How to deal with fixed costs when starting a new business
Planning to start a new business? Brilliant!! You have taken a very brave move. Starting a new business is a challenge worth taking especially if you are looking to earn some extra money from your daily job or even if you are starting it up as your sole source of income. They say business is not for the faint hearted and as soon as you set base, you will realize how true these words are.
That business idea is great and you must be excited to get into a new venture. How prepared are you. Of course you need some capital to start a new business, set up an office, get the office equipment, desk, computer etc. but is that enough to sustain you in the first phase of your business growth? Most of your friends and relatives will just look at you and congratulate you on the new venture but very few will tell you the truth, You must be ready to face big challenges at the beginning.
At the beginning, you will have a few clients to start with who have believed in your ideas, for some businesses it takes time to grow the customer base. During this period, it could be weeks, months and sometimes years to grow a customer base for your business. This is the most critical period for any new business and nobody will tell you this, 75% of all new businesses will die before their 5th birthday. Why so? Because there needs to a long term plan for the business to overcome the test of time. Before you go looking for an office space, before you hire your first secretary, before you purchase those office equipment and hire staff, there’s an important question you need to ask yourself.
That is; How long will i sustain the business before it can sustain itself? How long can will it take for the business to be profitable? How long can my initial capital sustain the business? Because if you don’t have answers to the questions, you will be r immediately you have exhausted your capital. However, the good news is that you can plan in advance and have your facts right before making the first move. Its best if you start small and grow organically. This means that you don’t need any expensive infrastructure at the start. For some businesses, it might not even be necessary to have a physical office at the beginning. Do you really need a secretary for a new business? Well, it depends on the nature of your business. Avoid any fixed costs as much as possible. These fixed costs include the overhead running costs of a business ie. salaries and wages, rent, subscriptions or anything that will take up your money regardless of whether you earned or not.
How do you avoid fixed costs? In todays life, most businesses have shifted to online based rather than the traditional brick and motor systems. If you are a starting a business of selling clothes, fashion, design, crafts, consumables, accessories, electronics, etc., it would be advisable to start online before establishing a physical location. In this case, you will have ample time to establish a good relationship with your newly acquired clientele, you will be able to understand their demographics, interest, age, special interests before engaging in any fixed costs. At the growth stage, you need to study keenly the buyer behavior and their tastes and preferences. In fact for the fashion industry it would be best to get the feedbacks from the first buyers which will help you understand your market.
There are many businesses that have been set up to help up startups like the rent a shelf model, whereby you sell beauty products, fashion, design , health products, supplements, phone and computer accessories, pets accessories, small household goods, etc. You just direct your clients acquired online to the small shelf rented where . These shops have attendants who will as well guide your your customers when buying your products. The good thing with this model is that you only pay for a small space where you stock only a few pieces of each item as you learn your market before engaging in bigger spaces
There are also drop shipping companies that will help deliver products to your customers and collect payment on your behalf. At wakah errands, we have a customer care support team that will assist you with scheduling orders, cash on delivery and collecting feedback from your customers.
Are you in the service business? there are solutions for you as well. Operating a service business also comes with numerous challenges and fixed costs. You need messengers, couriers for document deliver, cleaners for your office, assistants for statutory payments, filing tax returns, filing, organizing your office, collect checks and packages, meal collection, banking services, distributing fliers and catalogues, etc. You need not hire permanent employees for such tasks, you could engage an errands and concierge service on demand to help you with such tasks. You can get a corporate package or as well book on demand. This will make easier your day to day operations as you scale and learn what you need during your initial stages of business growth.
Consider researching further before starting on a new business.
