However, the risk is high as the funding and the knowledge may not be sufficient to manage a fast-growing organization. Some Business Angels have industry knowledge and network that add value to the business even more than the money they invest.
Grants & Government-backed loans
Horizon2020 is a fantastic opportunity for all small businesses incorporated in the EU. The SME Instrument has two phases providing funding for businesses at different stages of their development. Phase 1 is EUR 50 000 which are intended to cover market research and R&D costs. Phase 2 goes up to EUR 2.5 mio which are available to growing businesses that need more funding to scale their operations.
On top of the EU funding, in many countries, there are local funds available to the businesses incorporated in that particular country. Innovate UK is a good example with a broad range of opportunities. The main challenge for a small business is probably to obtain information about the funding opportunities that are available and to prepare the documentation that is required.
For those having no access to grants, there are government-backed loans that can be accessed even if the entrepreneur has no credit record or any assets to secure the loan. In the UK, there are a variety of startup loans varying from GBP 500 to GBP 25 000. Similar opportunities are available in other countries as well. Although the loans are backed by a government agency, being on default may negatively impact the credit score of the entrepreneur.
Most startup founders are familiar with this form of funding. In contrast with the previous two forms of funding, equity funding results in the selling of part of the equity of the company to a third party, usually a Business Angel or a VC fund. The entrepreneur may partially lose control over the business and accept some terms that are not necessarily favorable in the long run. Sometimes, the performance indicators ( KPIs) are too aggressive and not meeting them results in further dilution or accepting subsequent funding at a lower valuation.
There are advantages too as the equity funding model may secure funding for faster growth. Quite often, the first customers are other portfolio companies which are more tolerant and open to providing feedback which is essential in the early days.
Never Underestimate the Power of Communication
SEO & Social Media
No matter your product or industry, your new business is only as successful as your customers' opinion of it. ReliableSoft.net emphasizes that you need to look into SEO (search engine optimization) to advertise your business on leading websites and the power of social media to get the word out about your startup. Using the services of a trusted digital agency is a good option in the early days when the funding and budgets are limited and it is a challenge to hire experienced marketers. Underestimating SEO and launching a website without SEO optimization wil definitely result in higher marketing spend and lost customers going forward.
Word of Mouth
A grassroots way to organically market your business is word of mouth. Enlist a team to take out advertisements and spread the news of your new endeavor. Offer trials and samples to your customers to satisfy their needs so they will tell their friends. Visit as many events as you can and speak with your potential customers. You may be surprised, but there will be people subscribing for the wait list even before your product or service is launched. And speaking of wait lists, definitely, have a landing page with a registration form available online since the very beginning. Building a list of potential customers and sending them regular updates will help a lot going forward.
Affiliate or Referral Programs
In the early days, the marketing budgets are limited but marketing is more important than ever.
So how to address the challenge?
Affiliate or referral programs work in two ways. First, they pay a commission to a partner organization referring your business only if their efforts result in customers signing up ( pay per lead) or revenue being generated ( commission- basis). As there is no upfront marketing expense, the only budget that needs to be allocated is to cover the tracking software and the cost to administer the affiliate program. Second, an affiliate program allows access to the user base of the partner organization. Your partners market your product or service by sending newsletters, publishing articles to their blog, sharing information via social media and more. All these are good for brand awareness and builds trust so affiliate marketing is not to be neglected.
Even more, joining an affiliate program as a partner can be a fantastic source of revenue for you diversifying your revenue streams and allowing you to monetize your user base twice.
By carefully establishing your business and evaluating each step on the way, you can thrive as an entrepreneur. After laying the groundwork, you can run a successful business of your own. Find your passion and carefully consider what you have to offer to the world. Then, figure out how to make your passion work for you.
If you are starting your own business, then let Transformify help with sourcing top candidates and hiring the best talent for your team!