How to Start a Business on a Shoelace

As a small business developer I get lots of potential clients who will actual say things “If I could get a million dollars I think I could make my business successful.” Unfortunately this is about as far from reality as a new business owner can start from.

Yes it takes capital to start a business and the lack of capital is the number one reason new businesses fail. On the other hand there are many well-known businesses that started on a shoe string. You do not need a million dollars to start a successful business.

One of the biggest expenses new business owners put in their budget is their salary. It seems that everyone wants to start their own business so they can make a six figure income. Again, this is backward thinking. The amount of salary is a direct result of the success of the sales of a business and not a result of a line item on a budget spread sheet.

Another common cost issue is that the new business owner wants to buy a building for their business. Purchasing a building for a very new company is high risk strategy. Even signing a lease can be financially stressful for many new businesses. A business lease is often for three years, regardless of the amount of income the business generates.

A third common issue is that many new business owners want to purchase all new equipment and furniture. Most communities will have a center that sells used business furniture and equipment, include computers, printers, and desks. In addition, there are all those other almost new businesses which spent way beyond their means. Now they are going out of business and have some office furniture and equipment to get rid of at a discounted rate.

The final issue to discuss in this article is inventory. Having a lot of inventory sitting around in a warehouse or storage room can drain a new business of valuable capital which could be used for other business expenses. Unless the inventory is flowing at a good pace it is holding company assets hostage.

Entrepreneurs should consider the total cost of operating their business. Expenses go far beyond the cost to purchase the product, supplies, and the labor to deliver them. The cost of goods and services must pay for all of these other operational costs. The more these common operational costs can be managed and lowered the more potential there is for the entrepreneur to garner a higher salary.

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