Let’s face it, being young comes with a particular measure of “I can do anything” syndrome that often blinds us when it comes to taking advice. This practice can be even tougher if you’re an entrepreneur under 30 years old. Getting into business for yourself that young generally means you’re exceptionally confident in your abilities and you’ve got an idea that you are optimistic can come to fruition and turn a tidy profit for you along the way.
It’s a great place to be, but wielding that much financial power also means that you have a lot to lose. And let’s face it, no matter what the diploma on the wall says or how many angel investors you’ve piled up for your first go-round, there are going to be plenty of pitfalls along the way.
There are lots of obstacles on your way to financial success as an entrepreneur regardless of how old you are. Here are 10 tips for young entrepreneurs that can help you survive the often murky financial waters.
1) Keep your fixed expenses low.
Is it cool to rent an office in a high rise downtown and plot your future empire from fancy leather chairs with flat-screen monitors everywhere? Sure, but that makes no sense for a startup business. Until your product or service or idea is off and making you big doses of cash, you should keep it simple and keep your costs low. A space in a strip mall, an office park, heck even your home office is a much better idea when you’re just getting going. Rent a place on a monthly basis to give yourself the freedom to stick with it, upgrade, or even downgrade if things aren’t going so great.
2) Time is money, so stop wasting it!
There are necessary things that have to happen when you’re building a business that takes away from your ability to make money. But if you can’t do them efficiently, you’re wasting your time, and thus wasting your money. Realize the limits of your abilities to do things and that sometimes, spending a little money to hire someone else to do a project well makes more sense than you wasting time to do it adequately.
3) Save a lot of money beforehand.
You know how the normal person is supposed to have around three months salary socked away for big emergencies? If you’re going into business for yourself, you need to double or quadruple that number to 6 or 12 months of savings. No matter how great your idea, you never know what’s going to happen when starting a business. What if your product needs refinement? What if an investor pulls out? What if customers don’t pay on time? You want to be financially secure from a personal and professional level at all times.
4) Manage your cash flow carefully.
Cash flow is perhaps the trickiest thing to maintain when you’re starting a business because everything costs and you’re usually not bringing any money in until those first few sales start coming. A budget is imperative. Know your costs and keep them static. If you don’t know where the money is going or when more is going to arrive, you’re in deep.
5) Set goals and establish milestones.
It doesn’t matter if you want to gross $1,000 or $100,000 in sales during your first year in business, you need written goals that you can strive for and measure up to as time passes. Milestones, such as your first $1,000 in sales or your 10th customer, help you chart your goals along the way and enable you to see what’s working and what’s not.
6) Track your spending.
Creating a budget is great, but the odds that it will look the same a year later, heck even a month later, are small. Use spreadsheets or whatever process works best to carefully, accurately list every single expense. There’s no better way to predict future behavior than by maintaining precise records. This practice is also helpful at tax time so you can measure your deductions.
7) Find your first customer ASAP.
A business isn’t a business until someone is buying something from you. It’s not necessary to spend big money on Big Data analytics to drill down on the exact persona of your ideal customer. What you need right now are sales to get the ball rolling. Those first few customers will be integral in determining future sales and marketing procedures, not to mention letting you know how your product or service can be improved. Treat them like royalty and make sure to keep in contact with them. The only thing better than a first customer is a repeat customer.
8) Communicate regularly and openly with your investors and lenders.
Your sales pitch is flawless and investors or lenders open up their checkbooks to get you going. That’s great during the early days of the process, and that good feeling might last a week, even a month for your money lenders. But over time, they’re going to get interested in what you are doing with their money and when they can expect to start seeing some of it back. To ensure you’re fair to them and to potentially hit them up for more investments down the line, you need to keep communication lines wide open. Send out a weekly, biweekly, or monthly “newsletter” detailing what you’re doing with the business and where their money is going. Invite them to come to the office and see what’s going on in person if they want. Keep them in the loop to keep them happy and helpful.
9) Pay yourself.
Yes, you get the lion’s share of the profits of a company, at least at the beginning, but you shouldn’t be starving yourself and wearing the same five T-shirts over and over. Be conservative in what you’re paying yourself; the investors won’t like seeing you driving a new Ferrari around but give yourself enough to survive.
10) Intellectual property is priceless.
Every idea, slogan, product, or service you think of is yours, but only if you make it so. Write down your ideas and put dates on them. Timestamp any documents or emails in which you have discussed your thoughts. And if something is extraordinary, apply for a copyright or patent on it. Your idea might be unique now, but it’s unlikely to stay that way unless you guard it.