We're all aware that the Credit Crunch drastically limited the sources of finance for small businesses. The media is full of stories about how SMEs (small/medium sized enterprises) are not getting access to loans to help their cashflow or to fund further growth. Accountancy organisations such as the UK's ICAEW give firm advice about small businesses having to provide good reasons for needing capital injections.
That's just one more reason why business owners need to be realistic about their survival costs before they start a business. All businesses need startup capital, to cover the initial outlay on property rental, vehicles, tools, overheads, stock, office equipment and stationery, fuel costs, etc. The new business owner also needs to ensure that their personal overheads, such as mortgage/rent/loans, household expenses, personal vehicle & fuel costs, are also covered.
Traditionally, business advisers suggest that most small businesses take up to three years before they are fully profitable. That's three years where, every time you take money out of the business for personal use, you delay the point where your business "breaks even" and moves towards profitability. The more net profit you can invest in your business in the early years, the earlier your business will break even.
If you need an income of £2000 ($3000 or 3000 euros) per month to survive on before you start your own business, ask yourself how you will fund that income in the first 3 years of running your own business. If you can't fund that income out of savings, where is the £72000 coming from? From redundancy payments? From family? From another income in the household?
Or would it be better for you to build your business part-time, in parallel with an existing job? Can you do that with your current skill set? If you can, how will you get customers? How will they pay you? Will you need to take time off your existing job to visit prospective customers, or can you sustain business growth outside of your existing workday?
All of these questions need answers before you build up your own business. It's part of making sure you're not a business failure statistic in 6 - 18 months time.
Showing posts with label Startup Costs. Show all posts
Showing posts with label Startup Costs. Show all posts
Monday, November 08, 2010
Friday, November 05, 2010
The Get Rich Quick Mentality Sucks!
It came as no surprise to me to find that if you type the word Kleeneze into Google, the second suggested option in their drop-down list is Kleeneze scam.
Why?
Because, as my first business lecturer told us, a satisfied customer will tell a couple of people, a dissatisfied customer will tell a dozen. Upgrade that to the Internet version and it's closer to a satisfied customer will tell their social network, a dissastified customer will tell their social network and then go on to conduct flame wars on every forum and review site that dares to mention the product.
The amount of hatred and bile directed at Kleeneze, Avon etc. is truly disheartening; you'd think people were nicer than their internet personae indicate.
But note:
This bile isn't spewing from dissatisfied Kleeneze customers. The pyroclastic flow ready to engulf the wary new distributor erupts from ex-distributors, many of whom appear to have distinctly distorted views of how to run their own business. There are complaints about fees needing to be paid to use various services, shipping costs needing to be paid if orders are under a certain amount, admin charges being applied in some cases. All of which, it has to be said, are covered in the manuals you get in your starter pack as well as online on the distributor site. Do these people not read any small print?
Part of the reason for the "bitter ex-distributor syndrome" has to be due to poorly-trained apprentice distributors not winnowing out applicants who are either tyre-kickers, lazy or who really just want an employer prepared to pay them better than minimum wage for no real effort. Those applicants would not make it in their own business; heck, they couldn't cope with fixed-price leaflet delivery work either.
In my previous network marketing company, my sponsor was a lovely lady who should never have been recruited into the industry. She would spend a fortune to avoid going out and talking to others about her own business opportunity, and then complained when she wasn't getting value for money for the few leads that came her way. All she really wanted was a work-from-home job from a "real" employer, who paid her PAYE.
Kleeneze is a business first and foremost. A Kleeneze distributorship is also a business, first and foremost. Sure, it's an opportunity. But opportunities are not treasure troves waiting for the taking. First you mine the gold ore, then you refine it, then you wear it or sell it on. Treasure troves only exist in fairy tales.
Let's face reality. According to US statistics, 30% of small businesses fail in the first 2 years; by the 5th year only 50% have survived. According to UK reports at least 33% of startups fail within 2 years; one BBC report had it closer to 80% since the credit crunch hit.
