The age of the entrepreneur is upon us. Starting a side hustle or building a booming business is now easier than ever. No longer does a budding business baron need huge capital to start their own business. E-commerce allows for aspiring entrepreneurs to take baby steps, with many people launching side businesses while still working full time. Social media generated sales avoid expensive shop fronts and international distributers allow for many small businesses to thrive in a global marketplace.
With the flexibility of being able to work from home at any time you choose, having your own business is the dream life for many. Earning money and making a healthy profit is the challenge. Ensuring your businesses is viable long term is even harder.
Latest research suggests that nearly 20% of businesses fail within the first year and close to 50% of businesses fail within the first 5 years. A profit and loss statement does not lie, but let’s be honest, ‘failure’ means something different to everyone. A business can be unprofitable for its first few years (quite common) but still be successful and fulfilling in other ways. Obviously, no profit long term is not a viable business. Many people have a side business for the pure joy and satisfaction it provides, and large profits are not the driving force. However, every business owner’s goal is of course, to make money.
Profitable pricing
Starting up a business can be daunting for many reasons, but knowing how much to charge for your goods or service can be one of the most challenging parts of setting up.
How much you charge will have a huge impact on the following:
- Where you sit in the market when compared with competitors.
- How much profit you make for your business.
- How much you earn per hour or your take home pay.
- Whether you want to be considered a budget brand/service (and potentially perceived as not so good), middle of the range or elite (and potentially perceived as overpriced).
- The business’ scalability and its potential to grow.
Having a carefully considered business plan with a clear vision and purpose will assist you with pricing. Closely examine your intention for your business, as well as your goals. Market research is a useful early step to help identify your ideal customer, which in turn assists with determining their needs and desires. A well-executed marketing plan will convert your ideal client into a customer.
They say the first 3 years of running a business are the hardest, and the first 6 months is the hardest of all. So, if you can manage to make sales and have fun in the first 6 months you are doing something right. Even if you aren’t quite making a profit in the early days, if you have another means of financial support and a strategy to cover your expenses, there may be light at the end of the tunnel.
“Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don’t quit.” – Conrad Hilton
Business basics
Speak to an accountant or your financial institution to help ensure you have a solid financial strategy and back up plan to cover you while you find your feet. Taking out a business loan will give you the financial foundation on which to build your new business (provided you have the means to pay it off in a timely manner). Having a secondary income is always a good idea as it will support you to build your business over time.
Ensure you have a dedicated savings account set up under your business name. You might need a credit card for business use too. Use this account/card only for business related expenses and income. Once you are making a profit, aim to pay yourself the same set wage from the business account into your own personal savings account. Keep all business-related income and expenditure limited to your business account to make tax time (and calculating any profit and loss assessment) easier. Once you are earning a steady income don’t forget to allocate part of your earnings (say 10%-12) into a superannuation fund.
Remember, while you need to eventually make a profit to survive, don’t make your business just about the money. A business is more likely to thrive if it is based around something you enjoy, strongly believe in and are passionate about. All businesses face challenges and quiet periods. It’s how you face the more difficult times that will determine what happens next. Strategy, innovation and determination will put you in good stead for an enriching business career.
“Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.” – Albert Schweitzer
Alison Gallagher is a freelance writer, resourcefulness expert and entrepreneur. She has been featured in various publications including Stellar Magazine, Australian Health and Fitness Magazine, and Cleo Magazine. Alison is particularly passionate about sharing practical tips on how to live simply, sustainably and seasonally.
