How To Start a Business

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How to Reduce Operating Costs, Run Lean and Still Grow your Business Fast

Posted: 20 Jan 2012 10:18 PM PST

"Cash flow is the life blood of business." – Robert Kiyosaki

One of the most tedious; yet most important tasks in business is cash flow management. Constant in flow of cash is very vital to business survival but will be meaningless without proper utilization and channeling. Poor cash flow management is a major reason why most businesses fail; even with a winning product and business team.

"The most important word in the world of money is cash flow. The second most important word is leverage." – Rich Dad

Every now and then, you will hear of businesses taking drastic measures such as downsizing; just to cut down costs. Now reducing the operating cost of your business is a very simple task; yet, it's extremely difficult because it takes discipline to achieve.

So in this article, I will be sharing with you some inside tips on how to reduce your operating costs, run your business on a lean budget and still grow fast. If you are an entrepreneur starting out with low capital or you are seeking ways to preserve investors' money and make the best use of it; then this article is for you. But before I go into the details, I want to point out the fact that reducing costs or running a business on a lean budget will never be possible without the three factors below:

Discipline
Thorough understanding of the business
Your team's commitment towards your plan

Having said that, below are practical ways you can reduce your business expenses and operate on a lean budget.

How to reduce your business expenses and operate on a lean budget

1. Avoid Marketing/Advertising whose results can't be measured

Marketing and advertising are some of the leaks through which money flows out of a business. Now don't get me wrong, both of them are important to generate sales but they should be done tactically. You are a start-up company and you don't have the million dollar marketing budget of the big corporations, so what do you do?

Well, you simply apply marketing tactics that puts you directly in the face of your targeted market; note the keyword "targeted market." Therefore, avoid marketing/advertising methods whose results can't be quantified or measured. Effective marketing must reflect in the books; it must yield the corresponding desired results (increase in sales, lead generations, increased traffic/visitors/customers) and must be quantifiable (percentage change, ratio).

Avoid advertising agencies, Pr firms and social media ad companies except you have millions of dollars to toy around with. Avoid advertising techniques you don't understand or have not mastered; stick to what you know. And best of all, try to make the most of free publicity; such as press releases, getting on TV and radio shows and contributing content to news sources. Most importantly, if you are going to use a paid advertising medium, make sure you first educate yourself about the intricacies of the medium; it will save you a lot of cash in the long run.

2. Avoid Expensive Office Spaces or Leases

"I could have an office all to myself but since my collaborators don't have one, then I too am contented to have a desk in a shared room." – Ingvar Kamprad

One of the expenses that take a large chunk of capital/resources is office space and most entrepreneurs waste investors money by situating their businesses in glorified high rise buildings; just to satisfy their ego. If you are a start-up company or you are running on a lean budget, then you don't need an expensive office spaces. You can go for shared office spaces or better still, work from home and make use of a virtual office address. After all, Amazon, Ford Motors and Apple were started from the garage; you shouldn't be an exception. Start small.

3. Avoid Technology or Software that doesn't improve Efficiency

"The tone is in the fingers……..not the instrument." – Jason Fried

I have a friend who has a dream to become a black belter in martial arts. This friend of mine is so committed to his dream that he has invested heavily in buying several kits, books and video tutorials on sparring techniques. He knows all the fighting styles and terminologies off hand; yet, never will you see this friend of mine sweating out in the Dojan (training ground). He would rather watch videos and read books than train. Is this friend ever going to become a black belter? The answer is no.

The same applies to business and unfortunately, most entrepreneurs are just like this friend of mine. They live with the illusion that a new technology, business software or tool will make them better entrepreneurs and push their profits to the sky. But improved technology or the latest software/tool will be useless if you are not prepared to put in the required efforts. An expensive golf club did not make Tiger Woods a star; a super computer did not make Bill Gates the richest man in the world, their skills did. So don't waste your resources pursuing technology, if it's not going to add to the bottom line of your business. Rather, work on improving your business skills and boosting the morale of your employees.

