I have been self employed for most of my working life apart from a small stint working as a General Business Account Manager for Telecom, even then, because I was a commission sales person, I considered myself to be the owner of a small business called Terry Rota, who just happened to contract to Telecom.
During this time I’ve made my share of stupid business mistakes. I’ve also coached and coaxed a number of people to start their own businesses, and I’ve seen many of them make similar mistakes however I still believe building your own business is one of the greatest methods of creating wealth available.
This series of articles (3) is geared towards small business owners, particularly people who are just starting (or about to start) their own business.
1. Selling to the wrong people.
While sales are vital to the survival of any business, you don’t need to push your business on everyone you meet, including friends and family (In fact it may pay to avoid these folks as clients or customers). Furthermore, it’s a waste of time to try selling to people who simply don’t need what you’re offering, especially in today’s environment.
Selling to the wrong people includes trying to sell to everyone. Yes some customers are much easier to sell to than others and some clients are much harder to work with than others.
If a potential customer is broke and obsessively worried about every nickel they spend, if they want a product or service but don’t know why, or if they simply don’t understand the benefits of your offering well enough, they won’t be a good client in the long run.
It’s OK to say no to customers or clients that may be more trouble than they’re worth. Let your competitors sell to them instead. You’ll save yourself many headaches, and you’ll free up more time to focus on serving the best customers.
2. Spending too much.
Until you have a steady cashflow coming in, don’t spend your precious start-up cash unless it’s absolutely necessary. I started my Mortgage Broking Business with about $10,000 cash (my money and my 2 partners at the time), and it went fast; shortly thereafter we were using debt to finance the business.
Unfortunately, the original business model didn’t work, and it has been a rocky 10 years before the business was generating a positive cashflow. This taught me that every dollar invested in the business was another dollar that eventually had to be recouped from sales. Currently that business still owes me many hundreds of thousands of dollars. Today though it is forging ahead and eventually it will be another great asset in my portfolio.
In 2004 I started the New Zealand business with only a few hundred dollars even though I could have spent much more on it. No fancy logo, no snazzy web design, no business cards or stationery, no company cars. I paid to register the company, and that was it. That’s as much as I was willing to spend before I started generating a positive cashflow. All other business expenditures came out of that cashflow.
A business should put cash into your pocket, so before you “invest” money into it, be clear on how you’re going to pull that cash back out again.
Obviously some businesses require lots of cash to start, but in the age of the Internet business, you can very easily start a lucrative business for pocket change (Big Tez The IT Company was started in 2007 for under $100).
3. Not Spending Enough.
It’s also a mistake to be too tight with your cash. Don’t let frugality get in the way of efficiency. I have always taken advantage of skilled people who can do certain tasks more efficiently than I can. Just yesterday I was asked again how I can juggle so many businesses, it is because I use skilled people to do the jobs I am not good at.
Buy decent equipment. I like to kid Mary about the silly $600 printer, fax machine, scanner and telephone she brought because she thought it would save us money. The copier we have in the office costs that much every months and has done for 10 years however we print, scan copy and fax documents that are 100 and 200 pages long. Can you imagine sending a fax of 100 pages on a machine where you had to manually put each page on to the platten? It would take hours.
You don’t have to overspend on fancy furniture, but get functional furniture that helps you be more productive. We spent most of our initial budget getting cheap but solid furniture that 10 years later still looks just the same as it did in 1998.
Don’t use outdated software or old computers that slow you down if you can afford something better.
It will take time to develop the wisdom to know when you’re being too tight or if you are being too loose with your money, so if you’re just starting out, get a second opinion.
Sometimes the very thought of getting a second opinion makes the correct choice clear. If you can’t justify the expenditure to someone you respect, it’s probably a mistake. Remember though, there are situations where it’s hard to justify not spending the cash.
4. Putting on a fake front.
Many one-person businesses refer to themselves as “we.” That’s something a lot of new entrepreneurs do, but it isn’t necessary. There’s nothing wrong with a one-person business, especially today. In some of my businesses it’s a we, in others it’s just me.
My mortgage broking and financial planning businesses have mostly been a we over the years, but my internet marketing business is just an I . My wife’s Training business is an I, since she has no staff working for her, but her weight loss consulting business is a We. It’s perfectly OK to refer to your business as an I when you’re the only one working in it.
Pretending that you’re a we when you’re really an I is a bit silly. You will have egg on your face if and when yur prospects visit your office to find out you are only an I .
It’s not going to gain you any respect in a way that matters and promoting yourself as an I may even be an advantage today, since people will know the buck stops with you, and if you make a promise, you’re the one who will carry it out.
If you’re a newly self-employed person, don’t pretend you’re anything else. Price your products and services fairly for your level of skills and talents, let people know you are new.
Some newly self-employed people have been told to “fake it until you make it” and think they must become actors. The business they promote to the world is pure fantasy. Trying to fool your customers in this manner will eventually backfire. I still do not take any clients for some of my businesses even though I now considered to be an expert by many people in this particular field. I believe I am still in training and if I am in training I can hardly charge for my work, this principle comes from completing my apprenticeship as an Electrician. Whilst I was an apprentice I worked in the industry but I certainly could not bill anyone as an electrician.
If you’re so desperate for business that you need to lie, you shouldn’t be starting your own business. If you can’t provide real value and charge fairly for it, don’t play the game of business. Develop your skills a bit more first.
Thats all for this part of the series.
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