2 Simple Ways to Keep Your Startup Growing
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There are so many things to pay attention when you're starting a business. You need customers, something to sell, employees, systems and processes - it's tough to know where to place your energy.
The reality is that without cash flow, your startup will quickly be relegated to the annuls of history. You need a plan to follow (this will keep you focused) and you must always have clear sight of your break even figure.
Here's how you begin.
1. A ONE-PAGE BUSINESS PLAN
The logic behind a business plan is great. It’s a plotted journey, with marked goals and targets. It gives you something to work on, and work towards. And you’ll definitely need one if you’re looking for financing.
But very seldom does it actually become a real working document for the small business owner; business plans are too long-winded and rigid and don’t allow for the fast changes and flexibility you’re going to need when you’re running a business.
So, gut instinct is how most survive, and the plan goes into the middle drawer. That doesn’t mean you don’t need a plan.
It just means you need a different kind of plan — one that works for you at the stage you’re at. A one-pager plan that acts as a dynamic working document is where it’s at.
The keyword here is dynamic. Try to compile a one-pager of what you aim to achieve in the next year. Break it down per month and list the small steps that you will be taking to reach your bigger vision at the end of the year.
This plan could include anything, but you should know that it will be your guide to what is important and what isn’t. Work on it weekly, review it monthly and ensure that you are moving in the right direction.
At the start of every month, review your plan and list your priorities for the month. If you hit a snag, stop, re-evaluate your plan, make changes and move on. It is not set in concrete. It is dynamic.
Too many entrepreneurs go to work each day and solve issues as they arise without planning proactively for what they want. Others view their business plan — all 100 pages of it — like it’s the Bible.
Neither approach will get you very far. The one-pager will be your plan, your guide. Keep it with you at all times so it can be as flexible as you need to be.
2. YOUR BREAK-EVEN FIGURE
For most entrepreneurs, numbers are one of those complicated matters best left to others, although it needn’t be that way. And when it comes to one particular number, it cannot be that way: That number is the break-even figure.
It’s the one number every entrepreneur must know. If you don’t have a break-even figure, how will you know if you’re succeeding or failing?
A break-even figure is the amount of sales you need to make in a month to cover all expenses and to make a target profit. If you can calculate this, then you have a number that you can chase every day — something that is measurable and understandable for the entrepreneur.
The break-even figure is calculated by using three figures:
1. Gross Profit Percentage: Your gross profit percentage is calculated by taking your gross profit (sales minus cost of sales) divided by your sales. Let’s say you sell a product for R200 and the cost of that product is R150, then your gross profit will be R50. Your gross profit percentage therefore is 25% (gross profit (R50) divided by sales (R200).
2. Overheads: Overheads are the total of all your fixed expenses each month. Examples include rent, salaries, Internet, fuel and all other costs that you need to pay, e.g. R100 000.
3. Profit Target: This is the profit you would like to achieve in a month, e.g. R20 000.
- Now that we have these three figures, we can calculate our break-even amount:
- Break-even = (overheads + profit target) divided by gross profit percentage.
- So, continuing the above example:
- Break-even = (R100 000 + R20 000) / 25% = R480 000
This means that you must make sales of R480 000 per month to cover all your overheads and achieve your profit target.
If you have this figure you can now plan how to achieve this target and go out every day chasing a goal, rather than just crossing your fingers.
One can take this number and divide it by the number of working days in a month to get to a daily target of sales. Also, make sure it’s on your one-page dynamic plan.
Sometimes, we just need basic things to give our journey meaning again. Something to chase and something to celebrate once we’ve achieved it (yes, make sure you celebrate).
To have goals, a clear vision and a one-pager plan might sound like petty things when you run a business — but you might soon realise that you need these things to keep you going.
PLUS: GIVE YOUR JOURNEY MEANING
Make sure you have a clear vision and a plan — something to chase and celebrate when targets are achieved.
When you start a new business, everything is exciting. You have a dream, something to work for. Once the business takes off, it’s easy to fall into a rat race of just going to work and reacting to challenges as they happen.
Many established business owners get to a place where they wonder if it’s all worth the effort. Whenever I talk to entrepreneurs feeling this way, I always ask them what they are working towards.
Most times, they don’t have an answer. No, I’m not going to give a motivational talk on how important goals are, but I do believe it’s important to work towards something.
To chase something worthwhile. Is it a vision and mission statement? Maybe that fuels your energy, but there are two practical things that I can suggest to any entrepreneur to keep you on track, and keep you motivated with a reason to wake up in the morning.