Let’s face it. There are about ten thousand things every entrepreneur should know. And even if you know all of those things, there is still a possibility that your idea won’t succeed. But the chance that it will . . . that’s what makes it so exciting and rewarding.
Unfortunately when most freshly-minted entrepreneurs start out they fail to realize just how much they will have to learn to survive in an ever-changing and extremely competitive market. Here are just a few of those things to consider.
1. Plan for profits and the future
When things finally start to go well and sales starts to come in, decide in advance where the money will go. Will you need to pay yourself immediately or will you pour it all (or a percentage) back into the business?
If you want to put the money back into the business consider where you’ll reinvest first? And at what point will you start drawing your own salary?
As Inc. contributor John Boitnott explains, “you need to have the cash flow on hand to cover your current commitments and the commitments you anticipate growing over the next six months.”
Another reinvestment priority is investing in the business itself. “Improving infrastructure, streamlining manufacturing, bolstering customer support, increasing and refining marketing; these all directly benefit your business. They increase your profits and decrease your expenses, potentially giving you more capital to work with.”
As you plan for profits, don’t forget to save for the future. If you don’t have employees yet consider a solo 401(k), also known as a Self Employed 401(k), a qualified retirement plan for Americans designed for employers with no full-time employees other than the business owner(s) and their spouse(s). It’s an easy low-cost way to start saving for retirement.
The solo 401(k) “comes in both a traditional and Roth version, just like IRAs. With the traditional individual 401(k), you put away money on a pretax basis and it grows tax-deferred. Your money is taxed when you withdraw it, in a future that may well include higher tax rates.”
2. Plan for growth from day one
When you start your business, you will be setting up systems for running your business. Most of these will likely be free programs like Microsoft Excel, Google Drive, and other online tools. It can be easy to build these systems for the present, when it is just you, or you and a few employees, but growing pains are considered painful for a reason.
If systems were not set up to scale then growth can turn into your biggest nightmare instead of your dream come true. As you set up communication channels, departments, and everything else that comes with the daily operations of a startup, pause and take the time to imagine that system working when the company is five or six times that size.
3. Hire smart and know your ‘roles’
Hiring is often a challenge for startups and small businesses. “Small businesses with uncertain cash flow are often unwilling to increase overheads by increasing permanent staff, but still have to come with growth. This can lead to over-reliance on freelancers or contractors,” at first.
Develop a staffing plan based on your goals and when you meet key milestones in your business. Your first few hires, if recruited carefully, can be a real asset to your company. They could also quickly suck you dry of cash and kill your idea before it ever really gets off the ground.
A small business that is growing rapidly often finds itself recruiting for roles that are not well understood. In order to hire the right employees you will need to understand their position. Too many startup founder hire employees before they have a complete grasp of what the job title really is.
They find themselves stuck with unqualified employees who impressed them in a single interview, but lack the necessary experience and skills to truly drive measurable growth.
A large company can withstand a few slackers or trainees, however a startup needs every employee to be a rock star at their job to survive. If you don’t know much about a position seek mentorship and network to get a better understanding of each role you plan to hire for.
These three tips can save you dozens of headaches and sleepless nights. Plan for profits, plan for growth and hire smart. These are just a few things you will need to know. Starting a business is challenging and exciting. Even if it fails the memories and experience are almost always worth it.
This article has been edited and condensed.
Spencer Mecham is a graduate from Brigham Young University in Utah. He has developed a passion for entrepreneurship and passive income while working as the director of marketing for Dark Energy, a Utah-based startup. He is a marketing consultant for startups and travels with his wife. Connect with @darkenergytech on Twitter.