The Tribune

By Simon Cooper

Res Socius

There is nothing wrong with avoiding risk in commerce. In fact, many buyers of my businesses for sale aim to do just that, investing in something with a track record. However, the same principles are also relevant when starting a new business. Just take the bits that apply to you, and use what’s most relevant.

When Will I Start Making Money?

There is no such thing as absolute certainty in any business. Ones to be especially wary of are those that don’t go into profit soon and need drip feeding. It is absolutely essential to do a cash flow forecast, and to compare results frequently.

This relates directly to ramp-up time, unless you buy an existing business that is already making enough money to support both it and you. Most firms that fail in the early start-up phase do so because the owner failed to adopt a sufficiently conservative forecast.

Stick to Your Plan

I will be the first to admit that Richard Branson and Bill Gates stumbled on until they wandered into profit. But they were young then, with little to lose and patient parents to fall back on. Many of my customers do not have the same advantage. I advise them to build a revenue model first.

Expenses have huge impact on profitability, especially when sales are still low. Successful businesses did not always have fancy premises and regiments of staff. In fact, luxuries like these can lead customers down the line of thought that your goods and services might be expensive. You should be in the business of pocketing money, not doling it out.

Test, Evolve and Test Again

Just because you fancy an idea does not mean that others will like it, too. Market research is unavoidable. Of course, if you buy a business for sale through me, you will already have an indication of what works. If not, hire a marketing consultant. If you cannot afford that, you will have to fall back on friends and colleagues.

Be flexible in your thinking, and absorb feedback. Back-fit this into your business model. Then try and try again, if necessary, until you get it right. If you bought an existing business because it is doing well, follow the same philosophy before you change what works, and do not forget to consult with staff members when you do.

Announce Your Presence

Tell everyone you know about your business enterprise, what you are supplying, and why it is great value, too. If it is not, you might need to think again. Spread your business networks widely and advertise as much as you can afford. You need to make a huge splash, especially if you are starting something new.

Crunch Time

I have had this debate with many business customers. It usually begins with “why should I buy a business when it’s cheaper to start my own?”. In truth, it seldom is. That is unless you ignore the outward cash flows and lack of personal income until it, hopefully, finally, enters profit.

NB: Simon Cooper is a founding partner of Res Socius, a firm authorised by the Bahamas Investment Authority to facilitate the sale and purchase of businesses and provide management consultancy services. Contact 376-1256 or visit www.ressocius.com.