Quick Books Community for Self-Employed is a fun place for me to hang out and to hear everyone’s stories. What a great crowd. If you’re running a small business or thinking about it, you should join the conversation. There’s no cost. Recently, I answered the questions Gina Bianchini asked the community, “What One Thing Did You Learn Today?” Here’s what I suggested:
First, start small. You have no idea if the marketplace thinks your product or service is as cool as you do. Don’t assume you know. You’re probably wrong. When I ran Bedazzled, Inc., I was convinced the summer drinks T-shirt would sell the best. It didn’t; the butterfly T-shirt design sold best. Of course, we hadn’t planned for that. But if you start small, that manages your risk.
Second, test the market. Remember, when you open a small business, you’re testing if there’s demand from a particular audience you think will care. You don’t have a real business until you have predictable cash flow and the business has grown beyond break even. Sample your product or service every way you can before you make the big investment leap. Don’t look for investors or bank loans at first.
Third, don’t go whole hog on the website, logos, stationery (like I did; ugh). Conserve cash like it’s do or die. In the Ultra Light Start Up world, they talk about something being no bigger than it needs to be.
Fourth, get some revenues under your belt. Then you have leverage. The first loan I took out was for Bedazzled, Inc. It was an SBA guaranteed loan for 70K and my business partner and I go that loan because we went to the bank with a signed purchase order from Lands End. Our idea had a caught the attention of a huge account that made a commitment. That order became collateral for the bank loan. We paid a 7 year term loan back in 18 months. Start small. Test the waters. Let the marketplace tell you what it wants from you. Then follow that thread. You’ll save so much pain and false starts.
Fifth, prove you can attract profitable customers over and over again. This means you have some customer loyalty. It’s one thing to sell to customers. It’s another to get them to buy from you again. Remember, it’s always more profitable to have a small group of loyal repeat customers than to have a large group that buys once then never shows up again.
If any term in this post feels like a foreign language to you, buy my book “Accounting for the Numberphobic; A Survival Guide for Small Business Owners” AMACOM Books.