4. Don't Overstaff or hire incompetent people emotionally

"If you own a butcher shop, don't hire vegetarians." – Rich Dad

Most entrepreneurs tend to over staff their company; based on the illusion that more numbers of employees will lead to increased productivity. Others tend to hire incompetent people emotionally. Don't do any of the above. Having a large staff doesn't signify success; neither does it increase your company's output. Remember, it's easier to increase your number of employees but difficult to shrink. Small businesses hope and strive to be big while big businesses wish they were smaller in size because being small gives room for flexibility. So don't overstretch your workforce; hire slow and fire fast still remains a golden rule in business.

5. Avoid Office equipment that doesn't add to the bottom line

I have seen entrepreneurs keep a computer on their desk that they don't even know how to use. I recall a time when I wanted to put a television set in my office; I had the urge to go for a 21 inch plasma but I sat back and asked myself: why do I need a television in my office? Why do I need a 21 inch wall plasma? Well, I figured out that I needed a television set to stay current with happenings but my desire to buy a 21 inch plasma was simply that of ego. A normal 14 inch will serve the same purpose, so I shoved the idea of buying a plasma TV and went for a normal 14 inch television. Buy necessities, not wants. If an equipment won't add to your bottom line; don't buy it.

6. Avoid hosting your business meetings in high brow buildings

Well, having a business meeting in an environment that's conducive is important but you must avoid expensive places. I sometimes meet with my business team in fast food joints or restaurants; other times, we meet in my office or the hall of my church or even a public recreation centre provided it is quiet. These places are conducive and almost free; we only get to pay for a meal, that's only if we need it. I think you can adopt this strategy too to save cost.

7. Watch the decisions you take; it may cost you a fortune

"I have made tough decisions, always with an eye on the bottom line. Perhaps it’s time America was run like a business." – Donald Trump

For every decision you take in life or business, there will always be consequences resulting from such decision; either positive or negative, so be careful of the decisions you take. I have seen businesses suffer massive setback and loss just because the entrepreneur or manager took a decision that backfired. So weigh every decision you are about to take while keeping an eye on the possible outcome; it will save you from monumental losses.

8. Concentrate on your core; outsource the rest

What is your core business operation? One of the mistakes small businesses and start-ups make is trying to do everything effectively. Business, just like the human body, is made up of systems and all systems must work effectively for a business to be successful. To be successful, a business must handle human resource, payroll, sales, marketing, product development, production management, customer relationship, accounting and so on.

Now instead of taking up all these tasks and increase your overhead; you can choose to concentrate on your core task and outsource the rest. Some business tasks you can outsource include employee recruitment, human resource management, product manufacturing and packaging, payroll, etc.

9. Avoid luxury and unnecessary expenses

"Simple routine have a greater impact. It is not just to cut costs that we avoid luxury hotels. We do not need fancy cars, posh titles, tailor made uniforms or other status symbols." – Ingvar Kamprad

Avoiding luxury is a good way to cut down on your business expenses. By avoiding things such as private or chartered jets, five star hotels, corporate cars, frivolous parties, being chauffeured in limousines, etc; you can save a tremendous amount of cash for your business.

10. Avoid taking on too much inventory

If you are running on a limited budget; then you should avoid tying down cash as inventory. Rather, try to produce on demand or work out a systematic time-based production.

Now these are ten common ways you can reduce your operating cost, run lean and still build a successful business. In addition to the above, below are an extra eleven unconventional ways to run a profitable business on a lean budget.

11 Unconventional ways to run your business on a lean budget

a. Work for free first; then put yourself on a decent salary

Working "in" and "on" your business for free is a good way to make some extra cash available for your business but unfortunately, most entrepreneurs wouldn't want to hear of it. Everyone wants to get paid for doing a task and that's why most people shy away from starting a business.

Most start-up entrepreneurs sometimes set aside ridiculous salary for themselves even when their businesses is yet to turned out a dime in profit; but things don't work that way. Building a business requires commitment and sacrifices especially in the start-up phase; so therefore, you should be prepared to work for free.

