Top tips for starting your own business – Part Two

LESSON 3: YOU ALREADY HAVE THE TOOLS YOU NEED

Most homes and schools are already equipped with a lot of the tools a business needs to reach a worldwide audience.

Computers are so cheap that many schools and universities have their own, and with processing power that was unimaginable only a few years ago.

Laptops can let you edit movies, design software, and keep track of all the details of a start-up at minimal cost.

Internet connectivity allows a start-up entrepreneur to collaborate via video conferencing at almost no cost, an extraordinary breakthrough.

The internet also enables a new business to reach a specific worldwide market with a minimal outlay.

Clever viral marketing can pull in curious customers seduced by ingenuity alone.

And very young people are often instinctively able to use the new technology that makes all this happen.

They already know things that large companies have to pay specialists huge sums to get done.

LESSON 4: CASH IS KING

Now, what about funding?

Starting any kind of business requires money: from savings, relatives, angel investors, and bank loans. Obviously the latter is very difficult to get these days. However, a lot of private organizations–often referred to as asset based lenders–have begun offering small businesses loans that are secured against their assets, assets ranging from inventory to invoices. Because these loans are secured, these private lending institutions have less risk than an ordinary bank when giving them out.

Luckily, for several reasons, including the technology mentioned above, not having tons of cash is much less of a problem than it used to be.

Several of the start-up entrepreneurs I have met needed only credit-card loans to get their businesses up and running – a potentially costly and risky route, mind you.

For example, Warren Bennett, 30, is co-founder of the bespoke tailoring service A Suit That Fits – now 6 years old, the company sells around 15,000 suits a year. Warren had the idea while volunteering as a teacher in Nepal, where he had stumbled on a good local tailoring business. Back home in the UK, Warren and a friend started what he says was the world’s first online bespoke suit-making business. The company now has studios across the UK for people to drop in to have measurements taken for a suit that is made thousands of miles away in Nepal. A Suit That Fits was funded solely through credit cards and by asking customers to pay in advance. It is a business that lives off cash-flow, not bank loans. Not having to depend on outside investors also means the founders get to keep a full stake in the business they founded.

And there are many businesses devised around generating cash flow that finances the rest of the company’s operations – asking for up-front money from customers that can be used to pay suppliers and manufacturers later on.

Positive cash-flow is a business wonder: funding your business expansion out of cash flow is even more wonderful.

But not always.

One Internet start-up founder told me what they say in Silicon Valley, USA: if you are making a profit you are not growing fast enough.

You should be gobbling up investors’ money to fund your hell-for-leather growth.

LESSON 5: TELL YOUR STORY

Whether you are pitching to a potential sponsor, mentor or customer, it helps to tell a good story.

In my experience, young entrepreneurs know how to tell a story, both their own and that of the business they have set up and the needs it is trying to address – plus the adventures they have had on the way.

Arnold Sebutinde, aged 27, from Birmingham runs Spontaneous Portraits. His story, which helped him get funding and a mentor from the Prince’s Trust, is compelling. Arnold got into trouble, and spent two and a half years in prison. While serving his sentence, he made use of his talent for drawing and started to sell portraits of inmates and their visitors, for £2.50 a time. After being released, he continued to build his business, and posted internet videos to highlight his special talent: “I got a commission to draw the England cricket team, and posted a video of me drawing, but I’m drawing with both hands. I did this to get the word out, so people would talk about me as this artist who draws with both hands.”

Story-telling is a vital part of running any kind of business, but it gets neglected as companies get bigger and bigger and more and more arrogant.

Start-ups have great stories to tell.

LESSON 6: DON’T TAKE TOO MUCH NOTICE OF THESE LESSONS

Just get on with it!

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