The easiest way to make a profit is to not spend money. You need to be frugal. Keep your costs down. Remember, you’re not spending your parent’s or your employer’s money anymore.
You’re spending your own money, so try to hold onto as much of it as possible. Here are some suggestions on how to accomplish this.
1Do not hire an IT guy
Especially when coming out of a big company, the world of IT seems so intimidating that it feels absolutely necessary to bring in an expert. Apart from the danger of adding overheads, an IT guy lets you abdicate responsibility for an important part of your business that’s actually not so difficult nowadays. Sign up for Office 365 or Google Docs.
Don’t try be cool and go with the latest craze. If you know Office, stick to it. 365 is perfect because it’s a rental model, which saves you cash up-front and plugs you into an infinite upgrade stream.
For email, domain registration and web hosting use Hetzner.co.za. The UX isn’t as nice as GoDaddy, but its local (fast) and it’s German so it always works. Best of all, if you have a problem, they have a call centre in your time zone.
2Nail your brand early; it makes life easy going forward
Find someone (an individual) who provides the full bouquet: Logo, letterhead, website. Do not use a pricey ad agency! If you become a monster corporation one day, sure, go ahead and use the likes of Ogilvy. Until then, be frugal.
Also, design your own business cards. Use Moo.com. Best quality cards in the world. Get the thickest stock available. People are impressed by thick cards (girth matters), and when you’re a start-up, you need as much help as possible when it comes to seeming credible.
Even more important than business cards is a sign. You’re not a real company until your office has a sign.
3Buy the stationery yourself
When you come from a corporate, you’ll be at a loss as to how to do things yourself. Finding printer paper, booking flights, etc. will seem awfully complicated. Fear not, you too can do it. You’ll find you get better deals than big companies do, even though they supposedly have much greater buying power. Also, you’ll get a feel for how much stuff costs in the real world. Like one litre of milk (R10). Or a 40 minute flight from Johannesburg to Polokwane (R2 000). It’s difficult to be frugal if you don’t know what stuff costs.
Use Apple Macs. I know this flies in the face of ‘frugality’, but Apple makes the best hardware. It never breaks so you have less need for IT support (see point 1), and it looks cool (see point 2). What’s the point of working for yourself if you can’t at least look cool?
4Use the cloud
Ignore the noise of all non-cloud vendors. Use the cloud for document storage (Box), sharing (Slack), CRM (Salesforce), hosting (AWS), websites (WordPress), etc. Don’t do it yourself. Let someone else worry about encryption, back-ups and data security.
5When in doubt, don’t do anything
There are many things that seem essential when you’re in corporate, but which are in fact superfluous — like fancy coffee, for example. Ricoffy with milk and sugar is actually survivable. Generally speaking, learn to do it yourself. If you can’t figure it out, outsource to the specialists. If you don’t know who the specialist is, Google it. If you don’t know how to Google it, stay in corporate.
6No matter what, be frugal
Some companies boast of valuation or revenue or profit or users or market share. Outside of Silicon Valley, these metrics are meaningless. The only meaningful metric is cash flow. You need to spend less money than you make. The starting point of positive cash flow is to be frugal. Don’t spend money unnecessarily.
Ignore the accountants, ignore depreciation, ignore goodwill, ignore your balance sheet, ignore your income statement, ignore your valuation, ignore your revenues. Instead, pay attention to your cash flow statement. Revenue is vanity. Profit is sanity. Cash flow is reality.
Read ‘Be A Hero’ today
How South Africa’s Small Businesses Plan To Invest Their Money In 2018
Here are their five areas they should focus their attention on in the next year and beyond.
Despite economic uncertainty, South Africa’s small businesses are positive about the future. In fact, our State of South African Small Business report reveals that 40% of small businesses are expecting to grow. However, to achieve growth without overextending their limited resources, small businesses need to invest wisely.
Here are their five areas they should focus their attention on in the next year and beyond.
When times are tight, companies typically reduce their marketing spend. This isn’t the case for 36% of South Africa’s small businesses. These respondents recognise marketing as a critical investment area.
They’d rather make a concerted effort to grow their customer base, than sit still and do nothing as consumer demand declines.
Without access to the latest technology, business growth can quickly stagnate. This is why 23% of South Africa’s small businesses plan to invest in up to date equipment, whether that be new machinery, mobile devices or computers.
The right investment in this area can give a business a real competitive advantage.
It can help boost profits and improve operational efficiency – both of which can help a small business withstand difficult economic conditions with greater success.
Consumers are spoiled for choice. Their needs are constantly changing and companies can’t afford to become complacent. To keep up with market demands, 22% of small businesses plan to invest in product development. Barring a few timeless classics, most products need a regular review and tweak to stay relevant and popular.