Now if you must know; every successful entrepreneur today has at one time or the other worked on their business without receiving a dime. I have also worked for free and I still work for free today in some of my new businesses. It's not absurd to work without getting paid; rather, it's something you should get used to as an entrepreneur. When your business begins to turn in some revenues or even profit; then you can place yourself on a decent salary. Remember, your aim for building a business is not to earn a steady paycheck. I want to believe you are in it for the bigger picture; which is building a multi-million dollar asset.

b. Don't expand vertically; grow horizontally

Most managers and entrepreneurs love the idea of growing vertically because it makes the business look big from the outside; and they do this by creating more job positions and employing more people. While this may look good from the outside and earn you some prestige; remember that growing vertically will increase your overhead and make your business more cumbersome.

Rather than growing vertically, I will advice small businesses grow horizontally through strategic partnerships and alliances. Do you want to expand into another industry or you want to grow in terms of scale? Instead of increasing your overhead by taking new employees, all in the name of growth; it is better you forge a partnership with an existing business that handles such task or serve such industry. This will help you save some cash and even reduce your growth risk.

c. Encourage your customers/clients to pay before service

This tactic is simple, yet most entrepreneurs ignore it. You can offer your clients/customers incentives and value added services to entice them to make advance payment for goods and services. This will help your business with cash inflows.

d. Avoid expensive business meals

I believe the message here is clear; avoid meals that cost an arm. Good food doesn't have to be expensive.

e. Spend on budget and stick to it

I am a stickler for forecasting and budgeting; both in business and in my personal life. I don't wake up and spend money just for the sake of spending; I spend on a budget. Everything I buy, every cash note that leaves my pocket today has been budgeted for months back. Even if I am going to spend some free cash, it has been budgeted for as miscellaneous; I have never had free cash at hand that's unaccounted for and I don't intend to. I tend to look at my cash needs at present and use it as leverage to forecast my future needs; this singe act has helped my business avoid a cash crisis. You should do the same; operate on a budget and stick to it.

f. Balance your acts with family and friends

"People say I am cheap, and I don’t mind if they do." – Ingvar Kamprad

The issue of family and friends is something I handle cautiously. Family is family and business is business; I don't mix both and this is a principle I live by. Now family and friends are a very important part of your life; so also is business. To be a true success, you have to balance your act between these three elements.

Family and friends are close to you; meaning, you can't hide your success from them. Secondly, you tend to be soft towards them because of their close relationship with you. Well, it's ok to be soft with them but when it comes to financial matters; you've got to be tough with them.

Most people see entrepreneurs as money bags; they see your company growing fast, with you working round the clock to ensure a smooth business operation and then they will think you are made. What they don't understand is that there's a big difference between revenue and profit. They won't understand that a business can generate revenue without profits. This is when you need to tighten up on your finances. Now I am not asking you not to give your family money; all I am asking is that you do it with cautiousness. I have had friends complaining that I am too strict when it comes to spending; well, why shouldn't I be. After all, I worked hard for my money while they slept; so I can't afford to waste resources on unprofitable things. I think I have ranted enough for you to get my point. Open your mouth and wallet cautiously…………………enough said.

g. Be a tough negotiator

You are running a business on a limited budget; this means you don't have the resources for trial and error, and there's no room for wastage. You can't also afford to leave money on the table, so you have to be a mean and tough negotiator. Now I am not asking you to be a penny pincher; I am asking you to be a tough negotiator and get the best out of every deal you make.

"If you want to buy something; it's obviously in your best interest to convince the seller that what he's got isn't worth very much." – Donald Trump

h. Cut down you energy consumption

Another way to cut down your expenses is to cut down on your power consumption; this will directly reduce your bills. You can do this by using energy saving appliances and switching off appliances that are not in use. Now for those who generate their own power supply like me, you can further cut down your energy cost by switching between alternative power supplies and generator.

i. Establish a credit line with your suppliers

Now by establishing a credit line with your suppliers, while encouraging your customer to make advance payments for goods and services; you will be creating a pool of extra cash that can be diverted to very short term tasks.

j. Avoid litigations; it cost money

This is as simple as ABC; avoid litigation, it's a huge waste of time and resources. The only people that get rich from litigations with certainty are attorneys or lawyers. Engage in litigation only when your business survival depends on it or you have a substantial case to prove with a success to failure ratio of 80:20.

