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Starting a new business

Running a business on limited resources is probably a skill most business owners and entrepreneurs would like to have at one time or another during their ownership of such an entity. In fact, during the last four years – between 2008 and 2012 – many businesses failed as a result of the economic crises and, perhaps, a few of them might have been saved if the proprietors could have scaled down budgets and operational expenses. Of course that’s only one person’s opinion.

Let’s take a look, though, at some of the challenges some new entrepreneurs are faced with. First off, When an individual decides to start a new business, s/he might consider going to the bank for a business loan. As long as the business plan is in order, along with the knowledge and experience necessary to successfully run the business, as well as all the necessary documents to present to the business loan lender, one would think the loan would be approved. But, believe it or not, in the majority of cases these loans are denied. You may ask why?!

Failure: A qualifying factor!

The answer is seldom one that seems satisfactory to the new business loan applicant, because it’s usually not due to readily apparent reasons, like satisfactory enough credit to back up a loan approval, or how excellent or poor a business plan is; but rather, a seemingly abstract statistic about the success-failure rate of new businesses during the first year of operation. Can you imagine being denied for a business loan and being given this as the reason, ‘you do not understand that over 90% of businesses fail within the first year, and you are not prepared in case YOUR business fails accordingly?’

While the lender became an adviser who was attempting to look out for the best interest of the applicant, it does seem rather presumptuous to not even extend the opportunity to fail. On some level, everyone that goes into business for themselves understand that chances are, the business will not make it past it’s first year, but that’s information which, in most cases, the new business owner has already taken into consideration.

Denial: Lender-defined success

Confidence in one’s ability, knowledge, experience and persistence is obviously not taken into consideration when the reason for denial is so abstract. Another potential result the business loan lender is concern with is, the new business owner is likely to spend his/her life savings before giving up, and should not be assisted in financial ruin by providing the means with which to do so. The means, of course, is busiess loan approval and subsequent issuance of proceeds.

So what does a new business person or entrepreneur do? Left with what s/he determines to be a great business idea, and everything else required to start a business, s/he does the next best thing. Go it alone! Gather whatever resources possible and set out on the adventure solo. Buy second hand office supplies and furniture. Buy the small cheap laptop instead of the multi-thousand dollar computer that would probably make life easier. Without the proper money for advertising, it would be necessary to get a little more creative than s/he might otherwise have to be.

Advertising methods would have to be unconventional, but workable. In other words, this is the stage at which Running a Business on Limited Resources becomes a required skill, and if that skill is developed and managed effectively, large amounts of money in order to get the business to the world becomes an afterthought.

Success breeds nostalgia?!

When success is achieved in your new business on limited resources, you can always engage in the “what if” nostalgia that often results when people become successful and think back on all the trials and hardships (tribulations?) they endured to achieve such success: “So would I have been so successful had the loan processor gave me the business loan?

Let’s face it, when you achieve success, especially in your own business, without money or other resources from others – even banks – you can always wonder what would have happened if you had the proper start-up money for advertising, payroll or other operational expenses, but those thoughts are quickly dismissed and replaced by Whatever the case may have been, I am glad things worked out the way they did, because as a result you are usually able to better understand some of the challenges that other entrepreneurs and new business persons face.

So how can you run your business on limited resources? Here are a few things that I learned along the way.

Tips for the business soloist

New vs. Used – When starting your business, you do not need everything to be “new.” Second hand items cost substantially less then new items, and work just as well. Plus, if you think about it, customers will be more comfortable around your office if it feels “broke-in”, rather then new and sterile. It gives them the feeling that you have been in business awhile.

Creative Advertising – You do not need the hundreds of dollars that it takes to place ads in papers or put commercials on TV. It costs very little to design and print you own flyers and put them in places where your potential clients would gather. Turn your vehicle into a moving billboard by investing in a vinyl signage for your doors or windows. The best thing? Face to Face meetings with your potential clients do not cost a penny, so look for every opportunity to talk with our potential clients.

Work At Home – Depending on your type of business, you may consider working at home rather then renting office space. This will save you a lot of money on rent and furnishing an office. Once your business becomes more successful, then you can always rent office space later. Overall, be thankful for the struggles that you go through now, because in the future, they will have been well worth it. Plus, it will give you a better understanding when it comes to other small businesses.

And, no matter what, never give up on yourself!

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One of the biggest challenges creative businesses have had to contend with in the past, and still exist to a great extent, is getting paid what they are worth. The root of the problem was not the client’s inability to pay the money requested; and it isn’t that the client is unwilling to pay what the service is worth. The root of the problem is in how you, the professional, is charging and how you are creating value in the mind of the client.

In order to buck the trend – so to speak – and start getting paid for the value you provide, instead of the time you spent on a particular project, you must do a couple of things. First, you must create a business based on value pricing and not hourly pricing. The number one worst way to charge (and most creative businesses have been charging this way) is by the hour.

Frankly, it shouldn’t matter how long it takes you to solve the client’s problems or provide your service, it should matter that the client is getting what s/he needs and what he wants. If you’re creating value and you’re giving them value, they’ll pay you for that value. They should not be paying you for your time.

Second, you must determine what value you are providing. If you’re being paid for your time you’re essentially setting a ceiling on how much money you can make because you can only work so many hours. Therefore, you must determine, specifically what your value is to the customer/client, not how many hours you will work for that customer/client.

Here are a few questions to consider in that regard:

How do you impact that customer or potential client?
What do you provide to them that will help them and help to solve their problems?
How will solving these problems impact the customer?
Is it a problem with high impact or low impact?
What is important to the customer?
Why is it important to the customer?
How important is it?
Have they had experiences working with someone in your type of business before?
If so, was it a good or bad experience? Why? Exactly what happened?
Why is the client coming to you for this issue?
What is the client’s definition of success with this project?
Ask him to describe specific ways he will know he made the right choice in hiring you.

By getting the answers to these questions – not guessing what the client will say, but actually getting the client to answer these questions – you will have the information you need to create VALUE in the mind of the client. If they perceive your work to be valuable, they will be thrilled to pay you. If they do not perceive your work to be of value, they won’t pay you no matter how low you go on the pricing scale.

It’s all in the mind of the client. Get in their head and understand specifically what they want and, even more specifically, why they want it. Once you do that, getting paid what you are worth becomes a matter of how-much-is-your-bill-I’ll-get-the-checkbook, instead of “I don’t know-I want to think about it a little more, let-me-get-back-to-you.

For the purpose of pricing, think of your business as if were a real estate agency where commissions are negotiated between the principal (the seller of property) and the agent (the real estate broker), without the imposition of any “set” fees or hourly payments for the agent’s time.

The broker may negotiate a higher fee if s/he believes the job may require more resources, advertising and risk, or s/he may negotiate lesser of a commission if the sale is considered a “slam dunk”. The point is – based on my frame of reference – there is no preset fees, hourly prices or time-based payments for the agent’s compensation.

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