Starting, running and growing a small business can be a challenge for the best of us. First problem is finding your business model. In the past self discovery has prevailed, but today advice is never hard too hard to find. But what does it mean for you and where should you spend your valuable time.
One of those great resources, which may come as a surprise, is [geot country=”Australia”]Xero[/geot][geot exclude_country=”Australia”]Xero[/geot]. Xero has created a site dedicated to small business tips and advice beyond cloud accounting. This is a must visit for many small business owners looking for business tips, but finding the time can be difficult. We have taken the time, read through Xero’s business tips and assembed a list of valuable advice for you.
Business tip 1 – 4 Business Ideas to Avoid
Xero CEO Rod Dury in Xero’s small business tip, How to Pitch a Business Idea list 4 ideas to avoid:
- Heading into a market that already has dominant market makers.
- Embed yourself into the market. There will always be someone who understands the market better than you. Travel and become part of the culture.
- Never outsource the parts of the business that will separate you from your customers. If you run a software business, don’t outsource the development.
- Always add value, if you don’t someone else will at your expense.
The key message, if your idea takes you into a ‘red ocean‘ you will need to excite customers and investors. Often this means being 10x better than current offerings.
Business tip 2 – Six Questions to ask yourself when raising capital
Some business ideas need large amounts of money at the start to develop the idea or grow the market. While others can delay the funding decision and bootstrap for longer. Understanding where your business sits is just as important as knowing your market. Having the right idea without the money to succeed can lead to the rapid failure of the business.
Trouble is as Xero mentions, you never get something for nothing so always read the fine print. Before you raise capital, in the series How to raise Money for your business, Xero encourages you to find answers to these 7 questions:
- Know how much you are looking to raise. Seeking investors willing to contribute capital can time consuming. Get the amount wrong and you changes of failure to raise capital increases. Know how much you need, what you are going to use it for, and how you will measure success.
- Know what you are willing to give up. You never get something for nothing – the more money you raise the more ownership you will give up. Ownership is a way
- Know if you need debt or equity funding.
- If you are seeking debt funding understand your credit ratings. The riskier your credit history the higher your interest rates.
- Know you operating history – how long have you been in business.
- Know your numbers – make sure you know what your revenue is.
A couple of side notes, Governments are source of funding worth exploring. Governments offer small businesses innovation grants, innovation rebates, export grants and other incentives.
Finally, a popular source of funding is family and friends. Poor management here can result in disaster. Make sure you treat the funding as a business transaction and ask a lawyer to draft a written agreement. This will reduce the chances of relationship troubles in the future.
Business tip 3 – Five tips for managing cash flow
One of the most important elements of success is having enough cash. Without cash having the best employees, most promising product or even the largest share of the market doesn’t count. Without cash your business will struggle to survive. Your business can be awash in sales, but that doesn’t matter unless you collect the cash.
What can you business do to make sure cash flow isn’t an issue, Xero provides these 5 tips:
- Make sure you know that financial state of your business. Keeping your books up to date can help you recover debts quicker and find problems before they get out of hand.
- Let you customers know you are running a business. Pushing customers for payment can be difficult, but giving customers too long may end up costing you your business. Make sure you are not too lenient with your credit terms. Offering credit card payments is a way to get immediate payment.
- Our favourite, keep your numbers simple. If accounting isn’t your thing, hire a [geot country=”Australia”]Professional[/geot][geot exclude_country=”Australia”]Professional[/geot]. Reliable accounting systems give you numbers you can trust and measure business performance with. Giving you power to predict performance and make decisions.
- Build cash reserves. The instinct when you have a great month is to spend the money. This is never the recommended approach, instead create a cash reserve target and stick to it. This will help you manage the business cycles and help you take opportunities as the come.
- Keep your business and personal finance seperate. It is often said the sign of a successful business is its ability to pay founders a market based salary. Instead of treating the businesses bank account as your own, take out a salary and keep your business seperate. Name one billion dollar company that does it any other way.
Perhaps one of the more important take aways – know your numbers. If accounting is a scary concept for you, hire a virtual CFO and outsource your accounting. Xero is great cloud accounting software it needs to right information from the start.