Any business executive can attest to the fact that starting a new business is an enormous challenge that requires a huge commitment from the owner and top management staff. Given the grim statistics about the percentage of new businesses that fail, any entrepreneur seeking to beat the odds must carefully navigate the best path to success. According to Business Insider, 50 to 70 percent of businesses don’t survive past the first 18 months. Considering the above facts, following proven strategies that have worked in the past for successful business ventures only makes sense. By carefully following the following advice, any business improves its profitability.
Tip #1 – Choose business partners carefully factoring in all costs related to the relationship
The tendency is to accept any money offered to you as a start-up business. When contemplating any financial partnership, it is crucial to carefully review all contractual details that may compromise the corporate vision or operational control. For this reason, it is important to constantly seek out the necessary capital so that business owners and leaders never feel so desperate that they will take money from partners that expect too much in return. In a financial bind, it is far too easy to make bad choices in an effort to keep the business afloat.
Tip #2 – Be extremely conservative and intentional with how capital is allocated
Having enough capital is critical for any business to prosper and grow. Attracting investors is only half of the picture to be concerned about as entrepreneurs manage cash flow and continue to invest in the company to ensure its ongoing health. Carefully controlling how precious cash resources are allocated is the other piece of the puzzle that is just as important as having enough cash on hand. Growth requires a substantial amount of money.
One strategy for preserving cash reserves is to try and not spend any money on activities that do not directly generate revenues. While this idea may sound extreme, in the first year of business it may be the type of drastic measure that keeps a company afloat. Too many entrepreneurs believe they need class A office space and the best in office equipment when they first open the doors. Going into debt immediately can be one of the worse moves that any business team can make.
What a new business needs more than anything else is revenue. It is important to remember that many giant businesses like Apple, Inc., Mattel, Inc. and Google, Inc. started in somebody’s garage. Remembering these giant’s humble beginnings provides the necessary perspective required for properly positioning a company for survival.
Tip #3 – Hire the best team you can afford
There is no substitute for excellent human resources. By hiring the best people you can find, you ensure that your company is prepared to tackle formidable competitors and come out on top. Corporate leaders must be able to focus on strategic planning and leading the company with vision. Concentrating on these critical, higher-level tasks is impossible if instead the focus is constantly shifted to personnel problems and deficits.
In a start-up company with few available resources on hand, it is sometimes difficult to offer a high salary and the best benefits. One way that start-ups attract the best people without breaking the start-up budget is to offer equity rewards or positions that will payoff big when the company succeeds. Many top people that share the company’s vision will gladly jump at the chance for long-term equity shares over huge salaries in the beginning.
By following the tips above, any start-up company increases the odds that they will succeed. All companies that are profitable over the long-term have embraced these ideas and know how important the right financial partnerships and team members are for corporate health. Additionally, cash flow management is the third ingredient that starting a new business will need in order to thrive and continue to grow into maturity.