The Biggest Mistake New Entrepreneurs Make
The key to survival in any business is cash. Cash is king. Cash is critical. Cash is everything. When starting a business, you must become an absolute fanatic about generating and conserving cash, especially in the beginning.
In order to save money, you must postpone, delay, defer and abandon every conceivable expense that you possibly can to assure an adequate supply of cash.
You must not spend a single penny on anything that you cannot turn quickly back into cash.
The Biggest Mistake Entrepreneurs Make: Not Having Enough Cash
When I started my first new business many years ago, I made one of the the biggest mistakes entrepreneurs make. I went out and bought furniture, office fixtures, and a large photocopier and invested thousands of dollars in printing.
Within 90 days, I had burned through all my savings and still had no sales or revenues. I went broke so fast I could hardly believe it. In no time, I was selling off my possessions, taking out a new loan on my car, and borrowing money from my friends and relatives. I almost went under because I did not realize how important it was to save money and conserve cash at the outset.
Why Cash is King When Starting a Business
Whenever a banker or anyone else looks at your business, the very first and most important number that they will turn to will be the amount of cash you have on hand. Cash is king. Cash is like blood or oxygen to the brain. If you have it, you can survive. If you run out of it for any period of time, you will die. Without cash, the enterprise will fail, no matter how good its prospects may be for the future.
The Best Ways to Save Money in Your Business
To save money, never buy when you can rent, borrow or lease. Never buy anything new if you can get it used. Postpone all major purchase decisions for at least 30 days before you make them. Then reevaluate them again. Most major purchase decisions postponed for 30 days are never made at all. Never buy large quantities of stationery or promotional materials that you absolutely need at the moment to conduct the business in the present. Forget all the economies of mass production and saving where you can get a better price by ordering large quantities.
When you start your own small business, you will be offered a thousand different ways to waste money and a thousand different people encouraging you to spend your money on things that are not helpful to you. You must become as careful as a miser and as crafty as a fox.
Be Realistic When You Plan Your Business
When you start a business, you must practice the “two times, three times rule.” This rule says that, no matter how conservative your financial projections, everything will end up costing you twice as much as you have budgeted and everything you need to do will take three times as long.
For example, if you think that it will cost you $1,000 to develop a product and bring it to the market, it will invariably cost $2,000 or more. Some start-ups actually end up paying ten times what they had planned to get the first product out the door. If you think that it will take you three months to break even once you have started, you should triple that number and calculate that it will take you at least nine months. I have worked with companies that have taken three years instead of three months to get their first product to market. The better you plan for this and save money, the more successful you will be as a new entrepreneur.
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About Brian Tracy — Brian is recognized as the top sales training and personal success authority in the world today. He has authored more than 60 books and has produced more than 500 audio and video learning programs on sales, management, business success and personal development, including worldwide bestseller The Psychology of Achievement. Brian's goal is to help you achieve your personal and business goals faster and easier than you ever imagined. You can follow him on Google+, Twitter, Facebook, Pinterest, Linkedin and Youtube.