Running a self-funded business doesn’t mean you have no costs or don’t need to manage them. It simply indicates a lack of proper cost estimation and business planning.
Learning how to save money in your business might not be as wise as you think.
We recently met an associate who runs his business with part-timers and interns. Yes. he does make a profit but without much of the business overheads. By doing so, he misses 2 things:
- Not having a proper estimation of his cost – Even if the business is making money. Its not an accurate gauge as its based on his lowly minimal cost and everything DIY operations. How would an investor be able to accurately value his business and burn rate?
- A proper team – Its good to see to everything through during the seeding stage. But as the business progress, a proof of concept emerges, a proper team needs to be in place to set up proper SOPs and keeps daily routine operations running.
Not knowing your cost can also be detrimental. Because you will never know when to give up. You may think that just by constantly having the sales, you make money. But nope, the timing it takes to clear your stock and to get back your initial investment also matters.
Every business has its cost of running. The very first question every investor wants to know is your cost. What’s your cost of setting up? Then your projections, proposal and proof of concept comes into play. Not having a cost is equivalent to not having a cap on your spending. Not knowing when to quit even when the business does not justify itself.
In business, its not about saving. Its about maximizing your dollars and cents for maximum ROI. Running a successful business is a mission to learn how to put your dollars and cents into good use. You create a successful business when the entity can automatically self-generate the profits required to sustain itself.