Digitisation is transforming business functions across the board. Technologies, like cloud software can take care of laborious administrative work.
This liberates employees from time-consuming tasks, enabling them to focus on more strategic work like customer retention and acquisition.
Technology has the power to improve productivity and efficiency. Which is why 18% of small businesses are going to focus their investment plans on this area of their businesses.
The customer should always be the priority. It doesn’t matter how good a product is, if there are no customers, then there’s no business. As competition increases, the user experience becomes more and more important to win over customers.
Business growth depends on happy customers and to achieve that, 18% of small businesses plan to invest in delivering better service.
All five of the above business areas are worthy investment focuses. The question is, how does a small business work out what to invest where? The only way it can invest effectively is with a full view of its company finances. A small business needs to be able to see which functions have provided the best return on investment to date.
It also needs to consider how much investment capital it has to spend. What’s more, before it makes an investment in say, marketing or product development, it must know exactly how and where the money needs to go.
The right software can help a small business access the real-time insights it needs to make better, faster financial decisions. To combat increased competition and market uncertainty, South Africa’s small business owners need access to up-to-the minute information from any device no matter where they are. An informed investment has the greatest chance of success.
The Simple Way To Pay Wages When Your Staff Don’t Have Bank Accounts
If you have employed casual workers over the busy season, you can pay wages even if they do not have bank accounts.
At Absa Business Banking, the things that are important to you are just as important to us. We understand your business needs, which is why we have developed tailored solutions to help you where it counts. Take CashSend Plus, for example. It is a payment solution that enables you to pay workers even if they do not have bank accounts.
It is safe and secure
Your employee will receive a six-digit access code and a ten-digit reference number, so that they can verify the transaction. The money is instantly available at an Absa ATM.
You can even pay yourself
We have all lost bank cards or wallets at some point in our lives. What an inconvenience. Well, it is good to know then that you can access cash by sending it to yourself. Now, that is what we call better.
Please speak to one of our consultants or call 0860 111 123 or visit your nearest branch.
Absa Business Banking
Do better business. Prosper.
Strategies To Help You Stay Out Of The Red With Cash Flow
Cash flow management is always essential, but in a recessionary environment it’s even more crucial to the overall health of an organisation. Here’s how you can keep your business growing and out of the red.
In every adversity there is an upside. This saying is particularly valid when it comes to managing your cashflow in a recession. As we all know, cashflow is the lifeblood of any business. Banks are implementing stricter lending criteria and this places greater strain on your business as the availability of cash becomes limited.
For savvy entrepreneurs there are a number of strategies that one can apply to ensure that you have the required cash to continue funding your business operations.
Conduct a rigorous overview of your costs
This is a particularly good time to review all your costs in your business and truly question each expense. Often this exercise reveals unnecessary costs that do not impact the effective operation of the business. Set yourself and your team a target to be able to reduce costs by 10% and then review these costs with each department.
A really good example to follow are costs that once trimmed have a ripple effect of cost reduction in other areas of the business. Scaling down on office rental has the advantage of reducing your utility bill, insurance and possibly also your telecommunications bill.
Managing your Debtors Book
If you are not already doing it, you should be reviewing your debtors book at least weekly, dependent upon the type of business you are running. Keep regular contact with all your customers, particularly those outside of their credit terms.
Chase payments from these customers regularly but fairly and ensure that you apply your own debtors policy and procedure.
If you find this difficult to do, appoint a third party to manage your debtors book for you but do not lose touch with your customers.
Ensure that you are invoicing your customers at the completion of ‘project’ and do not delay invoicing for a particular day in the month. This ensures that your customers are required to pay you timeously for the work done, for example within seven days of invoicing.
Review your Supplier credit terms
This is an important process to go through but recognise that your suppliers will be managing their cashflow as well. If you are a regular supplier and have a good payment history, they will be more willing to discuss an extension of payment terms with you.
It’s very important that you discuss any ‘broken agreements’ with them as soon as you are aware of them. If new payment terms are agreed, ensure that you can manage them.
Cash Flow Cycle
This is an ideal time to review your cash flow cycle to determine the length of time it takes from receiving an order to invoicing and receiving the cash in your bank account. Identify each step in the process and determine whether there are ways to shorten the cycle.
It’s always good advice to keep communication with your bank open but this is even more important in a recessionary environment. Should you require additional financing from your bank to be able to fund short-term shortfalls, ensure that you have a good business plan to support your application, as this will give the bank the comfort that you are ‘on top’ of your game, particularly where your cashflow plan is concerned. While bank finance should be your source of last resort, do not leave it until the last minute.
Following these strategies will largely negate the negative consequences that a shortfall of cash may have on your business.
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