The most common reasons for business failure include poor planning, lack of customers, poor market research, rising fixed costs (overheads, employee costs, fuel, etc.) and failure to obtain sufficient financing to grow the business.
The initial startup costs for a business should not be underestimated either. As well as whatever is required in the way of business setup costs (IT, tools, vehicles, office/workshop rental), a new startup owner needs to consider how they are going to cover their own basic costs (food, clothing, bills, personal expenditure etc.) until the business makes a profit. When I attended a business startup course, the advice was to pare down my personal outgoings to a bare minimum, and then calculate the costs for 3 years to see how much I needed in reserve before I started my own full-time enterprise. As a single parent with a mortgage and no other financial support, I needed a minimum of £60,000! Couples need to ensure that they can survive on one income for 3 years before both work in the business full-time.
Take a look at the available opportunities out there. Be sceptical, do your due diligence and do your own calculations regarding projected income and expenditure. Then make a decision. But don't whinge if you don't make that million in the first few years.
Why?
Because, as my first business lecturer told us, a satisfied customer will tell a couple of people, a dissatisfied customer will tell a dozen. Upgrade that to the Internet version and it's closer to a satisfied customer will tell their social network, a dissastified customer will tell their social network and then go on to conduct flame wars on every forum and review site that dares to mention the product.
The amount of hatred and bile directed at Kleeneze, Avon etc. is truly disheartening; you'd think people were nicer than their internet personae indicate.
But note:
This bile isn't spewing from dissatisfied Kleeneze customers. The pyroclastic flow ready to engulf the wary new distributor erupts from ex-distributors, many of whom appear to have distinctly distorted views of how to run their own business. There are complaints about fees needing to be paid to use various services, shipping costs needing to be paid if orders are under a certain amount, admin charges being applied in some cases. All of which, it has to be said, are covered in the manuals you get in your starter pack as well as online on the distributor site. Do these people not read any small print?
Part of the reason for the "bitter ex-distributor syndrome" has to be due to poorly-trained apprentice distributors not winnowing out applicants who are either tyre-kickers, lazy or who really just want an employer prepared to pay them better than minimum wage for no real effort. Those applicants would not make it in their own business; heck, they couldn't cope with fixed-price leaflet delivery work either.
In my previous network marketing company, my sponsor was a lovely lady who should never have been recruited into the industry. She would spend a fortune to avoid going out and talking to others about her own business opportunity, and then complained when she wasn't getting value for money for the few leads that came her way. All she really wanted was a work-from-home job from a "real" employer, who paid her PAYE.
Kleeneze is a business first and foremost. A Kleeneze distributorship is also a business, first and foremost. Sure, it's an opportunity. But opportunities are not treasure troves waiting for the taking. First you mine the gold ore, then you refine it, then you wear it or sell it on. Treasure troves only exist in fairy tales.
Let's face reality. According to US statistics, 30% of small businesses fail in the first 2 years; by the 5th year only 50% have survived. According to UK reports at least 33% of startups fail within 2 years; one BBC report had it closer to 80% since the credit crunch hit.
The most common reasons for business failure include poor planning, lack of customers, poor market research, rising fixed costs (overheads, employee costs, fuel, etc.) and failure to obtain sufficient financing to grow the business.
The initial startup costs for a business should not be underestimated either. As well as whatever is required in the way of business setup costs (IT, tools, vehicles, office/workshop rental), a new startup owner needs to consider how they are going to cover their own basic costs (food, clothing, bills, personal expenditure etc.) until the business makes a profit. When I attended a business startup course, the advice was to pare down my personal outgoings to a bare minimum, and then calculate the costs for 3 years to see how much I needed in reserve before I started my own full-time enterprise. As a single parent with a mortgage and no other financial support, I needed a minimum of £60,000! Couples need to ensure that they can survive on one income for 3 years before both work in the business full-time.
Take a look at the available opportunities out there. Be sceptical, do your due diligence and do your own calculations regarding projected income and expenditure. Then make a decision. But don't whinge if you don't make that million in the first few years.
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