The first few years are turbulent for businesses by default. They are what makes or breaks not just the business, but its owner as well. To stay afloat, you need to learn quickly and adapt even more quickly. In this article, you’ll find six tips on how to reduce as much as risk as possible and maybe even save some money.
Have an End Goal
First and foremost, you should be aware of what your end goal is. Better yet, take a look at your business strategy, and how well it lays out your path in the next five years. Knowing your end goal and your scaling plans for the future will give an insight on the possible financial pitfalls.
As you look over the possible obstacles of reaching your five-year goals, you’ll be able to assess all the possible risks and prepare for them accordingly. The possibilities include:
- Legal Risks – intellectual property, confidentiality agreements, GDPR compliances, etc.
- Talent Risks – disputes with the founding team over ownership, employing too many people too fast;
- Financial Risks – insurance, taxes, office space and equipment malfunction, loan interest and so much more.
Your best bet would be to sit down with your financial advisor and have a risk assessment talk. Find out how many mistakes you can afford to make without risking bankruptcy.
Find a Mentor
Assuming you already know the often-mentioned point of networking in the industry, we’ll advise one step further. Network until you find a mentor. Find several, actually.
Having a business network has its perks not only for exposure and possible bartering. It’s also an opportunity to establish partnerships where you receive industry insights and forewarnings about changing tides in the market. What’s more, close partners and mentors can be of great use when you encounter business difficulties.
Their advice and leadership can mitigate risks and assist in developing an improved strategy.
Outsource – and Work Remotely
We would like to drive one point home: outsource whatever you can, and work remotely. Why?
Outsourcing – First of all, it’s better to look for freelancers. They’re often more affordable due to not having commute expenses, insurances, and you can pay them per project. If at all possible, use your entire first year to work with a coordinated network of freelancers. Keep focused on staying financially afloat, and then set aside some finances to employ your first full-time workers.
Remote Work – instead of paying rent, utilities, heating, toiletries for the bathroom and maintenance – opt for working from home. Whether or not you’re outsourcing or have local employees, numerous online tools have enabled us to simulate a near-perfectly functional digital office. From project management and time tracking to chatting tools, you have everything at your disposal to keep a steady workflow with minimal investments. Not to mention that 90% of those tools have free versions for small businesses.
Be Vigilant About Records
This cannot be emphasized enough – keep accurate, up-to-date tax records. The sooner you start, the easier it will be to keep up the habit. Additionally, you won’t have to rummage for files several months later, because you didn’t feel like doing them right away.
To truly save money with tax refunds and write-offs, you’ll need additional help. The legislation can be convoluted and written in a very detailed way. Getting a tax expert who can interpret the terminology and help you set up the best tax-refund plan is worth gold.
Like with outsourcing you can find a freelancer, or an agency willing to give you a one-time kind of consultation. For now, you don’t need a full-time accountant, especially with so many apps and websites offering user-friendly ways to keep track of your finances.
At the very beginning, if at all possible, avoid looking for investors. Usually, they expect a near tenfold (if not more) return on their contribution, which only puts additional pressure on your product or service’s performance.
Instead, look into bootstrapping if your personal finances allow for it. Taking bank loans is a viable option, just don’t forget to consult your accountant or tax advisor. Lastly, you can also try crowdfunding. Kickstarter is a good platform where you can present your product or service, and then have future customers back it up until the needed sum is reached.
Diversify Income Sources
Many businesses specialize in more than just one service. For example, a lot of smaller studios in the video game industry offer outsourcing services to bigger clients, while developing their own product on the side. When the game development comes to a halt, they intensify their outsourcing efforts to retain financial stability.
Similarly, once their product takes off, the outsourcing takes a back seat to focus all efforts on making the product profitable.
In the End
There are several takeaways from this article. To stay ahead of the game and ensure the smoothest sails in your first few years, keep a close eye on the goal and the possible obstacles that stand in your way. Hire fewer people, outsource as much as you can and work from home. Find industry mentors for guidance and financial experts for budgeting issues that are just not your forte. As with raising children, so it is with business – it takes a village.