4 Business Start-up Secrets Every Aspiring Entrepreneur Needs To Know

The statistics are usually staggering and very similar; a very small number of start-up businesses make it beyond the twelve-month mark.

More often than not, the failure of a business in its first year of operation stems from pursuing a business idea that is not financially viable.

For the feasible business ideas, the inexperience of the entrepreneur in the field of business turns out to be the hurdle.

In this article, we are going to cover four things you should know before you even embark on starting a business of your own, based on my experience and observation.

1.  Focus on sales right from the onset

The main idea behind operating a business is to sell something of value to your target market in the form of a product or service.

Unfortunately, many start-up entrepreneurs spend a lot of time and money on activities and things that do not generate sales in the short run.

Without sales, you do not have a business. All you have is an expensive, glorified hobby.

The sooner you focus on sales, the higher your chances of creating a successful business for as long as you can generate repeat sales and retain customers.

2.  Know how to calculate the cost of money

All too often, budding entrepreneurs find themselves facing an urgent need for cash to fund various aspects of their businesses.

This sometimes causes them to lose sight of the cost of money.

It only starts to bite when the cash flow situation of the business makes it difficult to cover the loan repayments.

As a rule of thumb, you should only borrow money on repayment terms that your business can handle.

3.  Distinguish between revenue and profit

As simple as it sounds, failing to distinguish between revenue and profit can kill a would-be successful business in no time.

Let me explain the difference by the use of an example.

If I buy 10 widgets at $100 each and sell them for $150 dollars apiece, I will end up with $1,500 in cash.

That $1,500 dollars has a cost aspect and a profit aspect.

Since I bought the widgets at $100 dollars each, my initial cash outlay was $1,000.

Therefore, my cost price for all the widgets was $1,000. After the sale, the proceeds amounting to $1500 represent revenue.

The difference between my cost price for all the widgets and the sales proceeds ($1,500 – $1,000) is my gross profit, in this case $500.

Taking the entire $1,500 out of the business and spending it frivolously is a common trap that ensnares most novice entrepreneurs.

4.  Starting with credit sales in a bid to attract clients is a futile strategy

This business start-up strategy is doomed from the start because the type of bait you use to attract clients or customers will affect the quality of customers you get.

Shortening the gap between the sale and receipt of cash is of vital importance, especially in the nascent stages of a business.

The point is not to offer your products or services with the hope of being paid at the convenience of the customer or client.

There are many ways to compete with already existing businesses.

Deliberately starting with credit sales should never be one of them.

It is important to get a good understanding of how to start your business on the right footing from the onset, as opposed to mistakenly thinking business is common sense.

Having the right information can save you time, money and a lot of aggravation.