Right Business Right Life: Navigating Startup Costs to Profits
Hey, there freedom seekers!
Welcome back. This is number two of our new series of live videos on starting a business. This series centers around starting the right business for you so that you can build it, launch it on a rock-solid foundation to get to profit faster, and then live a life you love sooner. So last time I discussed with you this roadmap that I created to help my clients start a business. It has four stages:
- Stage #1 is the research where we do internal and external research. Stage #2 is the vetting where we vet the viability of the business or businesses that we are considering starting or buying. And not just the economic viability of the business, but also whether this is a good match for them based on what the owner wants to accomplish in their lives.
- Stage #3 is the planning, the business planning, where we create a business plan depending on what we needed it for. We might need it for a financial organization that requires a business plan before giving us a loan. It should also be for our own benefit to make sure that we have a good idea of how this business is going to be making money in the next few years.
- And then finally we have stage #4, the launch, to make sure that the business is started and launched on the right legal and administrative foundation. And this is how we get to a life that we want to live sooner.
- But it’s not as easy as it seems.
There is a timeline from investment to profit (see above) that we need to understand. And that timeline is from the moment we have startup costs to the moment that we have a profit in the business. The length of that timeline is going to be critical for most small businesses because the longer it is, the riskier it is for the business. And the greater chances the business has to fail if the timeline is too long. So let me give you an example of how most people start a business the wrong way, and how they launch a business the wrong way, and why the majority who start a business don’t last five years. So I’ll show you this timeline right here:
So as you can see, this is the roadmap we discussed we have stages one, two, three, and four. Again stage one is the research. Two is the vetting. Three is the planning and four is the launching.
Most people start this way: They have an idea to start a business. They may or may not do any research at all, but usually what they do is they dive in and they get a name for the business, get a website, get a logo, etc. They dive in and start the business and start incurring startup costs right here and now. But as soon as you have startup costs and you launch your business then you have recurring costs. These yearly, monthly, weekly recurring costs are fixed and variable costs. And of course, the costs are going to differ depending on the type of business you have.
But the point is here is as soon as you have these startup costs and recurring costs, then what happened is that most of these businesses launch the product without doing enough vetting and proving. And what happens next is that the market is going to vet their business model and their products for them. And that’s where it gets really scary.
Because, unless you verify it first, you are never sure whether the product you are creating is going to be a product that the customers are going to want to buy. You don’t even know at that point exactly who are your customers and how you find them? What channels are you going to use to get to those customers? But the market is going to tell you. The market is going to prove or disprove your idea for a business and product. And meanwhile, you are having recurring costs until you get to the point of breakeven where your costs and your revenues are equal, and hopefully to profits fast where your costs are lower than your revenues. But this part here is the most critical part of the timeline from startup cost to profit that most people get wrong.
And here’s why.
As soon as you have the startup costs, you have these working capital expenses, which are again, your recurring costs, which is the money you need to keep the lights on in your life and keep the lights on in your business until you get to profits. And the idea we have here is we want to shrink that timeline, that working capital timeline, from starting the business to when we make a profit. We want to shrink it as much as possible. And here’s how we do it. Let me show you the right timeline to do this. This is the timeline that I use for my clients. And it’s a lot less stressful and a lot easier to succeed with this timeline.
We are going to go through the same steps as above but in a different order. We’re going to say okay, do we start a business or not? So let’s do the research, internal research, and external research. Internal research has to do with you. External research has to do with the market. We’ll cover greater details about the research in the next videos and articles. So, then after the research we’re going to vet the business idea or business ideas that you want to start or buy to make sure that they are economically viable. And to make sure that they are the right business for you for the life that you want. And then we’re going to do some planning. And after the planning, we’re going to launch. Up to that point we have spent a minimum amount of money to research, vet and plan the business. The real startup costs are happening here when we are about to launch the business. When we launch the business and we start having the recurring costs here.
But here, as you can see, we don’t rely on the market to vet our idea, to prove or disprove our idea, because we’ve done that before we had the startup costs, resulting in the timeline between startup costs profit to be a lot shorter. This means you need a lot less working capital because for the moment you start your business, you will already have it proved.
You have a better idea of what product to create, what minimal viable product to launch with your ideal customers whom you have identified, and where to find them, before you have all these great costs.
And that my friend is how you minimize the risk of starting a business, and you maximize your chances of succeeding and getting to the life that you want sooner by researching, vetting and planning your business before you launch it so that you can shrink that timeline to profits and minimize your working capital needs.
If we haven’t met I’m Patricia Bottero St-Jean, I’m a Start-a-Business Coach and the founder of OPEN FOR BUSINESS, which is a business research lab. I’m here to help you research, vet, plan, and launch the right business for you. Let me know in the comment or send me a direct message: What is stopping you? What is stopping you from starting the right business for you so that you can live a life with more freedom?
Until next time…
Cheers to living a life you love with the right business for you!