Setting The Stage For Success
During the initial stage of setting up a business, there are a few things that would keep you going through the up and down phases of your business.
These things when put in place before starting will be a big help in giving your business a good chance of succeeding.
The 3 things that are being referred to are:
- Debt minimisation
- Having a cash runway
- Having a plan of action for your business
There is good debt and there is bad debt.
Ideally, you will have no debt at all whatsoever. However, as this is a difficult goal to achieve in the short term, focusing on getting rid of any bad debts is a good place to start.
For simplicity, any debt that isn’t working towards securing an asset is considered bad debt. Examples of bad debt are credit card debts, car loans and personal loans.
Debt that is working towards securing an asset is considered good debt. An example of this is a home mortgage.
Like all debt, the order in which it is to be paid off is important.
Consumer debt such as credit cards, personal loans, car loans should be paid off first.
After that, investigating ways to reduce payments on good debt is next. The overall goal is to reduce all outgoings.
If you have a regular income as an employee, this can be done by putting more money into debt repayment before giving up work to focus on building a business.
If you opt to give up being an employee and go into business, money still needs to come in from somewhere.
To provide a cash runway, you can either keep working in your current job while working on your business on the side or find another way to have money coming in from other sources.
The amount you have coming in needs to be enough to cover living expenses such as food, utilities and accomodation. Ideally, it would also be able to initially cover business expenses such as web hosting, domain name purchases and subscriptions.
This is where you define what type of business you will be creating and how it will be monetised.
Once the decision has been made, it then becomes a case of working on it until it is successful.
There are many ways a business can be monetised and the method you choose would be based on your business method.
Affiliate marketing, dropshipping, consultation, eCommerce, teaching are examples of how a business can be monetised.
Having minimal debt and a cash runway will allow you to focus on building your business.
One of the reasons businesses shut up shop is because of cash flow. This could be either business cash flow or personal cash flow.
So, once you have a handle on this, there is no telling how far your business will go.