New Start in Business

Dun & Bradstreet and INC. magazine report that, 33 per cent of all new businesses fail within the first six months. With fifty per cent of new businesses failing within their first two years of operation and 75 per cent within the first three years you can see that in order to survive you need to take every possible precaution against becoming just another statistic. There is plenty of information out there, some worthwhile, some confusing, but get the basics right from the start and give your new venture every chance of success.

Here are three top tips that will help you on your way. None of them absolutely guarantees the financial freedom you dream about when starting your own business, but nonetheless they will at least point you in the right direction.

Firstly, make a business plan, no matter how sketchy, no matter how short. A business plan allows you to work out your projected start-up costs and how much money you'll need to save or borrow. After all even things like envelopes, computer paper or labels cost money. It will also inform your marketing strategies and how you will reach target audience to make sales. It's important that you are able to make the numbers work out on paper before committing hard cash to your ideas in reality. In this respect, for most new small companies, the most important aspects of a business plan are the break-even analysis, a profit-and-loss forecast, and a cash flow projection - projecting your cash flow with accuracy could make or break your company. Despite being stacked up with work, if customers aren't paying you before you need to pay your suppliers you will end up in trouble. You need to plan. Your business plan is the perfect way to consider what ifs scenarios and work to them and around them. Forewarned is forearmed and will give you the ability to survive in a testing financial climate.

Secondly, keep it lean and light and take things one step at a time. Don't think big to start with and dont lay out any cash unless you really need to. Think small and perfectly formed. Keep your overheads down and your profits a healthy as possible. If you are able to work from home to start with then do so. If you can manage on your own to start with then manage on your own. Outsource if needs be, but consider carefully the commitments of employing staff. Thinking big burdens start ups with unnecessary expense, eventually crippling them if they aren't careful. Ambition is a fine thing, but ambition tempered with perspective and a realistic time frame on accruing overheads. Make your mistakes inexpensively. Learn from them as you go along. If you are running your company with the minimum of fat your initial errors won't burden you with debt. Live, learn and prepare for success.

Safeguard your personal assets. If you don't take the necessary precautions a creditor can go after your personal assets, for example your house or your car to pay for these debts. When you set up your own business, you are usually personally liable for all debts that the business incurs. These might include business loans, taxes, money owed to your suppliers and landlords plus any judgements made against the business as a result of legal action. While you can buy business liability insurance to help protect yourself against lawsuits, this won't be of any help when it comes to business debts. If you think that your new business will be running up big debts, then seriously consider forming a corporation or limited liability company.