Lee Murphy, Founder, Pandle, a cloud bookkeeping software provider shares how he pursued his dreams and launched a business
So you want to start your own business. Perhaps you have a great idea, or you just want the freedom that comes from owning a business. You are prepared to take the risk and can afford to live without a comfortable salary for a while. There’s just one problem: you have very little cash to get you started.
Having a small budget should not hold you back from pursuing your business dreams.
When I started out, my goal was to have full control over the direction of the business, so outside investment wasn’t an option. Instead, I put my social life on hold, cut my salary, and poured all my energy into getting the business going.
My method of financing, in the early days, was reinvesting all our profits, otherwise known as bootstrapping. We began developing Pandle in the summer of 2015, today we employ more than 30 people and more than 10,000 users have signed up to the service. Not bad for a business with no financial backing.
If you want to launch a business but have a limited budget, here are some strategies to help you get started.
Consider renting, not buying
Whether it’s an office, a van, computers, telephones, freezers or other equipment, it’s worthwhile considering renting rather than buying. This frees up some cash that can be put to better use elsewhere.
We also found that because we had good equipment earlier, we were able to increase our speed and efficiency, so we could get more done with fewer employees. This more than helped offset the overall additional costs of leasing. There is also the option to buy at the end of the lease, which may be something you consider but we decided against in favour of an upgrade.
Turnover is vanity, cashflow is sanity
Making sure you keep track of what is coming in and out of the business is essential if you are going to be successful.
Your turnover figure, otherwise known as revenue or sales, will give you skewed view of the company finances. Instead, a good cashflow forecast will show you not just income but future expenditure, giving you a clear picture of how much money you will need and when.
In the early days you may want to do your cashflow forecast weekly to avoid overspending and keep you up to speed with what is coming in.
Make sure your forecast includes not just your suppliers, rent, supplies and capital purchases, but also big lumpy payments like your annual corporation tax, quarterly VAT and large ad hoc payments. These are particularly important because, if you have not set aside money, you may well not be able to pay them when they arrive unexpectedly.
If you use cloud accounting software then there should be a cashflow tool. Pandle, for example, gives real time cash reporting and forecasting so that you can easily spot current or future problems and react.
Remember: many businesses that go under are not loss making, but simply have run out of cash and cannot pay what they owe.
Master your bookkeeping
Having a clear picture of your company finances will give you the foundations from which to grow your business.
There is much you can and should do to proactively take control of your books. It is important to set time aside each week to look at the company figures so you make decisions based on the right numbers, otherwise you will end up having problems later, especially if the financial aspects of running a business are new to you.
Also, have a clear pricing strategy (one that includes a decent profit margin) which sets out when and how customers can pay. This particularly helps stop you falling into the trap of cutting prices to gain volume and ending up being in demand but earning very little.
If I were to do it over again, I would have introduced allowing customers to pay annually in advance for a reduction in cost. If I had done this at the outset it would have enabled us to receive cash in advance of work and grow more easily.
How to work ‘on’ and ‘in’ your business
Make sure you don’t get too bogged down in the day to day detail of micro-managing people and clients. As a new company CEO, your job is to set the strategic direction and culture of the business and ensure it is moving in the right direction.
The 2008 financial crash taught me this valuable lesson. At the time I was working in my first business in building renovations, and I was so focused on getting the job done that I missed the oncoming financial crisis. It was the end for that business.
Today, I see many entrepreneurs making the same mistake of doing too much day-to-day work when instead they should be focused on the leadership and direction role of a company leader. So, make sure you set time aside at least weekly to consider the strategic issues affecting your business.
A small budget should be no reason to shy away from starting in business. Keep focused on your strategy to keep moving forward, work hard to keep customers happy, and pay close attention to the books to avoid failure. With determination and drive, you can make your business a success.