Written by The Brew, coworking and private office spaces in London – partners of Blu Sky
It is well publicised that 50% of businesses fail within the first 3 years, and new companies in London specifically have the lowest rate of survival. So, should we be scared by these figures?
There’s no escaping the fact that growing a business WILL cost you money. However, there are many ways to reduce these costs in order to keep expenditure low and profit margins high. Getting your business breaking-even or in-profit as soon as possible will maximise your chances of long-term success. So here are The Brew’s top five tips to maximise your chances.
1.Create a detailed business plan
According to Hollywood, “If you build it, they will come”….. Whilst it’s great to get feedback from family and friends, don’t forget to keep a keen eye on what your target market wants. Whether you’ve been in business for years or just starting out, launching a new product or service without proper budgeting, strategy and marketing plan will mean your business will be broke in no time.
So you need to plan. Firstly, do as much market research as possible. Get statistics on the market place, research your competitors, and be 100% honest with what costs you will incur when actioning business growth…. then double it because you’ll always forget something, and it’s prudent to have your worst-case scenario. Then work out your expected income…. then half it, because, again, it’s not pessimistic to build in a worst-case scenario, it’s realistic and means you can be prepared for all eventualities.
2. Use contractors instead of employing staff
In theory, an easy way to grow your business is to increase productivity. Whether that’s increasing the number of products you churn out, or the number of companies you can service. Either way you will probably need more personnel to deliver these effectively. Recruiting too early, or recruiting badly, can send your expenditure soaring and if your team is not bringing that worth back into the business then the blood, sweat and tears you have put in could all be wasted. Remember, they probably won’t care about your business as much as you do. Getting rid of employees can be hard, even within the probation period, plus you have additional costs to think about such as National Insurance and staff pensions.
So consider using a freelancer or contract work out to an agency. You may pay a slightly higher day rate, but you’ll save money and time on the usual recruitment costs including fees/equipment/payroll etc. They will always be committed to results because their business is reliant on their own success with clients. Also, if your business changes you have much more flexibility to amend how much you use them.
3. Find the right office space
Choosing the right business address will be key when managing your expenditure. Your business may have initially started from your garage or your shed. but when you need more space for your team and/or products/equipment you will need an office. Also do you really want your business cards to have your home address on?!
Timing is everything – Mumsnet for example worked from the owners’ kitchen table for the first four years of inception, and utilised freelancers during peak periods. By keeping expenditure to a minimum, they achieved fast growth while staying true to their ethos and avoid charging users to use the site.
Small businesses can work from home but use a Virtual Office where you pay from as little as £15/month. The Virtual Office service can include the use of a business address, a dedicated office phone number and even an answering service, while you focus on growing your business.
If working from home is not quite for you, then a hot desk is a great way to work in an environment with other like-minded business owners without committing to a full-time office. When the time comes, you could then take a coworking space or private office in the same location. By growing your business from virtual office to private office you won’t have to worry about the time and cost of changing address/numbers on your communication collateral (business cards, brochures, website) and you won’t miss out of that prospect you gave a business card to two years ago that has suddenly decided to give you a call!
4. Marketing your business effectively
It simple, for long term sustainability you need to regularly generate new business, so you need to get your name out there. If you can get advice from a marketing consultant early on, then you will save money in the long run as DIY marketing can result in a huge wasted cost over the years. Don’t think that one advert will give you a year’s worth of business, consider all the communication channels available to you. Don’t focus on the channels you personally like/use, but consider which ones your target market and competitors actually use.
Social media is low cost and can be incredibly effective in generating business, but it will take time to build up your following with genuine prospects. Cheap websites can be very restrictive but expensive websites often result in on-going costs. Advertising and exhibitions can be time-intensive and costly, but they are effective IF done properly as part of a larger campaign. Seek free partnerships with businesses and networking opportunities – online forums can also be a useful tool without the cost of travel. If you are focussed on a local area, then a flyer drop could cost as little as £100 and be hugely effective. Always carry a business card and/or flyer with you – a chance encounter costs nothing and can reap huge rewards!
5. Review expenditure every month
Finally, make sure you review your expenditure every month. It’s easy to get bogged down with your daily tasks and forget about all those direct debits and small invoices that quickly add up. Can you consolidate your office or find a better broadband service that will reduce your monthly outgoings? Try to cut anything that doesn’t improve your ability to generate on going income either directly or indirectly…
Conclusion
The secret to business success is simple – you need to earn more than you spend.
Running costs are inevitable, but by bootstrapping and building your business with a low but effective budget, you’ll maximise your chances of success.
About The Brew by rent24
The Brew rent24 has virtual offices, hotdesking, co-working spaces and private offices for teams from 1-100 people in Shoreditch, close to Old Street underground station. There are free-to-use meeting rooms for members, a five-star service, regular business seminars, events and wellbeing sessions!
