Your first year in business is about survival. The success of your business will depend on that most basic business equation: You need to bring in more revenue than you have in costs.
By Fiona Gilligan
Any surplus is your profit for a job well done. The goal is to make more revenue while also keeping your costs low. The greater your profit, the more money you should put aside to cover cash flow. This profit will allow you to keep your business operational if you have a few lean months and it will also be useful if you decide to grow your company, as growth requires cash.
Financial facts that matter:
Know your costs in detail.
Know how much revenue you need to bring in to cover costs.
What is your break-even point for profitability?
Control your costs to the bare minimum.
Hustle like crazy to promote sales.
For a business to go from survive to thrive in the first year, it often comes down to how you manage your cash flow. Most businesses are built in a fairly similar fashion, yet can operate on many levels. The core principle is that a business must have a product or a service that others place value on and want to buy.
You don’t need to own a company that generates $10 million annually to be a GirlPreneur. You might make family meals and sell them after school. You might work from home making beaded jewelry and sell it online. You might have developed a software prototype for a Fortune 500 company. You may have two, 10 or 100 employees – or no employees. You may be local, national or international. You may have shareholders or you may be a one-woman show. You don’t have to be big to be a viable business.
For the most part, the setting up, structuring and operating of a business requires similar procedures and practices. There are volumes of business books and blogs specific to each stage of the business cycle that may be an additional resource for you. So I suggest that you: Read. Read. Read. Put your pride aside when starting out. Find the right people and ask a lot of questions. And the questions you ask yourself about your business are the most important questions of all.
The GirlPreneur Pre-Launch Checklist:
Is this business right for me?
Can I see getting out of bed every morning for the next five years to do this?
Do I have the expertise to make the business work?
Have I investigated my competition?
Do I have the necessary capital to start? Have I considered loans/grants?
Am I familiar with price-setting strategies?
Will I work from home, or rent or share space?
Am I starting the business alone or do I have a partner?
Should I incorporate?
And any other questions that come to mind that are specific to your startup business.
GirlPreneurs sometimes think that building a business is a complex undertaking. But I assure you, it is not. If you make the wrong decision and you land on your butt? So what! Most successful GirlPreneurs have bounced off our butts dozens of times to get to where we are. Failures and missteps are the potholes on the road travelled by the GirlPreneur. We don’t let them derail, defeat or define us. We pick up our heels, dust off our pantsuits and carry on.
I was a social worker with zero business acumen, yet I built an industry-leading company. I followed by passion for helping others while making a living for myself. I realized that I did not have all the answers and that I would have to learn as I went along. I made lots of mistakes because I took lots of chances.
I was my own bank, for the most part. I was the payroll clerk, the marketer, the collection agency and accounts receivable, all in one. I learned very clearly how my business worked. I also learned where I could borrow money to cover off cash flow.
Even for a profitable startup company, it is not unusual to have cash flow issues. On your books you may be owed $100K in receivables, but your bank account is in the negative to the tune of $100K. When it comes time to pay the staff and the bills, you must have the cash in the bank or a very good line of credit and overdraft.
If you are a bootstrap entrepreneur, scale the company up when and if you have the cash. Except for administrative staff, I hired only people that I could bill out. Ninety per cent of my staff were billable staff so that I could build their costs into my contracts. And don’t count your chickens before they hatch. You may think you are going to get a contract, and then something changes. Your client goes belly up or you don’t get the work. Avoid hiring or outlaying money before you actually have a signed contract. I had to learn this the hard way.
Ottawa businesswoman Fiona Gilligan was the founder and former CEO of the Trauma Management Group. This excerpt is from her new book Confessions of a GirlPRENEUR: Life, Love, Business & Babies, which is available online at fionagilligan.com.