k. Keep your eyes open; to avoid larceny and waste

"Waste of resources is a mortal sin at IKEA." – Ingvar Kamprad

One thing I have observed in business is that employees don't attach value to business materials and equipment; because they aren't the ones that bought them. They tend to discard business items that can still be used or managed. Secondly, employees tend to take lousy decisions most of the time; if you allow them. After all, they have nothing to lose should their decision backfire; they will simply blame somebody else. Thirdly, employees will steal from you; consciously or unconsciously. Things employees steal from business premises include pens, notepads, toiletries, etc; and if they are left unchecked, they will even your steal time by engaging in unproductive activities during work hours. To run lean and still be successful, you have to successfully guard against the three things listed above.

As a final note, I think the above 21 steps is more than enough to help you grow your business on a lean budget. Remember, it takes discipline and action to achieve success in any endeavor. I rest my pen.

How to Start an Escort Service Business for Tourists

Posted: 20 Jan 2012 10:12 PM PST

The tourism industry in Nigeria is one that hasn't been tapped to its full potential. With a population of over 150 million and a growing need to get away from the maddening work life; many individuals are now spending their vacation, touring places. Now as an entrepreneur looking to satisfy a demand in return for profit; the tourism industry might just be your next point of call. There are many business opportunities in the tourism industry but in this article, I will be focusing on how to tap into the escort service business with no initial experience and succeed.

But before I go into the details of starting an escort service business, I want to emphatically state that the information provided in this article does not in any way replace the need for you to conduct a feasibility study, write a business plan and do your own due diligence. Secondly, the information shared in this article is applicable to any locality; be it USA, Canada, UK, Nigeria, Ghana, etc.

How to Start an Escort Service Business with Little or No Money

When tourists arrive a country; they always need personnel to escort them in their site-seeing trips and in social events they are invited to. This single need is the reason why many escort services have emerged in the industry.

Business-minded people that understand the potential of the tourism industry always seek ways to tap into the escort business because they know that money pours in this venture. Almost every city has tourist spots and conventions frequented by out-of-towners and foreigners. These people would pay big just to have someone who understands the terrain go with them as they explore the country or city. If you want to earn huge profits, then below is a step by step guide on how to start an escort business.

How to Start an Escort Service Business for Tourists

1. Get qualified personnel that knows the city in and out

The first thing you need to start an escort business is to get qualified personnel. These should be people with good and pleasing personality. They should also be aware of the various tourist spots in the city or country. After determining the males and females you need; you will also need to hire an experienced trainer or coach who can develop the personality of your escorts. Your employees will also need to be taught good grooming, dressing up right and good manners so that they would become sophisticated, elegant, articulate and well-informed.

2. Get necessary licenses and permits

The next step to starting an escort business is to contact the Chamber of Commerce in your area so that you will know what the necessary requirements are. You will also need to visit the Ministry of tourism to obtain vital permits. Afterwards, visit the Internal Revenue office and know what taxes you need to pay and the taxes to be collected from your employees. Visit the Immigration and Naturalization Service so that you will know the kinds of forms to fill out for your employees. You need to visit the Department of Labor also so as to know information on minimum wages, employees' training, substance abuse, firing, hiring, tipped employees and child labor.

3. Get an office

After accomplishing government requirements, the next step to starting your own escort service business is to get an office. Make sure it's beautifully-designed, elegant and professional because your office is a reflection of your brand.

4. Market your services through selected media

The last step to starting an escort service is to market your services and a good way to do it is to make an attractive and appealing website to promote your business. Place pictures of your escorts and indicate the services you offer on your website and make sure you mention the qualifications of your employees. If your staff does not want to place their real names on the website, you can give nicknames instead. You can also place ads in local dailies. This will help let the community know of your business. You can also enlist your office and telephone number in telephone directories.

As a final note, an escort service is one of the first things that a visitor or tourist would have in mind upon visiting a foreign country. They will pay big bucks just to have a companion, so that they would know what their itinerary would be. Having someone who knows the place also helps guarantee safety and a productive journey. If you are interested in offering this kind of service, then it's advisable you acquire the needed knowledge of running an escort service business; this will give you a head start over competition.

MULTIPLE INCOME FOR AFRICAN

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